Exports under GST

Last Update Date : August 13, 2018

exports under GST

Even before the times of World War II, trade has been a very sensitive issue all over the world. From General Agreement on Tariffs’ and Trades to the formation of world trade organisation, we have seen it all. When we speak about trade between nations, the most common response that we get is imports and exports. The current Account deficit is the comparison and measurement between the imports and exports of a country which determines the excess of imports over exports. The lesser is the current account deficit, the better is the economic condition. The Government of India is striving hard to reduce this deficit. GST Implementation is one such process which is assisting in the reduction of this deficit. In this article, we would discuss the exports under GST.

What is Zero Rated Supply

Zero-rated supply has been specifically provided to include two categories of supplies of goods and services or both:

  • Supplies for export
  • Supplies to an SEZ Unit / Developer

These are such supplies on which the tax rate is fixed as zero, and the supplier can avail and even claim the refund of the credit of inputs availed for making such supplies.

Exports

“Export” means when goods or services are sent from our country to another country against monetary consideration and realisation of foreign exchange earnings. As per section 2 (18) of Customs Act, 1962. “Export means taking goods out of India to a place outside India”. Increase in exports results in higher economic growth as it induces the purchasing power of the nation in the global market. Exports can be made under GST without payment of GST on furnishing a bond or letter of undertaking.

Note: Export of goods to Nepal or Bhutan fulfils the condition of GST Law regarding taking goods out of India. Hence, export of goods to Nepal and Bhutan will be treated as zero rated and consequently will also qualify for all the benefits available to zero rated supplies under the GST regime.

Note: The definition of ‘export of services’ in the GST Law requires that the payment for such services should have been received by the supplier of services in convertible foreign exchange. Thus, where the payment is received in Indian rupees, the transaction shall not qualify to be export of services.

Special Economic Zones

These are the areas having different economic laws than the rest of the country regarding duties and taxes. These benefits have been provided as the SEZ units manufacture and supplies goods/services to foreign entities and help reduce current account deficit by earning foreign exchange for the country. Supplies to SEZ unit or SEZ developer have been accorded the status of inter-State supplies under the IGST Act. Thus, anyone making a supply to an SEZ unit or SEZ developer has to necessarily obtain GST registration and charge IGST irrespective of whether the supply is made in the same state.

Exports under Bond

It is a financial instrument in which the issuer of bond owes the holders a debt and is obliged to pay them interest or to repay the principal at a later date.

In case of furnishing of bonds for exports, a general security bond is issued on an application made along with bank guarantee provided for a certain amount. The purpose of the bank guarantee is to provide security to the government in case of any non-compliances or frauds. The bonds issued under GST is not separate for each consignment, but a running bond is issued so that terms and conditions are the same for each consignment.

Exports under Letter of Undertaking

In the international banking system, a letter of undertaking is a provision of bank guarantee, under which a bank allows its customer to raise money from another Indian bank’s foreign branch in the form of short-term credit. The purpose of such undertakings is to ensure that owner of would employ security, enter an appearance acknowledge ownership and pay consequences of the product whether it is lost or not.

A letter of the undertaking under GST refers to a guarantee furnished by a taxpayer that it is engaged in the export of goods and/or services or both and it satisfies all the conditions about the export of goods and services without payment of GST. It is like permission taken from the government for exporting the goods without payment of tax. Earlier, the application for the same was generally made physically on the letterhead of the company, but under the GST regime, we are required to submit an online application on the GST portal.

Eligibility for using Bonds and Letter of Undertaking

The following people are eligible for using bonds and letter of undertaking for exports

  • Any registered taxpayer exporting goods can utilise the benefit of the letter of undertaking.
  • Any taxpayer who has been prosecuted for tax evasion for an amount of Rs. 2.5 Crores or above are not eligible to avail the benefit of LUTs. They can apply using bonds.
  • The validity of LUT is for one financial year. For every new financial year, a fresh LUT should be applied. If any discrepancies found in the application for LUT are not corrected within the prescribed time, then the LUT will be cancelled.
  • The LUT’s are required to be submitted online on the GST common portal. However, a bond has to be submitted as a hard copy to the department.

Example of transactions for which LUT / Bonds can be used

Export of goods to a country outside India without payment of IGST

Providing services to a client in a country outside India without payment of IGST

Procedure for Refund filing for Zero-rated Supplies

Situation A: If Bond / LUT has been furnished in form RFD 11:

  • The taxpayer is not required to make payment of taxes at the time of exports in case the bond / LUT has been furnished before exporting the goods/services. Therefore, he will not be required to claim any refund in respect of outward supply (export) of goods or services.

Situation B: If a Bond / LUT has not been furnished:

  • If the taxpayer has made the payment of GST on the export of goods, then the shipping bill filed by the exporter at the time of export would itself constitute the refund claim subject to two conditions:
  1. The person in charge of the conveyance carrying the export goods (Example: shipping agency) has filed an export general manifest
  2. The applicant has filed a valid return in form GSTR 3B and GSTR 1 accurately specifying all the details relating to the export of goods/services

Refund of Accumulated ITC on Exports

It may be noted that the refund of accumulated unutilized input tax credit would be required to be applied irrespective of the fact that whether bond or LUT has been furnished or not while making the exports.

In respect of the refund of accumulated unutilized input tax credit on account of exports, an online application in form RFD – 01 A is required to be filed on the common portal providing the details about:

  • Turnover of zero-rated supply of goods and services
  • Adjusted total turnover
  • Net Input tax credit

The portal automatically calculates the maximum refund amount to be claimed on entering the details mentioned above, and after entering the details of bank accounts, we can apply for a refund.

