Export of goods and services plays a crucial role in any economy, fostering international trade and promoting economic growth. In India, the Goods and Services Tax (GST) regime has brought about significant changes in the way exports are treated, simplifying procedures and ensuring ease of doing business.
In this blog post, we will explain the concept of export of goods and services, delve into zero-rated supply, explain how GST is levied on exports, cover the concept of deemed export, discuss claiming GST refunds on exports, and explore the place of supply in the case of exports.
1. What is Export of Goods and Export of Service?
Export of Goods under GST:
“Export of goods” , means taking goods out of India to a place outside India.
Export of Services under GST:
Export of services means the supply of any service when, -
1. The supplier of service is located in India.
2. The recipient of the service is located outside India.
3. The place of supply of service is outside India.
4. The payment for such service has been received by the supplier of service in convertible
foreign exchange or in Indian Rupees wherever permitted by the Reserve Bank of india.
5. 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.
2. What is Zero-Rated Supply?
Zero-rated supply is 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.
3. How will GST be Levied on Exports?
GST on exports is designed to be “zero-rated,” as mentioned earlier. When a registered supplier exports goods or services, they need to follow these steps:
Step 1: Obtain an Export Invoice: The supplier must issue an export invoice for the goods or services being exported. This invoice should contain all the necessary details as required under GST laws.
Step 2: File a Shipping Bill: For goods, the exporter must file a shipping bill with the customs authorities. This shipping bill acts as proof that the goods are intended for export.
Step 3: Claim Zero-Rated Supply: The exporter can claim zero-rated supply status for the goods or services exported. This means that the exporter can claim a refund for any GST paid on inputs or input services used to manufacture or provide the exported goods or services.
4. What is Deemed Export?
Deemed export refers to a transaction where the supply of goods does not physically cross the borders of the country but is considered as an export under GST.
These supplies are specifically catered to goods supplied to certain special projects or entities, such as supplies to Export Oriented Units (EOUs), projects funded by international organizations, or goods supplied for specific purposes like UN missions.
5. Claiming Refund of GST on Exports
To claim a refund of GST on exports, the exporter needs to follow these steps:
Step 1: File a GST Return: The exporter must file regular GST returns, providing the details of their exports.
Step 2: Provide Proof of Export: The exporter needs to submit proof of export, such as a copy of the shipping bill, to the GST authorities.
Step 3: Claim Refund: Based on the proof of export submitted, the exporter can claim a refund of the GST paid on inputs or input services used in the exported goods or services.
6. Options to claim GST refund on exports
Option 1 : Supply goods or services, or both, under bond or Letter of Undertaking, without payment of integrated tax, and then claim a refund of unutilised input tax credit.
Option 2: Export can pay IGST on export and can claim refund of such tax paid on the supplied goods or services, or both after fulfilling certain conditions, safeguards and procedures
7. Place of Supply in Case of Exports
The place of supply in the case of exports is the location outside India where the goods or services are received by the recipient. In other words, it is the foreign country where the exported goods are delivered or where the services are consumed.
Conclusion
Understanding the concepts of export of goods and services, zero-rated supply, deemed export, and claiming refunds is crucial for exporters to optimize their business operations and take advantage of the benefits offered under GST.
By adhering to the simplified procedures and leveraging the zero-rated supply provisions, Indian exporters can confidently engage in international trade and contribute to the growth of the economy.
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