Exporters are witnessing sea changes as regards export rules under the existing GST regime as compared to the earlier regime of indirect taxation in India. Particularly the traders and the provider of export services are facing difficulties in filing bonds and Letter of undertaking before making exports. Even the general meaning of exports have changed now as supplies made to SEZ developer or SEZ unit are now treated as export transactions even if they are made intra-state, also sales to export houses and penultimate exports are no longer covered under the definition of export now. Exports which were earlier made without payment of taxes are now made subject to payment of taxes or filing of some special documents in lieu of taxes paid on exports. In our previous article on “Place of Supply under GST”, we covered the nature of supplies to be treated as exports/import of goods or services under GST, so we are not discussing these provisions here. Rather, in this article we will now discuss benefits, procedures and other provisions related to export and import of goods and services under GST in India.
Before we proceed any further, we must have a look at some definitions provided under various GST Acts.
|Definition of India
Section 2(56) of CGST Act2017, “India” means the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and sub-soil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976, and the air space above its territory and territorial waters
|Definition of Import
Section 2(10) of IGST Act’2017 ‘‘import of goods” with its grammatical variations and cognate expressions, means bringing goods into India from a place outside India;
Section 2(11) of IGST Act’2017 ‘‘import of services” means the supply of any service, where––
(i) the supplier of service is located outside India;
(ii) the recipient of service is located in India; and
(iii) the place of supply of service is in India;
|Definition of Export
Section 2(5) of IGST Act’2017 “export of goods” with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India;
Section 2(6) of IGST Act’2017 “export of services” means the supply of any service when,––
(i) the supplier of service is located in India;
(ii) the recipient of service is located outside India;
(iii) the place of supply of service is outside India;
(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; and
(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;
|Definition of Zero Rated Supply
Section 16(1) of IGST Act’2017 “zero rated supply” means any of the following supplies of goods or services
or both, namely:––
(a) export of goods or services or both; or
(b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.
All the provisions related to import and exports of goods and services under GST in India are discussed separately under IMPORT and EXPORTS section of this article.
What are all the taxes that are applicable on Imports under GST?
Following Taxes shall continue to be levied on import of goods and services:
Additional duties of Customs, commonly known as Countervailing Duty (CVD) and Special Additional duty of Customs (SAD) are subsumed into IGST so they would be replaced with the IGST and GST Compensation Cess (wherever applicable).
It is important to note here that in respect of such goods that have been kept outside the purview of GST like petroleum products etc., levy of additional duties of customs shall continue.
What about the imports made during the transitional period?
In case of transactions of imports still under process as on 01-07-2017, IGST and GST Compensation cess (wherever applicable), would be levied on:
What would be method of calculation of these taxes?
Rate of IGST on goods and services as applicable to other inter-state supplies are applicable for imports also. Similarly different rates of tax have also been notified for goods attracting Compensation Cess.
Separate Chapter 98 of HSN codes are provided for Project imports, laboratory chemicals, passengers’ baggage, personal importation, ship stores. As per this chapter Project Imports have been taxable at 18% and Passenger baggage is exempted from GST.
Passenger Baggage up to a limit of the duty free allowances provided under the Baggage Rules, 2016.
However, basic customs duty shall be leviable at the rate of 35% and education cess as applicable on the value which is in excess of the duty free allowances provided under the Baggage Rules, 2016.
What would be the value on which these taxes would be levied?
Method of calculation of Anti-Dumping Duty or Safeguard duty, wherever applicable would be provided as per the respective notification issued for levy of such duty. Under Earlier laws, Anti-dumping duties and safeguard duty were not included in the value for the levy of additional duty of customs (CVD) or Special Additional Duty (SAD), however under GST these will also be included in the value for levy of IGST and Compensation Cess. For better understanding of the readers, calculation of various taxes under different situations has been provided below on the basis of following assumptions:
|Situations||Basic Customs Duty||CVD||Education Cess||Higher Education Cess||IGST||Compnesation Cess|
Are there any changes that are required to be made in Import Export Code (IEC)?
To identify a particular entity PAN would replace the Import Export code (IEC).
To indentify the transaction of every import and export, in addition to IEC, all the importers are required to quote GSTIN in their Bills of Entry.
In case where GSTIN is not applicable, UIN or PAN would be accepted as IEC.
Are there any changes that are required to be made in Bill of Entry or Courier Bill?
In order to incorporate additional details of GST like GSTIN of importer, rate of GST, amount of IGST, Amount and rate of Compensation cess etc. the formats of Bill of entry and Courier Bill of entry are also amended.
What will happen to export promotion schemes like EPCG, DEEC (Advance License) and DFIA?
Existing Export promotion schemes like EPCG, DEEC (Advance License) and DFIA shall continue as regard payment of Customs duties is concerned; however IGST and Compensation Cess will have to be paid all the imports made under GST, unless otherwise specifically exempted through some notification or amendment under the IGST Act’2017 and rules made there under.
Similarly EXIM scrips like MEIS and SEIS can be used for the payment of Basic Custom Duty, Safeguard Duty, Transitional Product Specific Safeguard Duty, and Antidumping Duty only and they cannot be used for payment of GST or Compensation Cess. For items not covered under the GST (specified in Fourth Schedule to Central Excise Act 1944 covering specified petroleum products, tobacco etc.), scrips can also be used for payment of duties like central excise, CVD/ SAD.
