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EXPORT OF GOODS UNDER GST

By Sandeep Kumar Gupta


Goods will be treated as export of goods when:

Physical Exports

  • Supplier of Goods is located in India.
  • The recipient of goods is located outside India.
  • The place of supply of goods is outside India.
  • The Payment is received in Foreign Currency.

 

Supply ‘to’ SEZ

  • Supplier of Goods is located in India.
  • The recipient of goods is located in SEZ Area within India.
  • The place of supply of goods is located in SEZ Area within India.
  • The Payment is received in Indian Currency.

 

 

Export of goods to be treated as interstate supply:

  • IGST will be applicable on export of goods.

How to export goods under GST:

Option 1: Export without paying IGST

Export of goods under letter of undertaking (LTU) without payment of IGST, and claim refund or take credit of input tax credit used in the outward supply.

Option 2: Pay IGST and export

Make payment of IGST on export of goods but without collecting this tax from the recipient. After completing the export of goods, claim refund or take credit of the IGST so debited.

 

PHYSICAL EXPORTS:

Example: ABC from Chennai supplies goods required by PQR in Delhi to effect exports to US (say to XYZ). Assume (i) GST on goods as 18% and (ii) 1 USD = Rs.65/-.

Answer: Under GST, there are two options for PQR to follow to complete the export of goods. Let us discuss both the options:

  • Export of Goods without payment of IGST
  1. ABC will raise bill (say Rs.10,000/) and charge IGST@18% (Rs.1,800/-) to PQR.
  2. PQR to avail input tax credit of Rs.1,800/-.
  3. PQR will raise export invoice (say $5,000/-) to XYZ. (Note: No IGST will be charged on export invoice).
  4. Now, PQR can claim refund or take credit of Rs.1,800/-. Such refund to be claimed by filing Form GST RFD-01.

 

  • Export of Goods with payment of IGST
  1. ABC will raise bill (say Rs.10,000/) and charge IGST@18% (Rs.1,800/-) to PQR.
  2. PQR to avail input tax credit of Rs.1,800/-.
  3. PQR will raise export invoice (say $5,000/-) to XYZ. (Note: No IGST will be charged on export invoice).
  4. PQR will pay IGST on GST portal. (i.e. Rs.58,500/- [($5000*65)*18%]). The amount can also be paid using input credit available.
  5. Now, PQR can claim refund Rs.58,500/-. Refund of Rs. 58,500/- to be allowed on automatic processing of shipping bill by Customs once GSTR-3 and EGM is filed (Rule 96 of the CGST Rules to be followed)

 

SUPPLY ‘TO’ SEZ

Example: ABC from Hyderabad supplies goods required by PQR in Kolkata for onward supply to XYZ in Kolkata-SEZ. Assume (i) GST on goods as 18%.

Answer: Under GST, there are two options for PQR to follow to complete the export of goods. Let us discuss both the options.

  • Export of Goods without payment of IGST
  1. ABC will raise bill (say Rs.10,000/) and charge IGST@18% (Rs.1,800/-) to PQR.
  2. PQR to avail input tax credit of Rs.1,800/-.
  3. PQR will raise invoice (say Rs.25,000/-) to XYZ (SEZ). (Note: No IGST will be charged on export invoice).
  4. Now, PQR can claim refund or take credit of Rs.1,800/-.

 

  • Export of Goods with payment of IGST
  1. ABC will raise bill (say Rs.10,000/) and charge IGST@18% (Rs.1,800/-) to PQR.
  2. PQR to avail input tax credit of Rs.1,800/-.
  3. PQR will raise invoice (say Rs.25,000/-) to XYZ (SEZ). (Note: No IGST will be charged on export invoice).
  4. PQR will pay IGST on GST portal. (i.e. Rs.4,500/- [(Rs25,000/-*18%]). The amount can also be paid using input credit available.
  5. Now, PQR can claim refund or take credit of Rs.4,500/-.

 

 

EXPORT INVOICES

Invoice shall carry an endorsement i.e.

“SUPPLY MEANT FOR EXPORT ON PAYMENT OF IGST” or ‘SUPPLY MEANT FOR EXPORT UNDER LETTER OF UNDERTAKING WITHOUT PAYMENT OF IGST”

PROCEDURE TO CLAIM THE REFUND UNDER GST

  1. File GST RFD – 1 before expiry of two years from the date of export of goods.
  2. After submitting the FORM GST RFD – 1, the proper officer shall within 15 days scrutinize the application and submit an acknowledgment in form GST RFD – 2.

