GST perspective on Export of Services
- Harshi Garg, ACA
Section 2(6) of IGST Act, 2017 (“the Act”)
(Export of services)
1. “export of services” means the supply of any service when.-
a) the supplier of service is located in India;
b) the recipient of service is located outside India;
c) the place of supply of service is outside India;
d) the payment for such service has been received by the supplier of service in convertible foreign exchange; and
e) 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 of the Act;
Explanation 1 to Section 8 of the Act
(Intra-state supply)
For the purposes of this Act, where a person has, —
(i) an establishment in India and any other establishment outside India;
(ii) an establishment in a State or Union territory and any other establishment outside that State or Union territory; or
(iii) 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.
Section 16 of the Act (Zero Rated Supply)
(1) “Zero rated supply” means any of the following supplies of goods or services or both, namely: —
a) export of goods or services or both; or
b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.
(2) Subject to the provisions of sub-section (5) of section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply.
(3) A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely: —
a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or
b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied,
in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder.
Refund of GST
An exporter dealing in zero-rated goods under GST can claim a refund for zero-rated supplies as per the following options:
Option 1: He may export the Goods/services under a Letter of Undertaking, without payment of IGST and claim refund of unutilized input tax credit; (Rule 96A of CGST Rules)
(1) Any registered person availing the option to supply goods or services for export without payment of integrated tax shall furnish, prior to export, a bond or a Letter of Undertaking in FORM GST RFD-11 Bond and LUT Format to the jurisdictional Commissioner, binding himself to pay the tax due along with the interest specified under sub-section (1) of section 50 of the Act within a period of —
(a) fifteen days after the expiry of three months from the date of issue of the invoice for export, if the goods are not exported out of India; or
(b) fifteen days after the expiry of one year, or such further period as may be allowed by the Commissioner, from the date of issue of the invoice for export, if the payment of such services is not received by the exporter in convertible foreign currency.
(2) The details of the export invoices contained in FORM GSTR-1 furnished on the common portal shall be electronically transmitted to the system designated by Customs and a confirmation that the goods covered by the said invoices have been exported out of India shall be electronically transmitted to the common portal from the said system.
Notification No: 37/2017 dated 4th October 2017
The Central Board of Excise and Customs hereby specifies conditions and safeguards for furnishing a Letter of Undertaking in place of a Bond by a registered person who intends to supply goods or services for export without payment of integrated tax –
(i) all registered persons who intend to supply goods or services for export without payment of integrated tax shall be eligible to furnish a Letter of Undertaking in place of a bond except those who have been prosecuted for any offence under the Central Goods and Services Tax Act, 2017 (12 of 2017) or the Integrated Goods and Services Tax Act, 2017 (13 of 2017) or any of the existing laws in force in a case where the amount of tax evaded exceeds two hundred and fifty lakh rupees;
Process of obtaining LUT:
a) Form for LUT: The registered person (exporters) shall fill and submit FORM GST RFD-11 on the common portal of GST. An LUT shall be deemed to be accepted as soon as an acknowledgement for the same, bearing the Application Reference Number (ARN), is generated online.
b) Documents for LUT: No document needs to be physically submitted to the jurisdictional office for acceptance of LUT.
c) Acceptance of LUT/bond: An LUT shall be deemed to have been accepted as soon as an acknowledgement for the same, bearing the Application Reference Number (ARN), is generated online.
Option 2: Refund of integrated tax paid on goods or services exported out of India. — Rule 96 CGST Rules.
(1) The shipping bill filed by an exporter of goods shall be deemed to be an application for refund of integrated tax paid on the goods exported out of India and such application shall be deemed to have been filed only when:-
(a) the person in charge of the conveyance carrying the export goods duly files an export manifest or an export report covering the number and the date of shipping bills or bills of export; and
(b) The applicant has furnished a valid return in FORM GSTR-3 or GSTR-3B, as the case may be;
(2) The details of the relevant export invoices in respect of export of goods contained in FORM GSTR-1 shall be transmitted electronically by the common portal to the system designated by the Customs and the said system shall electronically transmit to the common portal, a confirmation that the goods covered by the said invoices have been exported out of India.
Deemed Export (Notification No 48/2017):
Some supplies have been notified as deemed export vide above notification as below:
1. Supply of goods by a registered person against Advance Authorization;
2. Supply of capital goods by a registered person against Export Promotion Capital Goods Authorization;
3. Supply of goods by a registered person to Export Oriented Unit;
4. Supply of gold by a bank or Public Sector Undertaking specified in the notification №50/2017-Customs, dated the 30th June, 2017 (as amended) against Advance Authorization.
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