Like Customs, under GST also separate HSN 9801 is provided for Project imports which is taxable at 18% under GST and Passenger baggage upto permissible limits with HSN 9803 is exempt from GST.
Advance Authorisation holder will have to pay IGST at the time of imports. He can take input Tax Credit (ITC), and after export, claim refund of any unutilized input tax credit at the end of tax period.
The EPCG holder also will have to pay IGST at the time of imports and take input Tax Credit (ITC) on the duty paid. He cannot claim refund of any unutilized input tax credit after the exports.
For items covered under the GST, No Advance Release Order (ARO) facility will be available in Advance Authorisation and EPCG scheme.
For items not covered under the GST ARO would be available.
Invalidation facility will be available for both Advance Authorisation and EPCG schemes, but applicable GST would need to be paid while making local procurement, using an invalidation letter. Input Tax Credit (ITC) of the GST paid on such local procurement can be availed.
Whether balance import quantities under Advance Authorisations issued before 01.07.2017 can be utilised after 01.07.2017? And, will there be any implications on export obligation?
The balance import quantities under Advance Authorisations can be utilised for duty free import but only Basic Customs Duty will be exempted on import after 01.07.2017. The applicable IGST will be required to be paid. There will be no implication on export obligation of Advance Authorisations.
Whether balance import quantities under EPCG issued before 01.07.2017 can be utilised after 01.07.2017? And, will there be any implications on export obligation?
The balance import quantities under EPCG can be utilised for duty free import but only Customs Duties will be exempted on import after 01.07.2017. The applicable IGST will be required to be paid. Since the export obligation is based on actual duty saved amount, the EO will be accordingly adjusted.
What will happen to imports by EOU/EHTP/STP/SEZ etc.?
Facilities to EOUs/EHTPs/STPs shall continue as regard payment of Customs duties on Imports is concerned; however IGST and Compensation Cess will have to be paid all the imports made under GST, unless otherwise specifically exempted through some notification or amendment under the IGST Act’2017 and rules made there under.
For EOU’s the facility of duty free import of capital goods under the Procurement Certificate procedure will not be available. To import capital goods at zero duty, EOUs will have to follow procedure under of the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017.
As per notification no. 18/2017 Integrated Tax (Rate) dtd. 05-07-2017 Import of SERVICES by a unit or a developer in the Special Economic Zone for authorised operations is exempt from the whole of the integrated tax leviable thereon under section 5 of the Integrated Goods and Service Tax Act, 2017.
As per notification no. 64/2017-Customs dtd. 05-07-2017 Import of GOODS by a unit or a developer in the Special Economic Zone for authorised operations is exempt from the whole of the integrated tax leviable thereon under section 5 of the Integrated Goods and Service Tax Act, 2017.
Domestic Tariff Area (DTA) or Domestic Tariff Zone (DTZ) means an area within India that is outside the Special Economic Zones and EOU/EHTP/STP/BTP.
The units operating under certain specific schemes such as EPZ/SEZ/EOU are expected to carry out their activities within a customs bonded area. Any area which is not under the jurisdiction of a custom bonded area is called a Domestic Tariff Area. In the GST regime, clearance of goods in Domestic Tarrif Area (DTA) i.e. will attract GST besides payment of amount equal to BCD exemption availed (i.e. reversal as per Standard Input Output norms published by the DGFT or norms fixed by Norms Committee of DGFT) on inputs used in such finished goods. DTA clearances of those goods which are not under GST, would attract Central Excise duties as before and the existing provisions provided under notification no. 52/2003-Cus, notification no. 22/2003-CE and Notification no. 23/2003-CE will continue to apply for import, domestic procurement and domestic clearance respectively.
Inter Unit Transfers Supply of goods from one EOU to another EOU (inter-unit transfer) will require payment of applicable GST. The BCD exemption availed on inputs by the supplier EOU, utilized in such transferred goods would have to be reversed by the recipient EOU at the time clearance of such goods in DTA. Same provisions apply on sending of Goods for Job work.
Also as per Circular No. 29/2017-Customs dated 17-07-2017:
What about SAD Refunds under GST?
With effect from 01-07-2017, SAD has been subsumed under GST. However for certain items like petroleum products which are kept out of the purview of GST would be liable for payment of SAD on imports and hence would still be eligible for SAD refunds.
What about IGST paid on imports under GST?
At the time of imports, in case GSTIN is declared in Bill of Entry regime, input tax credit of the integrated tax (IGST) and GST Compensation Cess shall be available to the importer.
What about IGST paid on High Sea Sales under GST?
As per Circular No. 33 /2017-Cus F.No.450/131/2017-CusIV dated 01-08-2017, IGST on high sea sale (s) transactions of imported goods, whether one or multiple, shall be levied and collected only at the time of importation i.e. when the import declarations are filed before the Customs authorities for the customs clearance purposes for the first time.
Further, value addition accruing in each such high sea sale shall form part of the value on which IGST is collected at the time of clearance.
What would be taxability of Exports under GST?
Export would be treated as zero-rated supply under GST.
As per Section 16(3) of IGST Act, a registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely:––
(a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of un-utilised input tax credit; or
(b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made there under.
In case export is made after payment of tax, IGST paid on export goods would be refunded. Otherwise, in case export is made under bond /LUT without payment of taxes, the input tax credit proportionate to the goods and services consumed in goods exported under bond /LUT would be refunded. However, no refund of IGST paid on exports or GST paid on Inputs in case of exports made under LUT/Bond can be claimed if duty drawback is availed in relation to such exports. The provisions related to duty drawback are discussed later in details.
