Significance of Deemed Export under GST

CA. Heet Shah , Last updated: 22 September 2023  
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Deemed exports are a type of transaction under the Goods and Services Tax (GST) regime that involve the supply of goods or services that are not physically exported from India but are deemed to have been exported. This means that the goods or services are supplied to a recipient who is located in India but is entitled to receive them without payment of GST as if they were exported outside India. In this article, we will discuss in detail what is deemed export under GST, its relevance, and the implications for businesses.

What is Deemed Export under GST?

Definition: A deemed export under GST refers to a transaction in which the goods or services supplied do not leave India but are considered as exports under the GST law. This means that the goods or services supplied are intended for use in the manufacturing or production of goods that are to be exported outside India. Examples of deemed exports include supplies made to Export Oriented Units (EOUs), Special Economic Zones (SEZs), projects funded by multilateral or bilateral agencies, and supplies made to certain categories of organizations specified by the government.

Nature: The goods in a deemed export transaction remain within the country but are treated as if they were exported due to their use in projects like government contracts, development projects, or projects funded by international organizations.

Beneficiary: The beneficiaries of deemed export transactions often include contractors, suppliers, or manufacturers involved in government or infrastructure projects.

Benefits: Deemed export transactions may be eligible for certain export-related benefits or incentives, such as tax refunds or exemptions, to promote domestic production for export-oriented projects.

Objective : The objective of providing a deemed export status to such transactions is to encourage and promote the export of goods and services from India by providing various benefits and incentives to the supplier. These benefits and incentives may include exemption or refund of GST on the supply of goods or services, duty drawback, and other export promotion schemes.

Significance of Deemed Export under GST

Relevance of Deemed Export under GST

Deemed export under GST is relevant for businesses that supply goods or services to organizations that are eligible for such status. The deemed export status enables such organizations to procure goods or services without payment of GST, which can result in a significant cost saving for them. This can make such organizations more competitive in the global market by reducing their production cost.

On the other hand, the suppliers of goods or services to such organizations can avail themselves of various benefits and incentives provided under the GST law. These benefits can include exemption or refund of GST paid on the supply of goods or services, which can result in significant cost savings for the supplier. In addition, the supplier can also claim a refund of the unutilized input tax credit (ITC) accumulated on the supply of goods or services to such organizations.

Implications of Deemed Export under GST

Deemed export under GST has various implications for businesses involved in such transactions. Let us discuss some of the key implications of deemed export under GST:

1. GST Exemption or Refund: Deemed exports are exempted from payment of GST under the GST law. The supplier of goods or services can claim a refund of the GST paid on the supply of goods or services to such organizations. This exemption or refund of GST can result in significant cost savings for the supplier and make them more competitive in the global market.

 

2. Eligibility Criteria: The supplier of goods or services must fulfill certain eligibility criteria to avail of the benefits of deemed export under GST. For instance, the supplier must be registered under the GST law, and the recipient of goods or services must be an organization that is eligible for deemed export status.

3. Documentation: The supplier of goods or services must maintain proper documentation to claim the benefits of deemed export under GST. The supplier must issue a tax invoice indicating that the supply is intended for deemed export and must obtain a certificate from the recipient of goods or services confirming that the goods or services have been received for deemed export.

4. Compliance: The supplier of goods or services must comply with various provisions of the GST law to avail of the benefits of deemed export. This includes timely filing of GST returns, payment of GST on the supply of goods or services to organizations that are not eligible for deemed export status, and maintaining proper records.

 

Conclusion

Deemed exports are an important provision under the GST law that aims to promote the export of goods and services from India. The procedure for deemed exports involves eligibility, tax invoice, certificate from the recipient, and refund/exemption of GST. Contraventions of deemed export provisions can result in penalties and prosecutions under the GST law. Therefore, businesses involved in deemed exports must ensure compliance with the provisions of the GST law to avoid any penalties or prosecutions.


Published by

CA. Heet Shah
(Tax Consultant & Practitioner)
Category GST   Report

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