Definition of Exports:
Exports may be either Goods or Service or both and are defined as follows in the IGST Act.
Exports of goods: Section 2(5) of IGST Act, 2017 provides that 'export of goods' means taking goods out of India to a place outside India.
Exports of services: Section 2(6) of IGST Act, 2017 provides that 'export of services' means the supply of any service when:
- supplier of service is located in India;
- recipient of service is located outside India;
- place of supply of service is outside India;
- payment for such service has been received by the supplier of service in convertible foreign exchange; and
- supplier of service and the recipient of service are not merely establishments of a distinct persons
Under section 7(5) of IGST Act, supply will be treated, as inter-state supply when the supplier is located in India and the place of supply is outside India or place of supply is SEZ unit.
Further, Exports & Supplies to SEZ Developer/Unit would be considered as 'Zero rated supply' under section 16 of IGST Act.
Any person making zero rated supply (i.e. any exporter) shall be eligible to claim refund under either of the following options, namely:-
a. Supply goods or services or both under bond or Letter of Undertaking (LUT), subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilized input tax credit; or
b. Supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied, in accordance with the provisions of section 54 (Refunds) of the Central Goods and Services Tax Act or the rules made there under.
For the option (a) and (b), procedure to file refund has been outlined in the Refund Rules under GST. For both option (a) and (b) exporters have to provide details of GST invoice in the Shipping bill.
In order to ensure smooth transition from the earlier export procedure to the procedure being laid down for export of goods under the GST regime, the existing Shipping Bill formats (both manual/ electronic) have been modified to make them compliant with the IGST law. New formats of the Shipping Bill have been made applicable already.
ARE-1 procedure which was being followed is dispensed with except in respect of commodities to which provisions of Central Excise Act would continue to be applicable.
Furnishing of LUT and its Validity:
1. Exporters who are eligible to export under LUT has been specified along with the conditions and safeguards in the Notification No. 16/2017-Central Tax dated 01-07-2017.
2. The following registered person shall be eligible for submission of Letter of Undertaking in place of a bond:-
- 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,
- a status holder as specified in paragraphs 3.20 and 3.21 of the Foreign Trade Policy 2015-2020; or
- and he has not been prosecuted for any offence under the Central Goods and Services Tax Act, 2017 (12 of 2017) or under any of the existing laws in case where the amount of tax evaded exceeds two hundred and fifty lakh rupees.
3. It is clarified that LUT shall be valid for twelve months.
4. LUTs are generally submitted on the letterhead containing signature and seal of the person or the person authorized in this behalf.
Furnishing of Bond:
- All exporters, not covered above under LUT would submit bond. The procedures for submission and acceptance of bond has been prescribed vide circular No. 2/2/2017-GSTdated 4th July, 2017 & Circular No. 4/4/2017-GST, 7th July, 2017.
- FORM RFD -11 under rule 96A of the CGST Rules requires furnishing a bank guarantee with bond. Field formations have requested for clarity on the amount of bank guarantee as a security for the bond.
- Running bond (separate bond for each consignment / export not required) will be required to cover amount of tax involved in export based on estimated tax liability as assessed by exporter.
- 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 jurisdictional Commissioner may decide about the amount of bank guarantee depending upon the track record of the exporter
- No bank guarantee required if Commissioner is satisfied
- In any case the bank guarantee should normally not exceed 15% of the bond amount.
- Bond / LUT to be submitted manually to jurisdictional Deputy/Assistant Commissioner, till module is available on portal
- Instances where furnishing of bond is not required:
- An exporter registered with recognized Export Promotion Council, on submission of a self-attested copy of the proof of registration with a recognized Export Promotion Council need not submit bond.
- If a person having one PAN is registered in more than one State, because of splitting and accountal of receipts and turnover across different registered person with the same PAN the total amount of inward foreign remittances received by all the registered persons, having one Permanent Account Number, may be Rs. 1 crore or more and it also may be 10% or more of total export turnover. In such cases, the registered person can be allowed to submit bond without bank guarantee.