What about applicability of Compensation cess in case of Exports?
Ministry of finance on 26th july 2017 issued circular no. 1 providing clarification regarding applicability of section 16 of the IGST Act, 2017, relating to zero rated supply for the purpose of Compensation Cess on exports. As per this circular:
a) Exporter will be eligible for refund of Compensation Cess paid on goods exported by him [on similar lines as refund of IGST under section 16(3) (b) of the IGST, 2017]; or
b) No Compensation Cess will be charged on goods exported by an exporter under bond and he will be eligible for refund of input tax credit of Compensation Cess relating to goods exported [on similar lines as refund of input taxes under section 16(3) (a) of the IGST, 2017].
What about Taxes on inputs in case of export of exempt goods or service?
Though Input tax credit is not available for exempt supplies. However, Exports are not exempt supplies, but these are zero rated supplies and moreover as per section 16(2) of IGST Act’2017. in case claim of ITC in respect of a particular supply is not restricted under section 17(5) of CGST Act’2017, then in case of zero rated supply under IGST, ITC shall still be available irrespective of the fact that such supply is declared as an exempt supply under CGST. So in case exempt supplies are exported or in case exempt supplies are made to SEZ developer or SEZ units, such a supplier may claim ITC on inward supplies related to such supply.
Is there any special endorsement which is required to be made in the document of supply in case of exports out of India?
As per the proviso to Rule 46 of CGST Rule, in the case of the export of goods or services, the invoice shall carry an endorsement
“SUPPLY MEANT FOR EXPORT/SUPPLY TO SEZ UNIT OR SEZ DEVELOPER FOR AUTHORISED OPERATIONS ON PAYMENT OF INTEGRATED TAX”
“SUPPLY MEANT FOR EXPORT/SUPPLY TO SEZ UNIT OR SEZ DEVELOPER FOR AUTHORISED OPERATIONS UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF INTEGRATED TAX”,
as the case may be, and shall, in lieu of the details specified in clause (e), contain the following details, namely,-
(i) name and address of the recipient;
(ii) address of delivery; and
(iii) name of the country of destination.
Are there any changes that are required to be made in Shipping Bill or Courier Bill?
In order to incorporate additional details of GST like GSTIN of importer, rate of GST, amount of IGST, Amount and rate of Compensation cess etc. the formats of Shipping Bills and Courier Bill of entry are also amended.
What is the procedure of Exports without payment of IGST?
Exports can be made without payment of duty in following two ways:
CBEC on 7th of July 2017 issued a notification no. 16/2017, whereby it specifies the conditions and safeguards for the registered person who intends to supply goods or services for export without payment of integrated tax, for furnishing a Letter of Undertaking in place of a Bond.
As per this notification, any person who fulfills following conditions shall be allowed to make exports by furnishing a Letter of Undertaking in place of a Bond without payment of integrated tax:
(a) Person must be a status holder as specified in paragraphs 3.20 and 3.21 (Corrigendum issued in this regard) of the Foreign Trade Policy 2015-2020; orOnline GST Certification Course by TaxGuru & MSME- Click here to Join
(b) Person must have received in the preceding financial year:
However such person should have not been prosecuted for any offence under the Central Goods and Services Tax Act, 2017 (12 of 2017) or under any of the existing laws in case where the amount of tax evaded exceeds Rs. 2,50,000/-.
|As per paragraphs 3.20 of the Foreign Trade Policy 2015-2020:
|Paragraphs 3.21 of the Foreign Trade Policy 2015-2020 prescribed category of status holders from one star to five star Export House, these are as follows:
This LUT shall be valid for twelve months. If the exporter fails to comply with the conditions of the LUT he may be asked to furnish a bond. Exports may be allowed under existing LUTs/Bonds till 31st July 2017. Exporters shall submit the LUTs/bond in the revised format latest by 31st July, 2017.
As per Circular No. 4/4/2017-GST, F. No. 349/82/2017-GST all the other exporters shall submit bond on non-judicial stamp paper of the value as applicable in the State in which bond is being furnished.
The exporters shall furnish a running bond, in case he is required to furnish a bond, in FORM GST RFD -11. The bond would cover the amount of tax involved in the export based on estimated tax liability as assessed by the exporter himself. The exporter shall ensure that the outstanding tax liability on exports is within the bond amount. In case the bond amount is insufficient to cover the tax liability in yet to be completed exports, the exporter shall furnish a fresh bond to cover such liability.
FORM RFD -11 under rule 96A of the CGST Rules requires furnishing a bank guarantee with bond. The jurisdictional Commissioner may decide about the amount of bank guarantee depending upon the track record of the exporter. If Commissioner is satisfied with the track record of an exporter then furnishing of bond without bank guarantee would suffice. In any case the bank guarantee should normally not exceed 15% of the bond amount.
Also Government has issued Circular No. 2/2/2017-GST No. 349/82/2017-GST, providing some relaxations regarding furnishing of Bond/ Letter of Undertaking for Exports , whereby two relaxations have been provided to exporters:
For a time being FORM GST RFD-11 may be filed in Manual form which is otherwise required to be filed Online.
For a time being FORM GST RFD-11 to Deputy/Assistant Commissioner, which is otherwise required to be filed to Commissioner.