Once the application is accepted, the proper officer shall issue the refund order within sixty days.

PROCEDURE TO OBTAIN LTU (Letter of Undertaking)

Under GST, if you want to export the goods without payment of taxes, then you need to file the LTU under GST either online or offline along with the other supporting documents. Let us understand LTU:

Letter of undertaking (LTU): Letter of undertaking is a document by which the exporter declares that he shall not default in any of the conditions for export of goods and he further declares that the foreign exchange shall be received in the due time. The LTU shall be valid for 12 months.

 

WHERE TO FILE THE LTU UNDER GST

Ideally the LTU shall be filed online in the format GST RFD – 11. However, since the online system is not ready yet, the government has released a circular and allowed the manual filing of the LTU under GST. The LTU shall be accepted by the jurisdictional commissioner having jurisdiction over the principal place of business of the exporter.

Further, exporter is free to file the LTU before central tax authority or state tax authority till the administrative mechanism is implemented.

 

ADDITIONAL INFO

SUPPLY TO MERCHANT EXPORTER UNDER GST REGIME

 

Background

  • Unlike the erstwhile Excise law, under Goods and Services Tax (‘GST’) law, there is no provision for issuance of CT-1 form which enables merchant exporters to purchase goods from a manufacturer without payment of GST.
  • The transaction between a manufacturer (‘supplier’) and a merchant exporter (‘recipient) is in the nature of supply and same is liable to GST as any other normal taxable supply.
  • The GST Council in its 22nd meeting had decided that merchant exporter can pay a nominal GST of 0.1 percent for procuring goods from a domestic supplier for export.

RATE OF GST

GST rate would be as under:

GST Type

Rate (percent)

Relevant notification no.

CGST

.05

40/2017 – Central Tax (Rate)

SGST

.05

As Notified by States

IGST

.10

41/2017- Integrated Tax (Rate)

 

PROCEDURE

The procedure for supplying goods to a merchant exporter shall be as follows:

STEP 1: PLACING AN ORDER BY A MERCHANT EXPORTER AND FURNISHING COPY THEREOF TO THE DEPARTMENT

  • Merchant exporter shall place an order on registered supplier for procuring goods at concessional rate.
  • Copy of the order shall also be provided to the jurisdictional tax officer of the registered supplier.
  • Graphical transaction flow is as under:

STEP 2: SUPPLY OF GOODS

For exporting the goods, the recipient shall

  • Directly move the said goods from supplier’s place to the port/inland container depot (ICD)/airport/land custom station (LCD) from where the said goods are to be exported; or
  • Directly move the said goods to a registered warehouse from where the said goods shall be move to the port/inland container depot (ICD)/airport/land custom station (LCD) from where the goods are to be exported.
  • Graphical transaction flow is as under:

Option to aggregate the inward supplies:

  • If merchant exporter intends to aggregate supplies from multiple suppliers and then export, he can move goods to registered warehouse and thereafter to the port/ICD/airport or LCD and then export there from.
  • In this case merchant exporter shall endorse receipt of goods on the tax invoice and also obtain an acknowledgement of receipt of goods from the warehouse operator.
  • The endorsed tax invoice and the acknowledgement of the warehouse operator shall be provided to the registered supplier as well as to the jurisdictional tax officer of such supplier.

STEP 3: POST-EXPORT COMPLIANCE

Once the goods are exported, merchant exporter shall provide following documents to the supplier and the jurisdictional tax officer of the supplier:

  • Copy of shipping bill/ Bill of export (incorporating supplier’s GSTIN).
  • Tax invoice provided by supplier.
  • Export General Manifest/ Export report.

CONDITIONS

Following are the conditions to be satisfied for availing benefit of concessional rate of GST on supply to a merchant exporter:

  • Supplier shall supply goods under a tax invoice.
  • Goods must be exported within a period of 90 days from the date of issue of tax invoice by the supplier. The exemption would not be available to the supplier if the merchant exporter fails to export the said goods within a period of 90 days from the date of issue of tax invoice.
  • Merchant exporter shall indicate the GSTIN of the supplier and tax invoice number issued by the supplier in the shipping bill/ bill of export.
  • Merchant exporter must be registered with an Export Promotion Council or a Commodity Board recognized by the Department of Commerce.

 

 

 

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