Note: A registered taxpayer is making an online application in form RFD – 01A will also be required to submit a physical copy of the application filed to the concerned jurisdictional officer for further proceedings and refund.

Credit of Refund to the Taxpayer

After the processing of the application of refund claim, 90% of the amount claimed as refund shall be credited to your bank account within 7 days of the date of claim. The remaining 10% refund will be credited on due verification of documents furnished by the applicant.

The refund process will halt if:

  • A request has been received from the jurisdictional Commissioner of central tax, State tax or Union territory tax due to the person claiming a refund by the provisions of sub-section (10) or sub-section (11) of section 54; or
  • The proper officer of Customs determines that the goods were exported in violation of the provisions of the Customs Act, 1962.

If the applicant is not found guilty for the above-mentioned reasons, 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.

Filing of Shipping Bill

GSTIN must be quoted in the shipping bill. If the product is exempted from GST or not under the GST regime, the PAN of the supplier would be sufficient. In case of exports by specialised agencies such as United Nations Organization or notified Multilateral Financial Institutions, Embassies and Consulates, the exporter can quote Unique Identity Number, instead of GSTIN, in the Shipping Bill. Without GSTIN or PAN or UIN, the Shipping bill cannot be filed. The claim for refund of IGST paid or Input Tax Credit on inputs consumed in goods exported cannot be processed without GSTIN and GST Invoice details in Shipping Bill. Commercial Invoice information should be provided in the Shipping Bill. Wherever Commercial Invoice is different from Tax Invoice, details of both have to be provided in the Shipping Bill. Taxable value and Tax amount should be mentioned against each item in the Shipping bill for processing the refund amount. Multiple tax invoices issued by same GSTIN holder are allowed in one Shipping bill for the same consignee. State code is part of GSTIN numbering scheme.

Deemed Exports

Deemed exports are the supplies do not leave India. The payment for such supplies is received either in Indian rupees or convertible foreign exchange. All supplies notified as supply for deemed export will be subject to levy of taxes, i.e. such supplies can be made only by payment of tax.

However, the refund of tax paid on the supply regarded as deemed export is admissible to either the supplier or the recipient. The deemed exporters can either:

  • To levy GST on supply and collect it from the recipient. In this case, the recipient shall apply for a refund.
  • To levy GST on supply and to not collect it from the recipient. In this case, the supplier shall apply for a refund through GST RFD 01. In this case, a declaration is also required from the recipient to the effect that he does not avail any input tax credit of the same.

Categories of Supply of Goods notified as deemed exports

  1. Supply of goods by a registered person against Advance Authorisation
  2. Supply of capital goods by a registered person against Export Promotion Capital Goods Authorisation
  3. Supply of goods by a registered person to Export Oriented Unit
  4. Supply of gold by a bank or Public sector Undertaking specified in the notification No. 50/2017-Customs dated the 30th June 2017 (as amended) against Advance Authorisation

Documents Required for Deemed Exports

The following are the documents required as per the categories of goods mention under deemed exports as above:

Category Document

Category 1: Supply of goods against Advance Authorisation Acknowledgment by the jurisdictional Tax officer which states that the said Advance Authorization holder has received the deemed export supplies

Category 2: Supply of capital goods against Export Promotion Capital Goods Authorisation Acknowledgment by the jurisdictional Tax officer which states that the deemed export supplies have been received by the said Export Promotion Capital Goods Authorization holder

Category 3: Supply to Export Oriented Unit A copy of the tax invoice which is duly signed by the Export Oriented Unit stating that the deemed export supplies have been received

All the above Undertaking stating that the ITC has not being availed by the recipient.

All the above Undertaking by the recipient stating no objection to the refund claimed by the supplier.

Procedure for Deemed Exports

  • 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, and the details of the supplier before such deemed export supplies are made. The said intimation shall be given to
  1. the registered supplier,
  2. the jurisdictional GST officer in charge of such registered supplier and
  3. it’s jurisdictional GST officer.
  • The registered supplier supplies the goods under tax invoice to the recipient EOU / EHTP / STP / BTP unit.
  • After receiving the supplies, the EOU / EHTP / STP / BTP unit shall endorse the tax invoice and send a copy of the endorsed tax invoice (proof of deemed exports) to
  1. the registered supplier,
  2. the jurisdictional GST officer in charge of such registered supplier and
  3. its jurisdictional GST officer
  • The recipient maintains the records of such deemed export supplies in digital form, based upon data elements contained in “Form-B”. The software for maintenance of digital records shall incorporate the feature of the audit trail.
  • The digital records should be kept updated, accurate, complete and available at the said unit at all times for verification by the proper officer, whenever required.
  • 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 the month) in a CD or Pen drive, as convenient to the said unit.
  • The above procedure and safeguards are in addition to the terms and conditions to be adhered to by an EOU / EHTP / STP / BTP unit in terms of the Foreign Trade Policy, 2015- 20 and the duty exemption notification being availed by such unit.

EOU: Export oriented unit
EHTP: Electronic Hardware Technology Park
STP: Software Technology Park
BTP: Bio-Technology Park

The exports regime under GST is going to provide a great platform for growth in the amount of supplies going out from the country resulting in boosting the economic condition of the nation. Also, GST simplifies the tedious process of exports.

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