What is the procedure of obtaining refund of integrated tax paid on export of goods or services ?
The procedure of obtaining refund of IGST paid on Exports is provided in Rule 96 of CGST Rules 2017.
|As per Rule 96 of CGST Rule 2017.
Refund of integrated tax paid on goods exported out of India.-
(1) The shipping bill filed by an exporter shall be deemed to be an application for refund of integrated tax paid on the goods exported out of India and such application shall be deemed to have been filed only when:-
(a) the person in charge of the conveyance carrying the export goods duly files an export manifest or an export report covering the number and the date of shipping bills or bills of export; and
(b) the applicant has furnished a valid return in FORM GSTR-3 or FORM GSTR-3B;
(2) The details of the relevant export invoices contained in FORM GSTR-1 shall be transmitted electronically by the common portal to the system designated by the Customs and the said system shall electronically transmit to the common portal, a confirmation that the goods covered by the said invoices have been exported out of India.
(3) Upon the receipt of the information regarding the furnishing of a valid return in FORM GSTR-3 or FORM GSTR-3B from the common portal, the system designated by the Customs shall process the claim for refund and an amount equal to the integrated tax paid in respect of each shipping bill or bill of export shall be electronically credited to the bank account of the applicant mentioned in his registration particulars and as intimated to the Customs authorities.
(4) The claim for refund shall be withheld where,-
(a) a request has been received from the jurisdictional Commissioner of central tax, State tax or Union territory tax to withhold the payment of refund due to the person claiming refund in accordance with the provisions of sub-section (10) or sub-section (11) of section 54; or
(b) the proper officer of Customs determines that the goods were exported in violation of the provisions of the Customs Act, 1962.
(5) Where refund is withheld in accordance with the provisions of clause (a) of sub-rule (4), the proper officer of integrated tax at the Customs station shall intimate the applicant and the jurisdictional Commissioner of central tax, State tax or Union territory tax, as the case may be, and a copy of such intimation shall be transmitted to the common portal.
(6) Upon transmission of the intimation under sub-rule (5), the proper officer of central tax or State tax or Union territory tax, as the case may be, shall pass an order in Part B of FORM GST RFD-07.
(7) Where the applicant becomes entitled to refund of the amount withheld under clause (a) of sub-rule (4), the concerned jurisdictional officer of central tax, State tax or Union territory tax, as the case may be, shall proceed to refund the amount after passing an order in FORM GST RFD-06.
(8) The Central Government may pay refund of the integrated tax to the Government of Bhutan on the exports to Bhutan for such class of goods as may be notified in this behalf and where such refund is paid to the Government of Bhutan, the exporter shall not be paid any refund of the integrated tax.
What is the procedure of obtaining refund of integrated tax paid on inputs related to export of goods or services under bond or Letter of Undertaking?
Manner of calculation of amount of claim eligible for refund in case of exports made under bond or Letter of Undertaking is provided in Rule 89(4) of CGST Rules 2017. In case of zero-rated supply without payment of tax under bond or letter of undertaking, refund of input tax credit shall be granted as per the following formula:
Admissible Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net ITC / Adjusted Total Turnover
The procedure of obtaining refund of IGST paid on Exports made under bond or Letter of Undertaking is provided in Rule 96A of CGST Rules 2017.
|As per Rule 96A of CGST Rules 2017
Refund of integrated tax paid on export of goods or services under bond or Letter of Undertaking.-
(1) Any registered person availing the option to supply goods or services for export without payment of integrated tax shall furnish, prior to export, a bond or a Letter of Undertaking in FORM GST RFD-11 to the jurisdictional Commissioner, binding himself to pay the tax due along with the interest specified under sub-section (1) of section 50 within a period of —
(a) fifteen days after the expiry of three months from the date of issue of the invoice for export, if the goods are not exported out of India; or
(b) fifteen days after the expiry of one year, or such further period as may be allowed by the Commissioner, from the date of issue of the invoice for export, if the payment of such services is not received by the exporter in convertible foreign exchange.
(2) The details of the export invoices contained in FORM GSTR-1 furnished on the common portal shall be electronically transmitted to the system designated by Customs and a confirmation that the goods covered by the said invoices have been exported out of India shall be electronically transmitted to the common portal from the said system.
(3) Where the goods are not exported within the time specified in sub-rule (1) and the registered person fails to pay the amount mentioned in the said sub-rule, the export as allowed under bond or Letter of Undertaking shall be withdrawn forthwith and the said amount shall be recovered from the registered person in accordance with the provisions of section 79.
(4) The export as allowed under bond or Letter of Undertaking withdrawn in terms of subrule (3) shall be restored immediately when the registered person pays the amount due.
(5) The Board, by way of notification, may specify the conditions and safeguards under which a Letter of Undertaking may be furnished in place of a bond.
(6) The provisions of sub rule (1) shall apply, mutatis mutandis, in respect of zero-rated supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit without payment of integrated tax.
Will I get refund of Compensation Cess paid by me?
Ministry of finance on 26th july 2017 issued circular no. 1 providing Clarification regarding applicability of section 16 of the IGST Act, 2017, relating to zero rated supply for the purpose of Compensation Cess on exports. As per this circular:
a) Exporter will be eligible for refund of Compensation Cess paid on goods exported by him [on similar lines as refund of IGST under section 16(3) (b) of the IGST, 2017]; or
b) No Compensation Cess will be charged on goods exported by an exporter under bond and he will be eligible for refund of input tax credit of Compensation Cess relating to goods exported [on similar lines as refund of input taxes under section 16(3) (a) of the IGST, 2017].