Exporter may furnish bond/LUT before Central Tax Authority or State Tax Authority till the administrative mechanism for assigning of tax payers to respective authority implemented
Exports may be allowed under existing LUTs/Bonds till 31st July 2017. Exporters shall submit the LUTs/bond in the revised format latest by 31st July, 2017.
Procedure for Refund Claim of Accumulated ITC:
1. The registered person availing the option to supply goods or services for export without payment of IGST shall furnish, a bond or a Letter of Undertaking in FORM GST RFD-11, prior to export to the jurisdictional Commissioner, binding himself to pay the tax due along with the specified interest within a period of:
- 15 days after the expiry of three months from the date of issue of the invoice for export, if the goods are not exported out of India; or
- 15 days after the expiry of one year, or such further period as may be allowed by the Commissioner, from the date of issue of the invoice for export, if the payment of such services is not received by the exporter in convertible foreign exchange.
2. The details of the export invoices contained in FORM GSTR-1 furnished on the common portal shall be electronically transmitted to the system designated by Customs and a confirmation that the goods covered by such invoices have been exported out of India shall be electronically transmitted to the common portal from the system.
3. Where the goods are not exported within the time limit and the registered person fails to pay the amount, the export as allowed under bond or Letter of Undertaking shall be withdrawn forthwith and the said amount shall be recovered from the registered person in accordance with the provisions of section 79.
4. The export as allowed under bond or Letter of Undertaking withdrawn in terms of sub-rule (3) shall be restored immediately when the registered person pays the amount due.
5. The Board, by way of notification, may specify the conditions and safeguards under which a Letter of Undertaking may be furnished in place of a bond.
Procedure on Payment of IGST & Refund of IGST Paid:
The shipping bill filed by an exporter shall be deemed to be an application for refund of IGST paid on the export of goods and such application shall be deemed to have been filed only when:-
a. the person in charge of the conveyance carrying the export goods duly files an export manifest or an export report covering the number and the date of shipping bills or bills of export; and
b. the applicant has furnished a valid return in FORM GSTR-3 or FORM GSTR- 3B, as the case may be;
- The details of the relevant export invoices contained in FORM GSTR-1 shall be transmitted electronically by the common portal to the system designated by the Customs and the system shall electronically transmit to the common portal, a confirmation that the goods covered by the invoices have been exported out of India.
- Upon the receipt of the information regarding the furnishing of a valid return in FORM GSTR-3 or FORM GSTR-3B, as the case may be from the common portal, the system designated by the Customs shall process the claim for refund and an amount equal to the IGST paid in respect of each shipping bill or bill of export shall be electronically credited to the bank account of the applicant mentioned in his registration particulars and as intimated to the Customs authorities.
- The claim for refund shall be withheld where,
c. A request has been received from the jurisdictional Commissioner of central tax, State tax or Union territory tax to withhold the payment of refund due to the person claiming refund in accordance with the provisions of sub-section (10) or sub-section (11) of section 54; or
d. The proper officer of Customs determines that the goods were exported in violation of the provisions of the Customs Act, 1962.
If the applicant becomes entitled to refund of the amount withheld due to above 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.
The Central Government may pay refund of the integrated tax to the Government of Bhutan on the exports to Bhutan for such class of goods as may be notified in this behalf and where such refund is paid to the Government of Bhutan, the exporter shall not be paid any refund of the integrated tax.
Sealing of Export Containers:
Circular No. 26/2017-Customs; Date: 1st July, 2017
In the earlier regime, there were three categories of containers which arrive at the port/ICD:
- Containers stuffed at factory premises or warehouse under self-sealing procedure.
- Containers stuffed / sealed at factory premises or warehouse under supervision of central excise officer.
- Containers stuffed and sealed at Container Freight Stations/ Inland Container Depot.
