Introduction:-

Taxation laws have laid down the taxes applicable on import and export of goods and services. In the current tax regime, laws of Customs duty, Excise, Service Tax and VAT lay down the tax treatment of imports and exports. In the GST regime, Excise, Service Tax and VAT will be subsumed into GST and customs duty will continue to be levied separately.

Let us understand the tax implication on imports and exports under GST in comparison to the current regime.

Import of goods

In the GST regime, a person who imports goods has to pay customs duty and IGST. The difference here is that CVD and SAD levied on imports in the current regime will be replaced by IGST under GST. IGST will be levied at the rate applicable to the imported goods in India. An importer can claim full tax credit of IGST paid on imports. Hence, importers who were unable to claim credit of CVD or SAD in the current regime can now claim full tax credit of the IGST paid on imports. However, no tax credit will be given on customs duty paid and it remains a cost for the importer under GST also.

Let us take an example to understand the levy of import duties in case of import of goods in the GST regime.

Example: Shubham Apparel in Rajasthan purchases apparel from a supplier, Oz Designs, in Sydney, Australia.

Tax calculation

Particulars Nos. Price per no. (Rs.) Total Price (Rs.)
Women’s T-shirts 200 2,500    (51.68 AUD) *   5,00,000
Men’s T-shirts 100 5,000    (103.37 AUD) *   5,00,000
Total 300 10,00,000
Customs duty @ 10%        1,00,000
Education cess @ 3% on customs duty (10,000*3%)              3,000
Sub total     11,03,000
IGST @18% **       1,98,540
Total cost of import     13,01,540

* Exchange rate taken is 0.021 AUD = 1 Rupee
**Assuming GST rate of 18% on apparel.

Import of Services

Under GST, a supply will be considered as an import of service when-

  1. The supplier of the service is located outside India.
  2. The recipient of the service is located in India and
  3. The place of supply of the service is in India.

For example: Rajesh Apparels in Hyderabad, Telengana, avails fashion designing services of INR 50,00,000 from Kaushi Designs in Colombo, Sri Lanka

Location of supplier: Colombo, Sri Lanka

Location of recipient: Hyderabad, Telengana

Place of supply: Place of supply will be the location of the recipient, i.e. Hyderabad, Telengana.

Hence, this supply is an import.

Tax calculation

Particulars Amount (Rs.)
Fashion designing services   50,00,000
IGST @ 18%*     9,00,000
Total cost of import  59,00,000

* Assuming GST rate of 18% on fashion designing services

Exports

Under GST, exports will be zero rated, similar to the current regime. An exporter can also claim refund of the tax paid on inputs used to manufacture/purchase/provide the exported goods or services.

Export of services

Specific conditions have been laid down for a supply to be considered an export of service under GST. These are:

  1. The supplier of the service is located in India.
  2. The recipient of the service is located outside India.
  3. The place of supply of the service is outside India
  4. The payment for the service has been received by the supplier in convertible foreign exchange and
  5. The supplier and recipient are not establishments of the same person.

For example: Rohan Consultants in Mumbai, Maharashtra, provides business consultancy services to Abey’s Engineering in Singapore. The payment for the service has been received in Singapore Dollars.

Here,

Location of supplier: Mumbai, Maharashtra

Location of recipient: Singapore

Place of supply: Place of supply will be the location of the recipient, i.e. Singapore.

Payment for the service: Payment for the service has been received in convertible foreign exchange, i.e. Singapore Dollars.

Relationship between the supplier and recipient: The supplier and recipient are distinct persons.

Hence, this supply qualifies as an export of service. Rate of tax on the supply will be 0%.

Conclusion

The levy of taxes and treatment of taxes in case of imports and exports largely remain the same under GST in comparison with the existing laws. In case of an importer, full input credit will be available on the IGST paid on imports and additional input credit will be available on the GST paid on all types of inputs used or intended to be used in the course of or for the furtherance of business. Similarly, in the case of an exporter, refund will be given on the tax paid on all inputs used in the course of business. Overall, costs of import and export are expected to reduce under GST and compliance is expected to become easier with the convergence of multiple tax laws into one law.

(Author can be reached on subhamsharmaupw.blogspot.in)

Author Bio

Qualification: CA in Job / Business
Company: N/A
Location: Sikar, Rajasthan, IN
Member Since: 29 Aug 2017 | Total Posts: 4

My Published Posts

More Under Goods and Services Tax

Posted Under

Category : Goods and Services Tax (7660)
Type : Articles (17840)
Tags : goods and services tax (6132) GST (5733)

3 responses to “How Imports and Exports Treated in GST”

  1. Elisha says:

    Dear Sir,
    We are importing iran and Wood used materials from my home town (From odisa to Bangalore), How much I would pay the (IGST,CGST, SGST) Tax or no need to pay any tax.
    E-Way bill:
    From and To details what are the details I should enter there.

    Could know that how to enter.
    Thanks with regards,
    Elisha

  2. Narendra01 says:

    individual (having GSTIN#) and is having incoem in india form his buisness. Further is helping china exporter to export to Africa. for this China gives fees and sends the fees in foreign currency to India. Then no GST is applicable.
    Now question is ; This income from China, to be mentioned in GST return?

  3. Tushar says:

    Please refer to Section 16(3)(b) of the IGST Act and the Rules relating to refund under the CGST Rules. It is doubtful that exports can be made at 0%. Though, not to be charged on the export invoice, IGST needs to be paid separately by the exporter and then claimed as refund.

Leave a Reply to Tushar Cancel reply

Your email address will not be published. Required fields are marked *

Featured Posts