Export of Goods and Services under GST Regime
Since the GST has came, we all define it in one line as “One NATION ONE TAX” but what if we sale the goods or services to another nation i.e. Export. In this article we will discuss, when it is termed as export of goods or export of service, there taxability, place of supply and the most important refund because the main objective of our Honorable Prime Minister Mr. Narendra Modi is to promote “MAKE In INDIA” and this can only possible when they provide benefits to exporter.
Q.1 What is export of goods under GST?
Ans: As per IGST Act, export of goods with its grammatical variation and cognate expression means taking goods out of India to a place outside India.
Q.2 What is export of service under GST?
Ans: Export of service 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 establishment of a distinct person.
Q.3 What is the Nature of transaction of export of goods and service?
Ans: Supply of goods or services or both:
- when the supplier is located in India and the place of supply is outside India,
- to or by a special economic zone developer, or a Special Economic zone unit,
shall be treated to be a supply of goods or services or both in the course of inter State trade or commerce.
Note: Export of goods or service are known as Zero rated supply
Q.4 How to Determine of the Place of supply of export of goods or services.
- In case of export of goods the place of supply shall be the location outside India.
- In case of export of services the place of supply shall be the location of recipient of services except the services specified in sub section (3) to (13) of section 13.
Q.5 What are the situations leading to claim refund by exporter?
- Goods or services or both are exported with the payment of IGST and refund of such IGST paid on goods or services or both supplied is claimed.
- Supply of goods or services, or both under bond/letter of undertaking (LUT), subject to such condition, safeguards and procedure as may be prescribed, without payment of IGST and claim refund of unutilized ITC (detailed below).
- Tax paid on the supply of goods regarded as deemed export may be claimed by recipient.
Q.6 What is LUT and Bond?
Ans: LUT is the bank guarantee given by the banks to its customers to raise money from another Indian bank’s foreign branch as a short term credit. This helps in trade between the different-different countries. It is the document filled by the exporter to get relief from the payment of IGST on exports. The government has provided the option of filling the LUT for exports without payment of IGST in order to boost the exports. Most of the small traders face the problem of an extreme liquidity crush so to solve the problem, the government has introduced the option of filing LUT bond wherein they can now conduct exports on 0% IGST.
Bond is a financial instrument in which the issuer of bond owes the holders a debt and is obligated to pay them interest or to pay the principal at later date. It is a highly secured instrument which is mostly negotiable.
Q.7 How to calculate refund of ITC in case of zero rated supply?
Ans: In case of zero rated supply of goods or service or both without payment of tax under bond/LUT, refund of ITC shall be granted as per the following formula :
( Turnover of zero rated supply of Goods and Services x Net ITC )
Adjusted total turnover
- Net ITC means, Input Tax Credit availed on inputs and input services during the relevant period.
- Turnover of zero rated supply of goods means the value of zero rated supply of goods made during the relevant period without payment of tax under bond/LUT.
- Turnover of zero rated supply of service (ZRSS) means the value of zero rated supply of services made without payment of tax under bond/LUT, calculated as Total payment received during the relevant period for ZRSS and includes ZRSS where supply has been completed for which payment had been received in advance in any period prior to the relevant period but it excludes the advance received for zero rated supply of services for which the supply of services has not been completed during relevant period.
- Adjusted total turnover means the total value of
- The turnover in state/UT, excluding the turnover of services; and
- The turnover of zero rated supply of services determined above and non zero rated supply of services
- Excluding, the value of exempt supply other than zero rated supplies and,
- Also excludes the turnover of supplies in respect of which refund claimed under deemed export or penultimate supply.
Q.8 What is the Refund procedures for Export of Services and Supplies to SEZ
The option to pay IGST and claim a refund is always available. In this case, the refund claim has to be filed in Form GST RFD-01.
For exporters of services, the following are also required to be filed along with the refund claim:
- A Statement containing Number and Date of Invoices; and
- Bank Realisation Certificates / Foreign Inward Remittance Certificates
The supplier of goods or services to an SEZ are required to file the following along with the refund claim:
- A Statement containing Number and Date of Invoices; and
- Proof of Receipt of goods or services which is authorised by the specified officer of SEZ
- Details of payment made
- The declaration that the SEZ or developer of SEZ has not claimed the input tax credit of the taxes paid by the supplier.
For any kind of questions, reach us at GST Discussion Forum
The author of above article is Tarun Mulani, ICAI.
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