Is there any rule for issuing of provisional refunds in case of Exports?
In case of claim for refund is on account of zero-rated supply made by registered persons, the proper officer may issue refund order in FORM GST RFD-04 on a provisional basis within seven days of issue of acknowledgement of refund application in form RFD-02. Refund amount in such order shall be ninety percent of the total amount so claimed, excluding the amount of input tax credit provisionally accepted and thereafter such proper officer shall make an order for final settlement of the refund claim after due verification of documents furnished by the applicant.
For the provisional refund, the proper officer shall issue a payment advice in FORM GST RFD-05 for the amount so sanctioned and the same shall be electronically credited to any of the bank accounts of the applicant mentioned in his registration particulars and as specified in the application for refund.
Also the provisional refund shall be granted only if the person claiming refund has, during any period of five years immediately preceding the tax period to which the claim for refund relates, not been prosecuted for any offence under the Act or under an existing law where the amount of tax evaded exceeds Rs. 2,50,000/-.
However, no provisional refund of amount less than Rs. 1,000/- shall be issued.
Though at the first instance it seems that the facility of this provisional refund is an advantage to a registered person under GST, however if we compare the scenario with the existing provisions of law, where purchases related to such zero rated supplies may be made without payment of taxes under statutory forms, we will come to know that now actually under GST purchases against these zero rated supplies has to be first made after payment of taxes & then the dealer shall apply for refund of such taxes paid. Thereafter if he satisfies all the conditions mentioned above, then only he will get 90 percent of such refund on provisional basis and balance when he completes all the documents and prove to the satisfaction of proper officer that he has not passed on the incidence of such tax and interest to any other person.
What are the Documents required to be filed along with refund application?
The application of refund shall be accompanied by any of the following documents, as applicable, to establish that a refund is due to the applicant:
However, as per section 142 of CGST Act’2017, Every claim for refund filed after the appointed day for refund of any duty or tax paid under existing law in respect of the goods or services exported before or after the appointed day, shall be disposed of in accordance with the provisions of the existing law.
What will happen to Duty Drawback?
Concept of Dutydrawback, All India Rate , Brand Rate etc. shall continue under GST regime also and there is no change in these provisions.
It means that for CGST Act’2017, drawback means duty drawback as mentioned in Section 75 of Customs Act’2017.
Second proviso to Section 54(3) of CGST Act’2017 states that “no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.”
So we may interpret that in case of Duty Drawback under Section 74 refund of both Customs duties as well as Integrated Tax and Compensation Cess paid on imported goods which are re-exported shall be available (same has also been substantiated by Circular No. 21/2017 -Customs dated 30-06-2017) and in case of Duty Drawback under section 75 of Customs Act refund shall be restricted to Customs duty paid on imports and Central Excise duty paid on goods which are out of purview of GST i.e. inputs on which GST is paid or IGST paid on exports shall not be available for refund.
Extracts of Section 74 & Section 75 of Customs Acts have been reproduced below, for your reference.
|SECTION 74. Drawback allowable on re-export of duty-paid goods. –
(1) When any goods capable of being easily identified which have been imported into India and upon which any duty has been paid on importation, –
(i) are entered for export and the proper officer makes an order permitting clearance and loading of the goods for exportation under section 51; or
(ii) are to be exported as baggage and the owner of such baggage, for the purpose of clearing it, makes a declaration of its contents to the proper officer under section 77 (which declaration shall be deemed to be an entry for export for the purposes of this section) and such officer makes an order permitting clearance of the goods for exportation; or
(iii) are entered for export by post under section 82 and the proper officer makes an order permitting clearance of the goods for exportation,
ninety-eight per cent of such duty shall, except as otherwise hereinafter provided, be re-paid as drawback, if –
(a) the goods are identified to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs as the goods which were imported; and
(b) the goods are entered for export within two years from the date of payment of duty on the importation thereof :
Provided that in any particular case the aforesaid period of two years may, on sufficient cause being shown, be extended by the Board by such further period as it may deem fit.
(2) Notwithstanding anything contained in sub-section (1), the rate of drawback in the case of goods which have been used after the importation thereof shall be such as the Central Government, having regard to the duration of use, depreciation in value and other relevant circumstances, may, by notification in the Official Gazette, fix.
(3) The Central Government may make rules for the purpose of carrying out the provisions of this section and, in particular, such rules may –
(a) provide for the manner in which the identity of goods imported in different consignments which are ordinarily stored together in bulk, may be established;
(b) specify the goods which shall be deemed to be not capable of being easily identified; and
(c) provide for the manner and the time within which a claim for payment of drawback is to be filed.
