Putting up in simple terms, ‘export’ means trading/ supplying of goods and services outside the domestic region of a country.
Under GST export of goods and services will be deemed as ‘inter-State supplies’ and will be treated as ‘zero-rated supply’. ‘Zero-rated supply’ makes the entire supply tax free. In nut-shell, there will be no tax burden either at the Input Stage or at the Final Output Stage.
GST Implications on the Export of Goods and Services
Exports under GST
As we know, ‘goods’ being tangible in nature can easily be deemed to be exported as and when it crosses the territorial borders of India. However, ‘services’ being intangible, export of it has a different treatment.
‘Export of Goods’ defined under section 2(5) of the IGST Act and ‘Export of Services’ defined under section 2(6) of the IGST Act clarifies the same. Both the definitions are simplified hereunder-
‘Export of Goods’ means taking goods out of India to a place outside India. Further, ‘Export of Services’ means a supply of service satisfying all the following conditions
- 1The supplier of service is located in India,
- 2The receiver of service is located out of India,
- 3The place of supply of service is out of India,
- 4The supplier receives the payment in convertible foreign exchange or India rupee when permitted by RBI, and
- 5The supplier and the receiver of service should not be the establishment of a distinct person.
Further, two more definitions i.e. ‘Zero rated supply’ defined under section 2(23) read with section 16(1) of the IGST Act, and ‘Deemed exports’ defined under section 2(39) read with section 147 of the CGST Act are also important for understanding the concept of ‘exports’ under GST.
Both the definitions are explained hereunder:
Zero-Rated Supply
‘Zero-rated supply’ means export of goods or services or supply of goods or services for authorized operations to a SEZ developer or SEZ unit.
Deemed exports
‘Deemed exports’ refers to the supplies which are deemed to have been exported. Here, the supplied goods don’t leave India. Notably, the supply of such goods should be notified under section 147 of the CGST Act.
Some of the examples of deemed exports are:
- 1Supply of goods against Advance Authorization.
- 2Supply of goods to Export Oriented Unit (EOU).
- 3Supply of goods to EHTP [Electronic Hardware Technology Park], STP [Software Technology Park] or BTP [Bio-Technology Park].
- 4Supply of goods against Export Promotion Capital Goods Authorization (EPCG).
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Export options available to the exporters
An exporter is facilitated with the following two types of export options-
- Export of goods/ services on payment of IGST [Section 16(3) (b) of the IGST Act read with rule 96 of the CGST Act]; and
- Export of goods/ services without payment of IGST under bond/ LUT [Section 16(3) (a) of the IGST Act read with rule 96A of the CGST Act].
Both the above export options are briefly explained hereunder:
Export of goods/ services on payment of IGST
Here the exporter exports the goods/ services on payment of IGST. And, the refund is available in accordance with provisions of section 54 of the CGST Act.
Export of goods/ services without payment of IGST (i.e. Export under Bond/ LUT)
Here, the exporter exports the goods/ services without the payment of IGST. And, refund of unutilized Input Tax Credit is available to the exporter.
Notably, since, the tax is not paid while exporting, the exporter here is required to furnish either a bond or a Letter of Undertaking (LUT). Integral facts of bond/ LUT is summarized hereunder-
- Bond/ LUT binds the exporter to make payment of tax under following situation-
- When goods are not exported – tax is to be paid within 15 days after expiry of 3 months from the date of invoice; or
- When the payment is not received – tax is to be paid within 15 days after expiry of 1 year from the date of invoice.
- Bond/ LUT is to be submitted, before undertaking export, to the jurisdictional commissioner in Form GST RFD-11.
- Running bond account is to be maintained. Whereas, LUT is valid for the whole Financial Year.
- As per circular no. 40/14/2018-GST dated 6th April 2018, for acceptance of LUT there is no need for submission of any physical document.
- Furnishing of Bond (i.e., LUT is not permissible) is mandatory under any of the following situations-
- The exporter is prosecuted for any offence under either of the following laws-
- The Integrated Goods and Services Tax Act, 2017,
- The Central Goods and Services Tax Act, 2017,
- Any of the existing laws.
- The amount of tax evaded is more than INR 250 Lakhs.
- The exporter is prosecuted for any offence under either of the following laws-
GST Refund Provisions in Case of Export of Goods
Refund provisions in case of export of goods | Refund provisions in case of export of services |
|---|---|
Filing of GST Refund Claim | |
· A shipping bill filed will be deemed to be a refund application when | The exporter is required to file a refund application in Form GST RFD-01 |
Time limit of filing the refund claim | |
Within a period of two years from | Within a period of two years from |
Important condition to be satisfied before filing the refund claim | |
Exporters are mandatorily required to file export details in Table 6A of Form GSTR-1 | Exporters are mandatorily required to file export details in Table 6A of Form GSTR-1 |
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