The comprehensive dual Goods & Service Tax has been come into force from July 01, 2017. Multiple indirect taxes have subsumed into it. It will also have enormous impact on exports as well. However, export duty will be continued to be levied on export of goods.
What is Exports?
'Export of goods' with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India.
'Export of services' means the supply of any service when,-
- the supplier of service is located in India;
- the recipient of service is located outside India;
- the place of supply of service is outside India;
- the payment for such service has been received by the supplier of service in convertible
- foreign exchange; and
- the supplier of service and the recipient of service are not merely establishments a distinct persons.
Following are the key points can be drawn from the above two definitions:
- Supply of goods requires specifically goods movement from India to outside India. Hence, movement of the goods alone is important & not location of the exporter. If location of the goods is outside India but location of the supplier is in India & goods are supplied outside India, this transaction will not be said to be export of goods liable to GST. However, in case of export of services, location of exporter & recipient is important.
- Payment in convertible foreign exchange is not at all a criterion for determining whether it is export in respect of goods. Whereas payment in foreign exchange is relevant for export of services including transactions involving goods treated as services.
- Supply of goods between the establishment of distinct person will be under the purview of export of goods unlike in case of export of services where exporter & recipient of service should not be establishments of distinct person.
Zero Rated Supply
Export of goods or services of both is included in the 'Zero rated supply'. It should not be treated as supplies taxable at 'NIL' rate of tax. The difference between Zero Rated & Nil Rate supply is that the credit is not available on inputs or input services used for supplies taxable at nil rate. Input tax credit can be availed for zero rated supplies including export of goods or services or both even though such supplies may be an exempt supply.
Export of goods or services or both can be done in following ways:
- Under Letter of Undertaking or Bond, without payment of IGST and claim refund of unutilized input tax credit; or
- Upon payment of IGST at the applicable rate on the goods or services & claim refund of such tax paid.
In case of exports of goods or services or both, the invoice shall carry an endorsement 'SUPPLY MEANT FOR EXPORT ON PAYMENT OF IGST' or 'SUPPLY MEANT FOR EXPORT UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF IGST' & contain the following details:
- name and address of the recipient;
- address of delivery;
- name of the country of destination; and
- number and date of application for removal of goods for export.
SAC Code not require to be mentioned on invoice for turnover below Rs.1.5 Crores for export of services. However, from turnover 1.5 Crores & above mandatory SAC Code is required.
Mandatory 8 Digit HSN Code required without any minimum turnover limit for export of goods
Quoting GSTIN in Shipping bill is mandatory if the export product attracts GST for domestic clearance.
Quoting PAN (Permanent Account Number), which is authorized as Import Export code by DGFT, would suffice if the exporter exclusively deals with products which are either wholly exempt from GST or out of GST regime
Bond or LUT along with Shipping Bill:
As per rule 96A of the Central Goods and Services Tax Rules, 2017, any registered person exporting goods without payment of integrated tax is required to furnish a bond or a Letter of Undertaking (LUT) in FORM GST RFD -11
The following registered person shall be eligible for submission of Letter of Undertaking in place of a bond:-
- a status holder as specified in the Foreign Trade Policy 2015-2020; or
- who has received the due foreign inward remittances amounting to a minimum of 10% of the export turnover, which should not be less than one crore rupees, in the preceding financial year, and he has not been prosecuted for any offence under the Central Goods and Services Tax Act, 2017 or under any of the previous law in case where the amount of tax evaded exceeds two hundred and fifty lakh rupees.
The 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.
The bond shall be furnished 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 (with debit/credit) facility, in case he is required to furnish a bond. Hence, no requirement of separate bond for each consignment/export. 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. Based on the track record of exporter, a bank guarantee required to be submitted along with the bond which can be waived off by the jurisdictional GST Commissioner. The bank guarantee should normally not exceed 15% of the bond amount.
Refund can be claimed of tax paid on export of goods or services or both or on inputs or input services used in export of such goods or services or both in prescribed form from the relevant date.
A registered person may claim refund of any unutilized input tax credit at the end of any tax period where supply of goods or services is made under bond or letter of undertaking without payment of tax. However, no refund of unutilized input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty. Also, 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.
The refund needs to be claimed within 2 years from the relevant date. However, exporter may utilise credits for discharge of other output taxes or alternatively, go for refund of taxes.
Deemed exports are those supplies of goods that are notified as 'deemed exports' where:
- The goods supplied do not leave India;
- Payment for such supplies is received in Indian Rupees/ Convertible Foreign Exchange; and
- Such goods are manufactured in India.
The definition of 'deemed exports' under this Act is in line with the definition of 'Deemed Exports' of the Foreign Trade Policy 2015-20. 'Deemed Export' under the FTP 2015-20 covers supply of goods to EOU/STP/EHTP/BTP, supply of goods under advance authorization etc. and hence provides for refund, drawback and advance authorization to the supplier of goods. On the other hand, the relevance of 'deemed export' under the GST laws is limited to the grant of refund of taxes on supply of goods as 'deemed export'. Therefore, a provision has been made under the Act to notify certain transactions as 'deemed export' to avoid situations where the persons might claim refund of taxes on 'deemed export' defined in the FTP 2015-20. List of supplies deemed to be export is yet to be notified.
It is important to note here that supply to qualify as deemed export must be manufactured in India. Therefore, even where the goods are of the nature that are notified by the Government as goods that qualify as 'deemed exports' on meeting certain conditions, if such goods are not manufactured in India or any processing performed on any imported goods does not result in manufacture, they cannot enjoy the benefit of the deeming fiction.
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