(4) For the purposes of this section –
(a) goods shall be deemed to have been entered for export on the date with reference to which the rate of duty is calculated under section 16;
(b) in the case of goods assessed to duty provisionally under section 18, the date of payment of the provisional duty shall be deemed to be the date of payment of duty.
|SECTION 75. Drawback on imported materials used in the manufacture of goods which are exported. –
(1) Where it appears to the Central Government that in respect of goods of any class or description manufactured, processed or on which any operation has been carried out in India, being goods which have been entered for export and in respect of which an order permitting the clearance and loading thereof for exportation has been made under section 51 by the proper officer, or being goods entered for export by post under section 82 and in respect of which an order permitting clearance for exportation has been made by the proper officer, a drawback should be allowed of duties of customs chargeable under this Act on any imported materials of a class or description used in the manufacture or processing of such goods or carrying out any operation on such goods, the Central Government may, by notification in the Official Gazette, direct that drawback shall be allowed in respect of such goods in accordance with, and subject to, the rules made under sub-section (2):
Provided that no drawback shall be allowed under this sub-section in respect of any of the aforesaid goods which the Central Government may, by rules made under sub-section (2), specify, if the export value of such goods or class of goods is less than the value of the imported materials used in the manufacture or processing of such goods or carrying out any operation on such goods or class of goods, or is not more than such percentage of the value of the imported materials used in the manufacture or processing of such goods or carrying out any operation on such goods or class of goods as the Central Government may, by notification in the Official Gazette, specify in this behalf :
Provided further that where any drawback has been allowed on any goods under this sub-section and the sale proceeds in respect of such goods are not received by or on behalf of the exporter in India within the time allowed under the Foreign Exchange Management Act, 1999 (42 of 1999), such drawback shall except under such circumstances or such conditions as the Central Government may, by rule, specify, be deemed never to have been allowed and the Central Government may, by rules made under sub-section (2), specify the procedure for the recovery or adjustment of the amount of such drawback.
(1A) Where it appears to the Central Government that the quantity of a particular material imported into India is more than the total quantity of like material that has been used in the goods manufactured, processed or on which any operation has been carried out in India and exported outside India, then, the Central Government may, by notification in the Official Gazette, declare that so much of the material as is contained in the goods exported shall, for the purpose of sub-section (1), be deemed to be imported material.
(2) The Central Government may make rules for the purpose of carrying out the provisions of sub-section (1) and, in particular, such rules may provide –
(a) for the payment of drawback equal to the amount of duty actually paid on the imported materials used in the manufacture or processing of the goods or carrying out any operation on the goods or as is specified in the rules as the average amount of duty paid on the materials of that class or description used in the manufacture or processing of export goods or carrying out any operation on export goods of that class or description either by manufacturers generally or by persons processing or carrying on any operation generally or by any particular manufacturer or particular person carrying on any process or other operation, and interest if any payable thereon;
(aa) for specifying the goods in respect of which no drawback shall be allowed;
(ab) for specifying the procedure for recovery or adjustment of the amount of any drawback which had been allowed under sub-section (1) or interest chargeable thereon;
(b) for the production of such certificates, documents and other evidence in support of each claim of drawback as may be necessary;
(c) for requiring the manufacturer or the person carrying out any process or other operation to give access to every part of his manufactory to any officer of customs specially authorised in this behalf by the Assistant Commissioner of Customs or Deputy Commissioner of Customs to enable such authorised officer to inspect the processes of manufacture, process or any other operation carried out and to verify by actual check or otherwise the statements made in support of the claim for drawback.
(d) for the manner and the time within which the claim for payment of drawback may be filed;
(3) The power to make rules conferred by sub-section (2) shall include the power to give drawback with retrospective effect from a date not earlier than the date of changes in the rates of duty on inputs used in the export goods.
A transition period of three months is also being provided from date of implementation of GST i.e. 1.7.2017. During this period, existing duty drawback scheme under Section 75 shall continue. For exports during this period, exporters can claim higher rate of duty drawback (composite AIR) subject to conditions that no input tax credit of CGST/IGST is claimed, no refund of IGST paid on export goods is claimed and no CENVAT credit is carried forward.
Exporters also have the option of claiming only the Customs portion of AIR and claim refund/ITC under GST laws.
A declaration from exporter and certificate from jurisdictional GST officer in this regard has been prescribed in the notification related to AIRs. Similarly, the exporter can claim brand rate for drawback of Customs, Central Excise duties and Service Tax during this period.
The certificates from jurisdictional GST officer as referred above may not be available during initial days. As per Systems design, whenever higher rate (composite rate) of drawback is claimed, the non-availment of credit certificate is a mandatory document and unless it is recorded as available, shipping bill will not move to LEO stage. In such a situation, all field formations shall ensure that exports are not delayed for requirement of the said certificate. The way out in such situation for the exporter is to amend the shipping bill to claim lower rate. The exporter will have an option to file supplementary claim as per Drawback Rules at a later date once the certificate is obtained.
A similar issue in respect of Cenvat credit has been examined and clarified in the past vide Instruction no. 609/159/2016-DBK dated 13.03.2014.
Secondly, it could be possible that export goods may be manufactured by using both Central Excise/Service Tax paid and CGST/IGST paid inputs and inputs services or only CGST/IGST paid inputs and inputs services. In such situation, an exporter opting to claim composite rate of duty drawback during transition period has to give specified declaration and produce certificates as stated above so that he does not claim double benefit.
Exporter will have to reverse the ITC if any availed and also ensure that he does not claim refund of ITC/IGST. Requisite certificate from GST officer shall also be required to this effect. As mentioned earlier, exporters will also have option of claiming credit/refund of CGST/IGST and claim Customs rate drawback.
Relevant Extracts of Customs Notifications are also reproduced below:
|Notification numbers 59/2017-Cus (N.T.), dated 29.6.2017
In order to ensure smooth transition to the GST regime, Government has allowed the extant Duty Drawback scheme to continue for a period of three months i.e. from 1.7.2017 to 30.9.2017.
