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Exports from India? GST Refund or Rebate

GST treatment in case of Exports

Type of Goods Exporter

  1. Manufacture Exporter
  2. Merchant Exporter

1. Manufacture Exporter

Manufacture Exporter means a person engaged in manufacturing activity for exporting of manufactured goods. An exporter dealing in zero-rated goods under GST can claim a refund for zero-rated supplies as per the following options:

Option 1: Supply goods under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax, and then claim a refund of unutilized input tax credit. The exporter needs to file an application for refund on the common portal. An export manifest or report has to be filed under the Customs Act at the time of export.

GST refunds

Option 2: Any exporter who supplies goods after fulfilling certain conditions, safeguards and procedures as may be prescribed; and paying the IGST, can claim refund of such tax paid on the supplied goods. The applicant has to apply for the refund as per the conditions specified under section 54 of the CGST Act. An exporter is required to file a shipping bill for the goods being exported out of India. In this case, the shipping bill is considered as a deemed application for refund for the IGST paid. It would be deemed to have been filed only when the person in charge of the shipment files the export manifest or report, mentioning the number and date of the shipping bills.

2. Merchant Exporter

Merchant Exporter means a person engaged in trading activity for exporting of goods. Merchant Exporter procures goods from the manufacture and export same in his own name. They may not have their own manufacturing unit or processing facility.

0.1% GST on Supplies to Merchant Exporter

With recent changes of indirect tax GST introductions, the Council noticed the major difficulties for the export sector are on account of delays in refunds of IGST and input taxes on exports. Due to delay of taxes which ideally resulting into blockage of working capital to export business.

To prevent cash blockage of exporters due to upfront payment of GST on inputs etc. the Council approved new scheme. Merchant exporters will now have to pay nominal GST of 0.1% for procuring goods from domestic suppliers for export. Merchant exporter can buy goods at 0.1% for export of goods. In article we talk about GST On Supplies to Merchant Exporter.

Conditions for buying of goods at 0.1% for Merchant Export

  1. Supplier shall supply goods to Merchant Exporter on tax invoice.
  2. Merchant export shall export goods with 90 days from date of tax invoice.
  3. Merchant Exporter shall mention supplier GST number & tax invoice number on shipping bill, bill of export etc.
  4. Merchant Export shall get registration with an Export Promotion Council or a Commodity Board recognized by the Department of Commerce.
  5. Place PO on Supplier: – The registered recipient shall place an order on registered supplier for procuring goods at concessional rate and a copy of the same shall also be provided to the jurisdictional tax officer of the registered supplier.
  6. The registered merchant exporter shall move the said goods from place of registered supplier – (a) directly to the Port, Inland Container Deport, Airport or Land Customs Station from where the said goods are to be exported; or (b) directly to a registered warehouse from where the said goods shall be move to the Port, Inland Container Deport, Airport or Land Customs Station from where the said goods are to be exported;
  7. When goods have been exported, the registered recipient shall provide copy of shipping bill or bill of export containing details of Goods and Services Tax Identification Number (GSTIN) and tax invoice of the registered supplier along with proof of export general manifest or export report having been filed to the registered supplier as well as jurisdictional tax officer of such supplier.

Documentation for Merchant Exporter

  1. Buy Goods from registered supplier under GST
  2. Place Purchase order on supplier for export of goods at concessional rate
  3. Submit Purchase order copy to the jurisdictional tax officer of the registered supplier
  4. Merchant exporter shall mention suppliers tax invoice number & GST Registration number On Export invoice, Shipping bill etc.
  5. Merchant Exporter shall provide copy of shipping bill or bill of export containing details of Goods and Services Tax Identification Number (GSTIN) and tax invoice of the registered supplier along with proof of export general manifest or export report

What if Export is not done in 90 days from date of Tax Invoice?

The merchant exporter shall not be eligible for the above mentioned exemption if the registered recipient fails to export the said goods within a period of ninety days from the date of issue of tax invoice.

Export of Service

Export of service is very ticklish term under GST. Sometimes a transaction seems to be supply of export of service but according to the provisions of the GST such transaction shall not be treated as export of service.

Export of service is defined in section 2(6) of the IGST Act:

Export of services means the supply of any service when,

  1. the supplier of service is located in India
  2. the recipient of 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

As per the provisions included under IGST law, the exports of services are considered as zero-rated supply is exempted from GST and are eligible to claim the refund as per the following options:

Option 1: Supply of services under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax, and then claim a refund of unutilized input tax credit. The exporter of services needs to file an application for refund on the common portal.

Option 2: Supply of services after fulfilling certain conditions, safeguards and procedures as may be prescribed; and paying the IGST, can claim refund of such tax paid on the supplied services. The applicant has to apply for the refund as per the conditions specified under section 54 of the CGST Act.