For the sake of uniformity and ease of doing business, Board has decided to simplify the procedure relating to factory stuffing hitherto carried out under the supervision of the Central Excise officers. Accordingly, Board has decided to lay down a simplified procedure for stuffing and sealing of export goods in containers.
It has been decided to do away with the sealing of containers with export goods by CBEC officials. Instead, self-sealing procedure shall be followed subject to the following:
- The exporter shall inform the details of the premises whether a factory or warehouse or any other place where container stuffing is to be carried out, to the jurisdictional customs officer.
- The exporter should be registered under the GST and should be filing GSTR1 and GSTR2. Where exporter is not a GST registrant, he shall bring the export goods to a Container Freight Station/Inland Container Depot for stuffing and sealing of container. However, in certain situations, an exporter may follow the self-sealing procedure even if he is not required to be registered under GST Laws. Such an exception is available to the Status Holders recognized by DGFT under a valid status holder certificate issued in this regard.
- Exporter desirous of availing this procedure shall inform the jurisdictional Custom Officer of the rank of Superintendent or Appraiser of Customs, at least 15 days before the first planned movement of a consignment from factory or premises, Once the permission is granted, the exporter shall furnish only intimation to the jurisdictional Superintendent or Customs each time self-sealing is carried out at approved premises. The intimation shall clearly mention the place and address of the approved premises, description of export goods and whether or not any incentive is being claimed.
- Where the visit report of the Superintendent or an Appraiser or an Inspector of Customs regarding viability of the stuffing at the factory/ premises is not favorable, the exporter shall bring the goods to the Container Freight Station /Inland Container Depot/Port for sealing purposes.
- Self-Sealing permission once given by a Principal Commissioner/Commissioner of Customs shall be valid for export at all the customs stations. The customs formation granting the self sealing permission shall circulate the permission along with GSTIN of the exporter to all Custom Houses/Station concerned.
- Transport document for movement of self-sealed container by an exporter from factory or warehouse shall be same as the transport document prescribed under the GST Laws. In the case of an exporter who is not a GST registrant, way bill or transport challan or lorry receipt shall be the transport document.
- The exporter shall seal the container with the tamper proof electronic-seal of standard specification. The electronic seal should have a unique number which should be declared in the Shipping Bill. Before sealing the container, the exporter shall feed the data such as name of the exporter, IEC code, GSTIN number, description of the goods, tax invoice number, name of the authorized signatory (for affixing the e-seal) and Shipping Bill number in the electronic seal. Thereafter, container shall be sealed with the same electronic seal before leaving the premises.
- The exporter intending to clear export goods on self-clearance (without employing a Customs Broker) shall file the Shipping Bill under digital signature.
- All consignments in self-sealed containers shall be subject to risk based criteria and intelligence, if any, for examination / inspection at the port of export. At the port/ICD as the case may be, the customs officer would verify the integrity of the electronic seals to check for tampering if any enroute. The Risk Management System (RMS) is being suitably revamped to improvise the interdiction/ examination norms. However, random or intelligence based selection of such containers for examination/scanning would continue.
The above revised procedure regarding sealing of containers shall be effective from 01.09.2017. Therefore, as a measure of facilitation, the existing practice of sealing the container with a bottle seal under Central Excise supervision or otherwise would continue. The extant circulars shall stand modified on 01.09.2017 to the extent the earlier procedure is contrary to the revised instructions given in this circular.
Filing of Shipping Bill:
- 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.
- In case of exports by specialized 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. However, in the Shipping Bill for the field 'State of origin' declare the State code from where export goods originated as it was being done before.
Export of Goods to Nepal and Bhutan Treated as Zero Rated and Qualify for all the Export Benefits:
- It is clarified that acceptance of LUT instead of a bond for supplies of goods to Nepal or Bhutan will be permissible irrespective of whether the payments are made in Indian currency or convertible foreign exchange as long as they are in accordance with applicable RBI guidelines.
- The supply of services, however, to Nepal or Bhutan will be deemed to be export of services only if the payment for such services is received by the supplier in convertible foreign exchange.