The exporter may, for exports made during this period, continue to claim the composite rates i.e. rates and caps given under columns (4) and (5) respectively of the Schedule of AIRs of duty drawback, subject to certain additional conditions.
During the transition period, exporters can also claim Brand rate of duty/tax incidence as they have been doing earlier.
The conditions imposed for claiming these composite rates aim to ensure that the exporters do not claim composite AIRs of duty drawback and simultaneously avail input tax credit of Central Goods and Services Tax (CGST) or Integrated Goods and Services Tax (IGST) on the export goods or on inputs and input services used in manufacture of export goods or claim refund of IGST paid on export goods.
Further, an exporter claiming composite rate shall also be barred to carry forward Cenvat credit on the export goods or on inputs or input services used in manufacture of export goods in terms of the CGST Act, 2017.
The exporters have to give a declaration and certificates as prescribed in this Notification at the time of export.
Similar checks shall apply while determining the Brand rate of drawback.
While a transition period of three months has been allowed, the exporters shall have an option to claim only Customs portion of AIRs of duty drawback i.e. rates and caps given under column (6) and (7) respectively of the Schedule of AIRs of duty drawback and avail input tax credit of CGST or IGST or refund of IGST paid on exports.
|Circular No. 23/2017 –Customs dt. 30-06-2017
For exports made during this transition period, the exporter can claim
All Industry Rate (AIR)
Brand rate of drawback for Customs, Central Excise Duties and Service Tax subject to certain additional conditions.
These conditions aim to ensure that the exporter simultaneously does not avail ITC of CGST or IGST on the export goods or on inputs and input services used in manufacture of export goods or claim refund of IGST paid on export goods.
Further, an exporter claiming drawback during transition period as per extant duty drawback provisions shall also be barred to carry forward Cenvat credit in terms of the CGST Act, 2017 on the export goods or on inputs or input services used in manufacture of export goods.
The exporter also has to give the prescribed declaration and certificates (similar to declaration and certificate prescribed in Notification No. 59/2017-Cus (N.T.) dated 29.6.2017 for claiming composite AIR during transition time) at the time of application for fixation of Brand rate of drawback.
At the same time, the exporter has the option of claiming the Brand rate of Customs duties and remnant Central Excise duties (in respect of goods given in Fourth Schedule to Central Excise Act, 1944) and avail input tax credit of CGST or IGST or refund of IGST paid on exports.
|Circular No. 32/2017 – Customs dated 27-07-2017 clarifying impact of Notification 73/2017-Cus (N.T.) dated 26.7.2017
Various issues have been highlighted by field formations and exporters regarding the requirement of a certificate to be obtained from the jurisdictional GST officer prescribed vide Note and Condition 12A of Notification 131/2016-Cus (N.T.) dated 31.10.2016 as amended by Notification 59/2017-Cus (N.T.) dated 29.6.2017. The certificate aimed to ensure that there was no double neutralisation of taxes by way of credit/refund and drawback. However, in view of factors such as absence of clarity about jurisdictional GST officer, time lag between exports and the requisite returns to be filed under GST laws, etc., the said certificate from GST officer may not be available immediately at the time of export.
Keeping in mind the above difficulties, the Government has amended Note and Condition 12A of Notification 131/2016-Cus (N.T.) dated 31.10.2016 by Notification 73/2017-Cus (N.T.) dated 26.7.2017 and dispensed with the requirement of the certificate from GST officer to claim higher rate of drawback. To facilitate exports, the higher rate of drawback can be claimed on the basis of self-declaration to be provided by exporter in terms of revised Note and Condition 12A of aforesaid Notification.
Since Notes and Conditions of Notification No. 131/2016-Cus (NT) dated 31.10.2016 (as amended) are integral part of the rates of drawback given under the Schedule to said Notification, accordingly in terms of the Section 75(3) of the Customs Act, 1962 and Rule 5(2) of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995, it may be noted that the changes made in Note and Condition 12A shall be applicable w.e.f. 1.7.2017 itself.
Thus, exports which have been made from 1.7.2017 onwards shall be governed by the revised Note and Condition 12A.
For all exports made w.e.f 1.7.2017 for which higher rate of drawback is claimed, exporter has to submit the self-declaration in the format attached. This format is also being suitably included in the EDI shipping bill.
In respect of exports that have already been made, exporters may submit a single declaration regarding the export products covered in past shipping bills for which let export order has been given from 1.7.2017 onwards. This shall be irrespective of any certificate or declaration, if any, given earlier.
5. Another aspect that may be noted is that there could be cases where export goods had been cleared from factory, warehouse, etc. prior to 1.7.2017 but let export order has not been issued before 1.7.2017. Such goods are not supplies under GST and accordingly, said Note and Condition 12A is not applicable. For such goods, the declaration from exporter or certificate from the then Central Excise officer as applicable in terms of Note and Condition 12 of said Notification No. 131/2016-Customs (NT) shall continue.
|Self-declaration for claiming higher rate of AIR of duty drawback under column (4) and (5) of the AIR Schedule under Notification No. 131/2016-Customs (N.T.) dated 31.10.2016 (as amended)
I/We, M/s. …………………………….., IEC No. ……………….. and address ……………………. hereby declare that in respect of export products covered under Shipping Bill Nos. ………………….. dated …………… on which higher rate of drawback under column (4) and (5) of the Schedule of All Industry Rates of duty drawback of Notification No. 131/2016-Customs (N.T.) dated 31.10.2016 (as amended) is claimed-
(i) no input tax credit of the Central Goods and Services Tax or of the Integrated Goods and Services Tax has been and shall be availed on the export product,
(ii) no input tax credit of the Central Goods and Services Tax or of the Integrated Goods and Services Tax has been and shall be availed on any of the inputs or input services used in the manufacture of the export product,
(iii) no refund of Integrated Goods and Services Tax paid on export product shall be claimed;
[Please strike out (i), (ii) or (iii), whichever is not applicable.]
b) CENVAT credit on the export product or on inputs or input services used in the manufacture of the export product has not been carried forward and shall not carry forward in terms of the Central Goods and Services Tax Act, 2017.
