FAQs on Exports under GST

GST & Other Indirect Taxes | By Dipanjali Chakraborty | Last updated on Oct 5, 2017

1) What is the meaning of “Exports” under GST?

“Export of Goods”, with its grammatical variations and cognate expressions, means taking out of India to a place outside India. It includes both goods and services.

2) What is meant by “Export of service”?

“Export of Services” as defined under Section 2 (6) of IGST Act, 2017 means the supply of any service, when –

the supplier of service is located in India;
the recipient of service is located outside India;
the place of supply of service is outside India;
the payment for such service has been received by the supplier of service in convertible foreign exchange; and
the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;
Explanation 1.— For the purposes of this Act, where a person has,—

an establishment in India and any other establishment outside India;
an establishment in a State or Union territory and any other establishment outside that State; or

an establishment in a State or Union territory and any other establishment being a business vertical registered within that State or Union territory, then such establishments shall be treated as establishments of distinct persons.

3) What is the general scheme of taxation on imports?

As per provisions of the IGST law import of goods into India shall be deemed to be a supply in the course of inter-State trade or commerce. It has also been provided that Integrated Tax on goods imported into India shall be levied and collected in accordance with the provisions of Section 3 of the Customs Tariff Act, 1975 at the point when duties of Customs are levied on the said goods under the Customs Act, 1962, on a value as determined under the Customs Tariff Act, 1975

Read More in our older article: Imports and Exports under GST

4)What are the taxes that are to be subsumed under GST?

Central Taxes to be subsumed:

Central Excise Duty
Service Tax
Additional Duties of Excise
Duties of Excise (Medicinal and Toilet Preparations)
Additional Duties of Customs (known as CVD) & Special Additional Duty of Customs (SAD)
Surcharge and Cess levied by Centre so far as they relate to supply of goods and services
Surcharge & Cess levied by Centre

State Taxes to be subsumed:

Central Sales Tax
State VAT
Luxury Tax
Entry Tax and Octroi (all forms)
Entertainment and Amusement Tax (except when levied by the local bodies)
Taxes on lotteries, betting and gambling
Purchase Tax
Surcharges and Cesses levied by the State

Read more in our article: Taxes to be subsumed in GST

5)What are the taxes that will not be subsumed?

Basic Customs Duty
Export Duty
Toll Tax
Road and Passenger Tax
Electricity Duty
Stamp Duty
Property Tax

6) What is the framework of GST working model?

The Central GST and the State GST would be levied simultaneously on every transaction of INTRA STATE supply of goods and services except the exempted goods and services.
Further, both would be levied on the same price or value. The decided rate of GST shall be divided between CGST & SGST as notified by the GST council
IGST shall be imposed in case of Inter-State supply of goods and or services and also in the case of Import of Goods/Services from outside India
Revenue from CGST would go to the Central Government, SGST to state goverment of consumption and IGST to Central, but to be apportioned amongst states and Centre as may be decided.
Read More in our article: BASICS of GST – Things to Know

7) What is the process of transition to GST regime and carry forward of Input Tax Credit?

Credit of ‘Eligible Duties’ in respect of inputs held in stock on the appointed date, shall be eligible to be carried to the GST regime subject to the following condition:

Such inputs or goods are used or intended to be used for making taxable supplies
The registered person is in possession of invoice or other prescribed documents evidencing payment of duty under the existing law in respect of such inputs
Such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day
The supplier of services is not eligible for any abatement under this Act
Read More: Input Tax Credit

8)What is the treatment of exports under GST?

As per the provisions of IGST law, export of goods and/or services are to be treated as “zero rated supplies” and a registered taxable person exporting goods or services shall be eligible to claim refund under one of the following two options:

Export under bond or letter of undertaking without payment of Integrated Tax and claim refund of unutilized input tax credit.
Export on payment of Integrated Tax and claim refund of the tax so paid on goods and services exported. The aforesaid refunds will be subject to rules,safeguards and procedures as may be prescribed.

9) What is charged on import of goods and services in India?

Both SGST and CGST is charged on import in India.

We have launched Single Platform on GST Compliances In India, assisting in 4 areas – 1) Migration, 2) GST Compliance, 3) Training and 4) Transition & Implementation. Click this link for any assistance.

10)Which supplies out of India are not considered as exports/

Supply of service to a person located outside India where place of supply of service is in India. For example – a property rented out in Mumbai to a person residing in Dubai; agent located in India providing service to a New York based exporter for selling goods to China.

Supply of services where consideration is received in Indian currency or a currency other than convertible currency. For example supply of consultancy service by an Indian consulting firm to an overseas entity, payment for which is made in Indian rupees by Indian branch of overseas entity.

Services provided to overseas branch would not be eligible as export of services due to specific exclusion for such transactions in the definition of “export of service”. This could entail reversal of input credits as such supply would be treated as non-taxable and not as zero rated.

11) What is meant by “Deemed Exports’?

Deemed exports refer to those transactions in which goods supplied do not leave country, and payment for such supplies is received in para 7.02 of Foreign Trade Policy 2015-2020 shall be regarded as ‘deemed exports’, provided that goods are manufactured in India.

12) Give some examples of “Deemed Exports”?