Invoicing in case of exports:
The contents in Export Invoice remain same except inclusion of following information:
- An endorsement in Export Invoice as 'SUPPLY MEANT FOR EXPORT ON PAYMENT OF IGST' or 'SUPPLY MEANT FOR EXPORT UNDER BOND WITHOUT PAYMENT OF IGST', as the case may be, and shall, in lieu of the details.
- Name and address of the recipient
- Address of Delivery
- Name of the country of Destination
- Number and date of application of removal of goods for Export (ARE-1)
The above procedures are same as central excise procedures for movement of goods for export, previous to introduction of GST except slight changes in procedures.
Duty drawback under GST:
No amendments have been made to the drawback provisions (Section 74 or Section 75) under Customs Act 1962 in the GST regime. Hence, the drawback scheme will continue in terms of both Section 74 and section 75. Option of All Industry Rate (AIR) as well as Brand Rate under Section 75 shall also continue.
Drawback under Section 74 will refund Customs duties as well as Integrated Tax and Compensation Cess paid on imported goods which are re-exported.
In earlier law Duty Drawback Scheme under Section 75 neutralizes Customs duty, Central excise duty and Service Tax chargeable on any imported materials or excisable materials used or taxable services used as input services in the manufacture of export goods. Under GST regime, Drawback under Section 75 shall be limited to Customs duties on imported inputs and Central Excise duty on items specified in Fourth Schedule to Central Excise Act 1944 (specified petroleum products, tobacco etc.) used as inputs or fuel for captive power generation.
A transition period of three months is also being provided from date of implementation of GST i.e. 1.7.2017. During this period, existing duty drawback scheme under Section 75 shall continue. For exports during this period, exporters can claim higher rate of duty drawback (composite All Industry Rates (AIR)) subject to following conditions:
- No input tax credit of CGST/IGST is claimed,
- No refund of IGST paid on export goods is claimed and
- No CENVAT credit is carried forwarded.
A declaration from exporter and certificate from jurisdictional GST officer in this regard has been prescribed in the notification related to AIRs. This will prevent double availment of neutralization of input taxes. Similarly, the exporter can claim brand rate for Customs, Central Excise duties and Service Tax during this period.
Exporters also have the option of claiming only the Customs portion of AIR and claim refund/ITC under GST laws.
The certificates from jurisdictional GST officer as referred above may not be available during initial days. As per Systems design, whenever higher rate (composite rate) of drawback is claimed, the non-availment of credit certificate is a mandatory document and unless it is recorded as available, shipping bill will not move to LEO stage.
Secondly, it could be possible that export goods may be manufactured by using both Central Excise/Service Tax paid and CGST/IGST paid inputs and inputs services or only CGST/IGST paid inputs and inputs services. In such situation, an exporter opting to claim composite rate of duty drawback during transition period has to give specified declaration and produce certificates as stated above so that he does not claim double benefit. Exporter will have to reverse the ITC if any availed and also ensure that he does not claim refund of ITC/IGST. Requisite certificate from GST officer shall also be required to this effect. As mentioned earlier, exporters will also have option of claiming credit/refund of CGST/IGST and claim Customs rate drawback.
Utilization of SEIS and MEIS Scrip's under GST:
- The duty credit scrip's cannot be used for payment of IGST (Integrated Goods and Services Tax) and GST compensation cess in imports, and CGST, SGST, IGST and GST compensation cess for domestic procurement.
- For items covered under the GST, scrip's can be used for payment of Basic Custom Duty, Safeguard Duty, Transitional Product Specific Safeguard Duty, and Antidumping Duty.
- For items not covered under the GST (specified in Fourth Schedule to Central Excise Act 1944 covering specified petroleum products, tobacco etc.), in addition to the Basic Custom Duty, Safeguard Duty, Transitional Product Specific Safeguard Duty, and Antidumping Duty, scrip's can also be used for payment of duties like central excise, CVD/ SAD.
Note: The scrip's cannot be used for payment of any type of GST.