The export of goods and services is very important for every country, therefore the Government ensures that the exports are made duty free. The Government provides various incentives to promote exports and also provides the refund of duties paid on inputs and input services used for the manufacture of exported goods.
Treatment of Exports Under GST
|Export of Goods||Goods taking out of India to a place outside India|
|Export of Services||Supply of any service where: (1) supplier is located in India (2) Recipient is located outside India (3) "Place of supply of service" is outside India (4) Payment received in convertible foreign exchange (5) Supplier and recipient are not establishments of the same person|
Zero Rated Supply
Under the GST Law, the export of goods or services are treated as inter-state supplies and therefore provisions of IGST Act are applicable on export of goods. As per IGST Act, the export of goods and services are treated as “Zero-rated supply” and therefore no tax is levied on export of goods or services.
All the benefits of exports are also available in case of supply of goods and services to SEZ unit or developer of SEZ as it is also treated as zero-rated supply. As per Section 16 (1) of IGST Act, following supplies of Goods and Services are treated as Zero Rated Supply:-
- Export of goods or services or both or;
- Supply of goods or services or both to a Special Economic Zone(SEZ) unit or developer of SEZ
Input Tax Credit Allowed
As per Section 16(2) of IGST Act, the credit of input tax is allowed for making zero-rated supply even when no tax is paid at the time of clearance of goods or services. Therefore input tax credit is allowed even if the export (or supplies to SEZ) made under bond or letter of undertaking.
Input Credit in Case of Exempt Supply
As per section 16(2) of the IGST Act, the credit of input tax for making zero-rated supply is also allowed even if such supply is an exempt supply under GST law.
As per section 2(47) of GST Act, Exempt Supply means the supply of goods and services:
- which attracts nil rate of tax
- which is wholly exempt
- which is non-taxable.
Therefore in case of exports, input tax credit will be allowed for making all supplies whether the supply is nil rated, exempt or non-taxable.
Procedure For Export of Goods and Services
As per section 16(3) of IGST Act, the export supplies (zero-rated supplies) can be cleared under following options:
1.Export Under Bond or Letter of Undertaking:
The exporter can supply goods and services under bond or letter of undertaking without payment of duty and claim refund of unutilized input tax credit. or
2.Export Under Rebate Claim:
The exporter can supply goods and services on payment of tax and claim refund of such duties or tax paid of supplies. The input tax credit can be utilized for payment of tax on export supplies.
GST Refunds For Exports
The exporter can claim the refund in respect of export of goods or services by either of following methods:
- Refund of unutilized credit when export of goods or services are made without payment of duty (Export Under Bond or Letter of Undertaking)
- Refund of taxes paid on output supplies of goods or services (Export under Rebate Claim)
Declaration of Imports in Return – GSTR-1
The detail of export is required to be declared in Table-10 of Form GSTR-1. This table contains different information of exports and bifurcated into “with payment of tax” and “without payment of tax”.
Impact of GST on Exports
1. Exporter of Services
Under GST tax regime, the exporter of services will also have two options of export –
- Pay output tax, utilize input credit and claim the refund of output tax or
- Supply services without payment of duty.
This option was not available to the exporter of services in the earlier tax regime. Now the service provider is also required file bond if he does not opt for rebate claim.
2. No Ab-Initio Exemption to SEZ
Unlike the earlier tax regime, Ab initio exemption is not available to SEZ unit or developer of SEZ, only refund option is available to SEZ i.e. first pay IGST tax and then claim the refund.