In layman’s language, export means taking or providing any goods or services or both from India to any place outside India. Promoting the ‘Make in India’ drive, the Government is continuously aiming to uplift the export market of India. Export under GST article mainly focusing on export of services, export of goods, What is zero rated supply? and more.
Notably, post implementation of GST, exports of goods under GST or exports of services under GST or both are deemed as ‘inter-State supply’ accordingly only IGST is applicable. Correspondingly, exports of goods or services or both are treated as ‘Zero-rated supply’ and hence the same makes the entire transaction of exports ‘tax free’.
In the present article, we will first understand what is an ‘export’ from a GST perspective. Once the concept of ‘export’ is clear, we will figure out the treatment of ‘exports’ under GST. Then, we will analyze the method/ manner of exports under GST and finally, we will sum up the entire article with a synopsis.
What is Export under GST
As we know, GST is applicable to the supply of goods or services or both. Accordingly, ‘Export of Goods under GST’ and ‘Export of Services under GST’ both are separately and specifically defined under the GST law. Both of the same is explained in the table below
Particulars | Relevant Section | Definition |
|---|---|---|
What is Export of Goods under GST? | Section 2(5) of the Integrated Goods and Services Tax Act, 2017 | ‘Export of Goods’ means taking goods out of India to a place outside India. |
What is Export of Services under GST? | Section 2(6) of the Integrated Goods and Services Tax Act, 2017 | ‘Export of Services’ means the supply of any service satisfying all of the following conditions –
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In a nut shell, the supply of goods or services or both satisfying the above definition will be termed as ‘Exports’ under GST. Hereunder, let us understand the GST applicability in case the supply of goods or services or both are treated/ termed as ‘Exports’.
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Treatment on Exports under GST
‘Exports’ under GST are treated as ‘Zero-rated Supply’. Notably, ‘Zero-rated Supply’ is defined under section 2(23) read with section 16 of the Integrated Goods and Services Act, 2017.
What is Zero rated Supply?
Accordingly, ‘Zero-rated Supply’ means any of the following supplies of goods or services or both
- Export of goods or services or both; or
- Supply of goods or services or both to a Special Economic Zone Developer or a Special Economic Zone Unit.
In short, all the following supplies will be treated as ‘Zero-rated Supplies’
- Export of goods; or
- Export of services; or
- Supply of goods/ services to SEZ developer; or
- Supply of goods/ services to SEZ Unit.
Hence, the first treatment of export is clear that the same is to be treated as ‘Zero-rated Supplies’. Now, let us deal with the credit of input tax and refund provisions applicable to exports.
As clarified under section 16(2) of the Integrated Goods and Services Act, 2017, credit of input tax is available to the export of goods or services or both.
As clarified under section 16(3) of the Integrated Goods and Services Act, 2017, ‘Zero-rated supplies’ shall be eligible for either of the following refund –
- Refund of unutilized input tax credit
When the goods or services or both are exported without payment of IGST (i.e. export is carried out under bond or Letter of Undertaking for export under GST (LUT)), then, in such case, a refund of the unutilized input tax credit is available. - Refund of IGST paid on goods or services or both
When the goods or services or both are exported on payment of applicable IGST, then, in such case, a refund of IGST paid is available.
In short, in the case of exports
- Credit of input tax used in manufacturing/ supplying of goods or services or both is available; and
- Refund of either unutilized input tax credit or tax paid on export of goods or services or both is available.
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Manner of Exports under GST
‘Exports’ of goods or services or both are possible in the following two manners –
Export without payment of tax
According to rule 96A of the Central Goods and Services Tax Rules, 2017, the registered person exporting goods or services or both without payment of tax is required to note the following points
- Furnish bond or Letter of Undertaking for export under GST (LUT) in form GST RFD-11 to the jurisdictional commissioner prior to export;
- Such furnished bond or Letter of Undertaking binds the exporter to pay the tax due along with application interest under the following circumstances
Circumstances when tax along with interest is payable | The time period within which tax along with interest is payable |
|---|---|
In the case of the export of goods – Goods are not exported out of India within a period of three months from the date of issue of the invoice for export. | Tax along with interest is to be paid within 15 days after the expiry of three months. |
In the case of the export of services – Payments of services exported are not received in convertible foreign exchange within a period of one year or such extended time period from the date of issue of invoice for export. | Tax along with interest is to be paid within 15 days after the expiry of one year. |
- The exporter is required to furnish the details relating to exports in Table 6A of Form GSTR-1;
- Details declared by the exporters in Form GSTR-1 will be verified with the details appearing in the ICEGATE portal.
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Export with payment of tax
Here, as the export is carried out on payment of tax and accordingly there is no need to execute any bond or Letter of Undertaking.
It is important to note that an application for refund of integrated tax paid on the export of goods or services or both is to be separately filed in Form GST RFD-01.
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Export under GST Synopsis
- Export of Goods means taking goods out of India to a place outside India;
- Export of Services should satisfy the following conditions –
- The supplier is located in India;
- The recipient is located outside India;
- The place of supply is outside India;
- Recipient and supplier should not be the mere establishment of distinct person;
- Payment is received in convertible foreign exchange.
- Exports are treated as an ‘inter-State supply’ of goods or services or both and hence IGST is applicable and not CGST/ SGST;
- Exports under GST are treated as ‘Zero-rated Supply’;
- The credit of input tax is available to the export of goods or services or both;
- Refund of unutilized input tax credit or amount of IGST paid is available;
- Exports of goods or services can be carried out either without payment of IGST or with payment of IGST;
- Separate application in Form GST RFD-01 is to be filed when export of goods or services or both is undertaken on payment of IGST.