Zero Rated Supply Under GST

Exports/ Supply To SEZ/ Deemed Exports Under GST

‘Export of Goods’ with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India.  [Sec 2(5) of IGST Act, 2017]

Export of Goods/Services is treated as Zero Rated Supply under GST. Zero Rating effectively means no tax is payable on exports but the exporter is eligible to take input tax credit on inputs/ input services used in relation to exports.

Other Supplies Covered Under Zero Rating Benefit

Apart from Exports following supplies are also eligible for Zero Rating benefit under GST, though Goods does not leave the territory of India:

1) Supplies to SEZ unit/ SEZ Developer [Section 16, IGST Act,2017]

2) Deemed Exports [Section 147 CGST Act, 2017; Notification No. 48/2017 Central Tax]

a. Supply of goods by a registered person against Advance Authorisation

b. Supply of capital goods by a registered person against Export Promotion Capital Goods Authorisation(EPCGA)

c. Supply of goods by a registered person to Export Oriented Unit (EOU)

d. Supply of gold by a bank or Public Sector Undertaking specified in the notification No. 50/2017-Customs.

3) Supplies to Merchant Exporter [Notification No.- 40/2017 Central Tax Rate]

Supplies to Merchant Exporter are not treated as Zero Rated Supply but are taxed at nominal Rate of 0.1% and the supplier is eligible refund of Input tax credit on inputs and input services under Inverted Structure Mechanism. Thus Supplies to merchant exporter are almost at par with the Zero Rate Supplies.

Refund of Zero Rated Supplies (Rule 89 of CGST Rules, 2017)

Refund Form: RFD 01A

In the following paragraphs we have highlighted the Refund Type and Documentary Evidence to be provided as per Rule 89 of CGST Act, 2017 for abovementioned supplies:

I. Exports/ Supplies To SEZ

The Exporters have two options for claiming refund of Zero Rated Supply, which are as follows:

a) To pay integrated tax on supplies meant to be exported and get refund of tax so paid after the supply is exported.

b) To make export supplies under a Bond or LUT without payment of Integrated Tax and claim refund of Input tax credit on Inputs and input services in relation to such exports.

Documentary Evidence (to be filled alongwith the Refund Form RFD 01A)

• Refund of ITC on Export of Goods without payment of IGST

STATEMENT 3 containing: [Rule 89(2)(b) of CGST Rules, 2017]

− Shipping Bill/ Bill of Export Date and Number

− Details of Export invoices

• Refund of ITC on Supplies to SEZ/ SEZ Developer (Without payment of IGST)

STATEMENT 5 containing:  [Rule 89(2)(d) of CGST Rules, 2017]

– Endorsement Date and Number of receipt of goods in SEZ

– Details of Invoices

• Refund of Integrated Tax on Supplies to SEZ/ SEZ Developer

STATEMENT 4 containing:   [Rule 89(2)(d) and 89(2)(f) of CGST Rules, 2017]

– Endorsement Date and Number of receipt of goods in SEZ

– Details of Invoices

– GSTIN of Recipient

– Declaration to the effect that SEZ has not taken ITC of tax paid by the supplier.

NOTE: In case of refund of Integrated tax paid on export of goods on payment of IGST Shipping Bill filled by the exporter shall be deemed to be application for Refund. [Rule 96 of CGST Rules, 2017]

II. Deemed Exports

Unlike Exports and Supplies to SEZ option of supplying goods on Bond or LUT without payment of Tax is not available in case of Deemed Exports. Thus supplier of Deemed export has to firstly pay the Tax and then can claim refund of Taxes paid. The option of claim of refund was earlier limited to only recipient of Deemed Export, however vide Notification No.- 47/2017 Central Tax; Dated 18 Oct 2017 same has been extended to the supplier as well.

Documentary Evidence  (to be filled alongwith the Refund Form RFD 01A)

• Refund by Supplier of Deemed Exports

STATEMENT 5B containing: [Rule 89(2)(g) of CGST Rules, 2017]

– Acknowledgment by the jurisdictional Tax officer of the Advance Authorisation holder or Export Promotion Capital Goods Authorisation holder, as the case may be, that the said deemed export supplies have been received by the said Advance Authorisation or Export Promotion Capital Goods Authorisation holder, or a copy of the tax invoice under which such supplies have been made by the supplier, duly signed by the recipient Export Oriented Unit that said deemed export supplies have been received by it.

– An undertaking by the recipient of deemed export supplies that no input tax credit on such supplies has been availed of by him.

– An undertaking by the recipient of deemed export supplies that he shall not claim the refund in respect of such supplies and the supplier may claim the refund.

• Refund by Recipient of Deemed Export

STATEMENT 5B containing: [Rule 89(2)(g) of CGST Rules, 2017]

– Number and Date of invoices

Additional Procedures in case of Supplies from DTA unit to EOU/EHTP/BTP/STP unit

[Circular No.- 14/14/2017-GST; Dated: 6/11/2017]

For supplies to EOU / EHTP / STP / BTP units in terms of Notification No. 48/2017- Central Tax dated 18.10.2017, the following procedure and safeguards are prescribed –

(i) The recipient EOU / EHTP / STP / BTP unit shall give prior intimation in a prescribed proforma in “Form–A” bearing a running serial number containing the goods to be procured, as pre-approved by the Development Commissioner and the details of the supplier before such deemed export supplies are made.

(ii) On receipt of such supplies, the EOU / EHTP / STP / BTP unit shall endorse the tax invoice.

(iii) The recipient EOU / EHTP / STP / BTP unit shall maintain records of such deemed export supplies in digital form, based upon data elements contained in “Form-B”. A digital copy of Form – B containing transactions for the month, shall be provided to the jurisdictional GST officer, each month (by the 10th of month) in a CD or Pen drive, as convenient to the said unit.

III. Supplies To Merchant Exporter

As discussed earlier Supplies to Merchant Exporter are not treated as Zero Rated Supply but are taxed at nominal Rate of 0.1% for all the goods, irrespective of their actual GST Rate. Supplier can claim refund of Input tax credit on inputs and input services related to such supplies under Inverted Structure Mechanism.

Documentary Evidence (to be filled alongwith the Refund Form RFD 01A)

• Refund of ITC Accumulated due to Inverted Tax Structure

STATEMENT 1A containing:      [Rule 89(2)(h) of CGST Rules, 2017]

– Number and Date of invoices received during the period

– Number and date of Invoices Issued during the period

[For any further queries related to GST, Customs or FTP author can be reached at ca.hsinghal@gmail.com.]