Exports and Deemed Export under GST
Introduction: Under GST it is important to determine that what are the GST provision in relation to export and when a supply will be treated as deemed export. It is important to understand how assessee will be taxed when transaction is determined as deemed supply.
- Export of Goods: It means taking goods outside India to the place outside India; and such supply is determined as Zero-rated supply under GST.
Zero-rated supply: As per section 16 of IGST Act, 2017; zero rated supply means supply of goods and service being: i) Export of goods or services or both; ii) Supply of goods or services or both to a Special Economic Zone developer/Special Economic Zone unit. Here it is worth noting that only supply to SEZ developer/ SEZ unit is covered. In case if SEZ developer/ SEZ unit is supplying and such is export then it will be covered under definition but any domestic clearance by them will not be covered under above definition.
- Export of Service: means the supply of any service when:
(i) the supplier of service is located in India;
(ii) the recipient of service is located outside India;
(iii) the place of supply of service is outside India;
(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange orin Indian rupees(in case of transaction with Nepal and Bhutan); and
(v) the supplier of service and the recipient of service are not merely establishments of a distinct person (Though it is not treated as export but in case of such transaction i.e. where supplier is located in India, recipient is located outside India, place of supply is outside India, but both the party are covered under the definition of deemed distinct person i.e. entity falling under same Permanent Account Number (PAN).)
- Deemed Export : In this case even if transaction is not satisfying definition of export i.e. Goods has not been taken outside India, payment may or may not have been received in convertible foreign exchange still it will be treated as deemed to be exported. This can happen only in case of Goods. Deemed export means:
- Supply of goods by the registered person against Advance Authorisation (AA). (Supply by registered dealer to person who holds Advance Authorisation) Advance Authorisation means an authorisation issued by the Director General of Foreign Trade for import or domestic procurement of inputs on pre-import basis for physical exports.
- Supply of capital goods by the registered person against Export Promotion Capital Goods Authorisation (EPCG).
- Supply of goods by the registered person to Export Oriented Unit (EOU)/ Electronic Hardware Technology Park Unit (EHTP) / Software Technology Park Unit (STP) / Bio-Technology Park Unit (BTP).
- Supply of gold by specified Bank or Public Sector Undertaking against Advance Authorisation (AA).
It is important to note that export is covered under zero-rated supply and in that assessee can either opt for paying tax and then claiming full refund of tax paid or assessee can opt to supply under Bond/Letter of Undertaking; but in case of deemed export assessee is liable to pay tax at time of supply as it is not covered under definition of zero-rated supply and here supply cannot be made under Bond/LUT without payment of tax.
Application for refund can be done by supplier or by recipient; in case supplier is applying for refund then recipient will not be eligible to get the credit of tax charged by supplier; further supplier needs to get an undertaking from the recipient that he has not availed the input tax credit on such supplies. In case where recipient is applying for refund,he shall ensure that supplier is not claiming for refund. The application for refund shall be made in Form GST RFD-01; time limit to furnish such form is within 2 years from the date on which return relating to such deemed export supplies is furnished.
Government has issued notification that in order to avail credit of IGST paid on import of inputs used by deemed exporter; he shall obtain certificate from chartered accountant and shall submit to the jurisdictional GST commissioner within 6 months of such supply.
Frequently asked question:
- Mr. R has exported goods to Russia; but Russian buyer has paid him in Indian currency whether such will be covered under the definition of export?
As per definition of export of goods; there is no requirement that only foreign currency is eligible to treat the transaction as export. Therefore, it will still be treated as export of goods.
- What if in the given case it was supply of service?
In that case one of the essential conditions is supplier receives foreign exchange on supply of service (except in case of Nepal and Bhutan). Therefore, said transaction will not be treated as export of service.
- Mr. D has contacted to export the good from India to Australia; however Australian buyer guided him to deliver the goods in Ahmedabad (Gujarat) where one of his factories is situated. Whether this transaction will be treated as export of goods?
In has been clearly mentioned in the definition that it will be treated as export of goods only when goods are taken out of India to the place outside India. Therefore, said transaction will not fall under the definition of export.
- Mr. B unregistered dealer has supplied goods to one of the exporters holding Advance Authorisation. Whether such will be treated as deemed export?
It has been specified under the definition of deemed export that if supply has been undertaken by registered dealer to person who holds Advance Authorisation will be covered under the definition of deemed export; In the given case transaction has been undertaken between unregistered dealer and exporter therefore, it will not be covered under the definition of deemed export.
- Mr. R has supplied goods to Mr. Q who is a holder of Advance Authorisation; Mr. R has furnished his return relating to deemed export on 20-06-2018; whether Mr. R is eligible to apply for refund? If yes what will be the due date within which claim of refund shall be furnished?
In case where assessee is registered person and has supplied the goods to the person holding Advance Authorisation then it will be covered under the definition of Deemed Export and supplier will be eligible to claim refund provided recipient will not be eligible to get the credit of tax charged by supplier; further supplier needs to get an undertaking from the recipient that he has not availed the input tax credit on such supplies