Goods and service tax

The Goods and Services Tax (GST) is the most revolutionary tax reforms in the records of Indian Tax history. The inclusion of major Central and State taxes in GST, doing away of falling effect of taxes complete and comprehensive set-off of input goods and services and phasing out of Central Sales Tax (CST) has reduced the cost of locally manufactured goods and services. The uniformity in tax rates and procedures across the country coupled with single common portal to meet the compliance requirement will go a long way in reducing the compliance cost and making India a single market.

The Indian government has the aim of increasing the quality and output of exports as portrayed by the “Make in India” policy and many tax benefits that are provided to the exporters. GST came into the picture on July 1 and still there is still some confusion among the exporters on the possibly impact of GST on exports. The Indian government shared a set of notifications and guidance note for the public on 28th June, 2017, to erase the confusions that exporters have, regarding the relevance of SGST, CGST, UTGST and cess and GST rates. The Indian government on 15th February released an update that the facility to furnish an LUT for FY 2021-22 is available of GST portal and the date of validity of LUT was until 31st March 2021.

GST on Exports

Under the previous laws a duty drawback was provided for the tax paid on inputs for export of exempted goods. Claiming the duty drawback was a complicated process. The duty drawback under GST would only be available for the customs duty paid on central excise or imported inputs on certain products used as fuel for captive power generation. Any exporter dealing in zero-rated goods under GST can claim a refund for zero-rated supplies as per the following options:

Option 1: Supply of goods or services, under bond or Letter of Undertaking (LUT), subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax, and then claim a refund of unutilised input tax credit.

The exporter needs to file an application for refund on the common portal either directly or through the facilitation centre notified by the GST commissioner. An export manifest or report has to be filed under the Customs Act prior to filing an application for refund.

Option 2: Any exporter or Embassy  or United Nations or other agencies/bodies as specified in section 55 who supplies goods or services, or both, after fulfilling certain conditions, safeguards and procedures as may be prescribed; and paying the IGST, can claim refund of such tax paid on the supplied goods or services, or both. The applicant has to apply for the refund as per the conditions specified under section 54 of the CGST Act.

An exporter is required to file a shipping bill for the goods being exported out of India. In this case, the shipping bill is considered as a deemed application for refund for the IGST paid. It would be deemed to have been filed only when the person in charge of the shipment files the export manifest or report, mentioning the number and date of the shipping bills.

Electronic as well as manual shipping bill formats are amended by the department to include GSTIN and IGST. The modified forms are available on the official department website. The Department is also in the process of relaxing the factory stuffing procedure and necessary permissions, to give a boost to the Indian export industry under GST.

GST for Deemed Exports

The supply of goods and services of the following would be treated as exports under GST:

  • Supply made to an Export oriented Units (EOU) or Hardware Technology Park unit, Software Technology Park unit, Biotechnology Park unit
  • Supply of goods by a registered person against Advance Authorisation
  • Supply of gold by a bank or Public Sector Undertaking against Advance Authorisation as per customs law
  • Supply of capital goods by a registered person against Export Promotion Capital Goods Authorisation

Filing of returns under GST for the deemed export is to be done as per the general procedures provided for export under GST.

Documents Required for Claiming Refund on Exports

  • Copy of invoice
  • Copy of return evidencing payment of duty
  • Document proving that the burden of paying tax has not been passed on (CA certification or self-certification). 
  • Any other document required by the government.

With GST in place, the export industry in India would be able to have internationally competitive prices due to the smooth process of claiming input tax credit and the availability of input tax credit on services.

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