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Export of goods and services under GST act

GST on Export of Goods and Services: An in-depth look

Jun 10, 2022

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GST on Export of goods and services

Sub-section 5 of section 2 and sub-section 10 of section 2 of the IGST Act define the “Export of Goods” and “Import of the Goods” respectively. The GST on Export of Goods and services is defined as the trading of or supplying goods and services outside the domestic territory of a country. Where the export of service is considered to be governed by the following aspect: 

-The supplier is residing in India

-The recipient is residing outside India

-The place of supply is outside India

-The payment is received in a convertible foreign exchange

-And finally, the supplier of service and the recipient of service are not establishments of a distinct person

Import of service means that-

-The place of supply is in India

-The supplier is located outside India

-The recipient is in India

(Note: Points that don’t come under the export aspect are, 1. When the place of supply of service is within India but the person is located outside of India. 2. When the supply of service is received in Indian currency or in currency other than a convertible. 3. When the supply of service is done to a foreign branch)

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Zero Rated Supplies 

Under the law, GST on Export of Goods and services has been taken up into two categories-

  1. Zero-rated supply of goods
  2. Inter-State supply (which is covered under IGST)

Zero rates supply basically means that the entire value chain is exempted from the tax. This also covers the fact that not only the output is exempted from payment of the tax but also there is no bar on availing credit of taxes paid on the input side for providing output supply. This concept is applicable to exports and supplies to SEZ units or SEZ divisions. The taxes which are paid on the supplies are refunded and credits of input services are allowed. The statement of explanation in Section 54 of the GST Act states that-

refund includes refund of tax paid on zero-rated supplies of goods or services or both or on inputs or input services used in making such zero-rated supplies, or refund of tax on the supply of goods regarded as deemed exports, or refund of the unutilized input tax credit as provided under sub-section (3). 

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Refund Method

In the form GSTR 1, a utility table (Table 6A) is introduced by the Goods and Services Tax Network (GSTN). This means one can claim refunds from the exporters. In this table, assessee files export related information for a suitable period of time that permits the processing of the GST refund.

GST on Export of goods and services – Shipping Bill

For the clearance of goods shipping bill is needed as it is required by the customs authority. For an exporter there lies so many formalities to perform as to send items to its customer, among all the documents “Shipping Bill” is one such important one. It is one of the most important documents which is required for the product to be shipped from one place to another.

Seeing the importance of this document, the bill can be electronically submitted also. Due to various kinds of products which are been shipped, the color of the bill is designed with particular colors.

The whole procedure of generation of shipping bill is:

  • The exporter with IEC code no. gets registered with customers or via Customs House Agents License No. or Authorised Dealer Code No.
  • A declaration form signed by the exporter or its authority is to be submitted to the service center.
  • After the data is been entered & completed, a checklist will be generated which is handed over to the exporter.
  • Now the exporter verifies the data and informs the service center
  • The correct data is then sent automatically for processing
  • The Assistant Commissioner of export will then check about the value of the goods and in the case is the value or sample value crosses the threshold limit that is Rs. 10 Lakhs & Rs.20,000 respectively (required action is been taken)
  • The status of the bill is checked by the exporter (in case he/ she wants)
  • At the docks, all the original documents are been submitted by the exporter along with the check-list (if required)
  • Finally, “Let Export Order” will be issued by the designated officer and a hard copy of it will be generated subsequently.
Export rules for goods and services under GST Act

GST on Export of goods and services – Deemed Exports

Exports in general terms mean sending goods outside of the home country or outside India (when India is considered as the Home country). For the purpose of GST on Export of Goods and Services, these are treated as Zero-rated. In some special cases, the Central Government of India has treated these supplies as Deemed Exports.

Deemed Export under Section 147 of CGST/SGST Act 2017 has defined it as, supplies of goods manufactured in India (and not service). The supplies in this case do not leave India and payment of the same is received in either Indian rupee or in convertible foreign exchange. All these supplies will be subjected to the levy of taxes and cannot be supplied under a bond or LUT. The refund application has to be filed by the supplier or recipient of deemed export supplies.

Condition to quality for Deemed Exports-

  1. Applicable to Goods only
  2. Goods are not taken outside India
  3. Goods manufactured or produced in India
  4. Payment received in Indian Rupees or in convertible foreign exchange
  5. Supplies cannot be made under Bond or LUT.
  6. Tax be paid at the time of supply

Under deemed exports, the supplies are not zero-rated, as all of them will be subjected to GST at the point of supply. Even the supplies cannot be made under bond or LUT. Whatever is the tax, that is desired to be paid on such supply and refund can be claimed.

The procedure to claim a refund is as follows:

  1. Some of the important document which has to be processed are, details of deemed export supplies (that are a statement of invoices), Acknowledgement document by jurisdiction tax officer of AA or EPCG, Undertaking for no ITC that has been claimed (by the recipient), and also undertaking by the recipient that one should not claim a refund in respect to such supplies.
  2. Application form, that is, Form GST RFD – 01 has to be filed along with the supporting documents. Even online facilities to file and process deemed export supplies are allowed. Along with it Statement 5B and Annexure 1 of the RFD-01 refund application should be filed
  3. Under GSTR 1 in Table 6C, the dealer has to give provide all the invoice details and other taxes paid on supplies.

Additional conditions for deemed exports to EOU/STP/HTP

  1. The EOU/ EHTP/ STP/ BTP unit must give prior intimation by filing Form A to the supplier and the jurisdictional GST officer of the supplier and recipient.
  2. Form A must bear a running serial number and contain details of goods to be procured, which is pre-approved by the Development Commissioner.
  3. The supplier must then supply goods under the cover of a tax invoice.
  4. The tax invoice must be endorsed by the recipient. An endorsed copy of the same must be sent to the supplier and jurisdictional GST officer of supplier and recipient.
  5. Record of such goods received by EOU/ EHTP/ STP/ BTP unit must be maintained in Form B.
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