As per Foreign Trade Policy 2015-2020, followings are treated as deemed exports:

Supplies against Advance Authorisation/ DFIA
Supplies to EOU / STP / EHTP / BTP
Supplies against EPCG authorization
Supply of marine freight containers
Supplies to projects against international competitive bidding
Supplies to projects with zero customs duty
Supply of goods to mega power projects against International Competitive Bidding
Supplies to UN Agencies
Supply of goods to nuclear projects through competitive bidding

13) Can exporters claim input tax credit in case of export of goods?

In case of zero rated supplies made without payment of tax, refund of input tax credit will be available as per proviso (i) to section 54(2) of CGST Act.
No refund of unitized input tax credit shall be allowed in cases other than exports including zero rated supplies or in cases where the credit has accumulated on account of rate tax on inputs being higher than the rate of tax on output supplies, other than nil rated or fully exempt supplies – first proviso to section 54(3) of CGST Act.
No refund of unutilized input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty – second proviso to section 54(3) of CGST Act.
No refund of input tax credit shall be allowed if the supplier of goods or services avails duty drawback of CGST / SGST / UTGST or claims refund of IGST paid on such supplies – third proviso to section 54 (3) of CGST Act.

Drawback – “Drawback” in relation to any goods manufactured in India and exported, means the rebate of duty, tax or cess chargeable on any imported inputs or on any domestic inputs or input services used in the manufacture of such goods – section 2(42) of CGST Act.

14)Will the existing exemptions be continued for STP/SEZ units?

No exemptions have been specified in the draft law for STP and SEZ units. Upfront exemption from customs duty/ excise duty for STP units and SEZ units (including service tax and CST exemption for SEZs) may not continue as GST will be payable on imports or procurements as per the draft law.

The GST paid on such procurements will be eligible as refund and therefore, will impact the working capital requirements of such units.

The efficacy of the STP scheme therefore seems doubtful upon transition to the GST regime, as the benefit may be restricted only to BCD paid on import of non-IT products.

Upfront exemption of service tax for SEZ units (by way of Form A1/ A2) is also likely to be converted to refund.

15) What is the refund Process under GST

The procedures for claiming the refund is as below-:

Application form for claiming refund can be filed through the GSTN portal.
An acknowledgement number would be shared with applicant via sms or email, once the application is filed electronically.
Adjustment would be made to return and cash ledger and increase the amount of “carry-forward input tax credit” automatically.
Refund application and documents submitted shall be scrutinized within a period of 30 days of filing the refund application.
Concept of “unjust enrichment” would be examined for reach refund application. If it does not qualify, then the refund would be transferred to CWF(consumer welfare fund).
If refund claimed exceeds the predetermined amount of refund then it will go through pre-audit process for sanctioning the refund.
Refund will be credited electronically to the account of applicant via ECS, RTGS or NEFT.
Application for refund can be made at end of each quarter.
No refund shall be provided for an amount of less than Rs 1000.

16) What if there is delay in refund process?

A refund application is to be processed within a period of 90 days.

If the refund application is not processed within said period then a interest at the rate of 6% is recommended.

However, as per Ms. Nirmala Sitharaman ( Commerce and industry minister) who spoke for the concern of exporters on delay in refund, that the refunds under GST shall be processed within a period of 7 days. If same is delayed more than 2 weeks, then refund will be provided with interest.

17) Will GST be debited in duty credit scrips such as Merchandise Exports from India Scheme (MEIS) and Service Exports from India Scheme (SEIS)?

No, MEIS and SEIS scrip would be used only for payment of Basic Customs Duty under GST regime.

18) What is HSN code (under GST scheme) for my product? What is the applicable GST rate for my product?

Please visit CBEC site for details on HSN classification and GST rates for your products.

19) As an EOU, BCD is exempted under customs notification 52/2003. In GST regime, EOUs should pay IGST on imports?

Only SEZs have been exempted from payment of IGST on import. EOUs will have to pay IGST on imports.

20) If we change ourselves to 100% EOU, do we still have to pay tax on domestic purchases?

100% EOU will not get ab-initio exemption of IGST for imports. In other words EOU will get same treatment as DTA unit under GST regime

21) The exemptions, benefits which are available to 100% EOUs, SEZs in current regime, whether the same will be available under the GST regime

SEZs are allowed to import raw materials duty free (Basic Customs Duty and IGST both exempted). But, 100%EOU will have to pay IGST, Input Tax Credit (ITC)/ refund of which can be taken after exports as per ITC/ Refund Rules

22) How to update GST number in IEC?

It is advised to update IEC in GSTIN. It also advised to check correct PAN in GSTIN and IEC. You may contact jurisdictional DGFT regional office for updating correct PAN in IEC. From 1st July, in all shipping bills declaration of GSTIN will be mandatory for claiming ITC/refund of GST. Please refer to DGFT Trade Notice No.09/2018 12.06.2017 for changes in IEC with the introduction of GST.

23) Under GST regime, can we get duty free benefit (all duties exempted) if we import using Advance authorization?

No, only basic customs duty will be exempted on imports made under Advance Authorisation. IGST will have to be paid on imports. IGST paid on import will be refunded on making exports.

24) We are recently started export firm. Now we are in process to take VAT/CST. But now as GST is come to action. So we have to register for both or only one is needed and mandatory.

You will require only GST registration. In case your product is not covered under GST, you may require VAT/CST registration as well.

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