Signature, date and seal of exporter
What are the conditions for availing of duty drawback in case of exports?
Ministry of finance, Customs department issued Notification No. 73/2017-CUSTOMS (N.T.) on 26th July, 2017, prescribing the condition for availability of duty drawback in case of exports. Whereby:
What is the procedure of Sealing of Containers for Exports under GST?
As per Circular No. 26/2017-Customs dated 1st July, 2017, CBEC has in the past issued various circulars both on the Excise and Customs side on the issue of sealing of containers. At present, there are three categories of containers which arrive at the port/ICD:
It has been decided to do away with the sealing of containers with export goods by CBEC officials. So now either the containers will be sealed under self sealing procedure or they must be stuffed and sealed at Container Freight Stations/ Inland Container Depot.
Conditions for availing self-sealing of containers:
The exporter shall be under an obligation to inform the details of the premises whether a factory or warehouse or any other place where container stuffing is to be carried out, to the jurisdictional customs officer.
The exporter should be registered under the GST and should be filing GSTRI and GSTR2.(Where exporter is not a GST registrant, he shall bring the export goods to a Container Freight Station/Inland Container Depot for stuffing and sealing of container.)
However, in certain situations, an exporter may follow the self-sealing procedure even if he is not required to be registered under GST Laws. Such an exception is available to the Status Holders recognized by DGFT under a valid status holder certificate issued in this regard.
Procedure of self-sealing of Containers w.e.f. 01-09-2017:
Any exporter desirous of availing this procedure shall inform the jurisdictional Custom Officer of the rank of Superintendent or Appraiser of Customs, at least 15 days before the first planned movement of a consignment from his/her factory/ premises, about the intention to follow self- sealing procedure to export goods from the factory premises or warehouse.
The jurisdictional Superintendent or an Appraiser or an Inspector of Customs shall visit the premises from where the export goods will be stuffed & sealed for export.
The jurisdictional Superintendent or Inspector of Customs shall inspect the premises with regard to viability of stuffing of container in the premises and submit a report to the jurisdictional Deputy Commissioner of Customs or as the case may be the Assistant Commissioner of Customs within 48 hours.
The jurisdictional Deputy Commissioner of Customs or as the case may be the Assistant Commissioner of Customs shall forward the proposal, in this regard to the Principal Commissioner/Commissioner of Customs who would grant permission for self sealing at the approved premises.
Once the permission is granted, the exporter shall furnish only intimation to the jurisdictional Superintendent or Customs each time self-sealing is carried out at approved premises. The intimation, in this regard shall clearly mention the place and address of the approved premises, description of export goods and whether or not any incentive is being claimed.
Where the visit report of the Superintendent or an Appraiser or an Inspector of Customs regarding viability of the stuffing at the factory/ premises is not favorable, the exporter shall bring the goods to the Container Freight Station /Inland Container Depot/Port for sealing purposes.
Self-Sealing permission once given by a Principal Commissioner/Commissioner of Customs shall be valid for export at all the customs stations.
The customs formation granting the self sealing permission shall circulate the permission along with GSTIN of the exporter to all Custom Houses/Station concerned.
Transport document for movement of self-sealed container by an exporter from factory or warehouse shall be same as the transport document prescribed under the GST Laws. In the case of an exporter who is not a GST registrant, way bill or transport challan or lorry receipt shall be the transport document.
The exporter shall seal the container with the tamper proof electronic-seal of standard specification. The electronic seal should have a unique number which should be declared in the Shipping Bill. Before sealing the container, the exporter shall feed the data such as name of the exporter, IEC code, GSTIN number, description of the goods, tax invoice number, name of the authorized signatory (for affixing the e-seal) and Shipping Bill number in the electronic seal. Thereafter, container shall be sealed with the same electronic seal before leaving the premises.
The exporter intending to clear export goods on self-clearance (without employing a Customs Broker) shall file the Shipping Bill under digital signature.
All consignments in self-sealed containers shall be subject to risk based criteria and intelligence, if any, for examination / inspection at the port of export. At the port/ICD as the case may be, the customs officer would verify the integrity of the electronic seals to check for tampering if any en-route. The Risk Management System (RMS) is being suitably revamped to improvise the interdiction/ examination norms. However, random or Intelligence based selection of such containers for examination/scanning would continue.
Board has decided that the above revised procedure regarding sealing of containers shall be effective from 01.09.2017. A future date has been prescribed since the returns under GST have been permitted to be filed by 10.09.17 and also with the purpose to give enough time to the stakeholders to adapt to the new procedures. Therefore, as a measure of facilitation, the existing practice of sealing the container with a bottle seal under Central Excise supervision or otherwise would continue.