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EXPORT OF SERVICE UNDER GST

By Sandeep Kumar Gupta


Service will be treated as export of service when:

  • Supplier of service is located in India.
  • The recipient of service is located outside India.
  • The place of supply of service is outside India.
  • The payment is received in foreign currency.

Export of service to be treated as interstate supply:

  • IGST will be applicable on export of services.

 

How to export services under GST:

Option 1: Export without paying IGST

Export of service 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 service but without collecting this tax from the recipient. After completing the export of service, claim refund or take credit of the IGST so debited.

Example: Suppose Mr. A is an exporter of services. Mr. A wants to raise a bill to one of his clients in US for the services. The amount to be billed is $10,000. To provide the aforesaid services, he took some input services amounting to Rs.200,000/- in India on which 18% GST (Rs.2,00,000*18%=Rs.36,000) has been paid. Now, he wants to know, how he should bill his US customer under GST. Assume (i) GST on output services as 18% and (ii) 1 USD = Rs. 65/-.

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

  • Export of Services without payment of IGST

Under this route, letter of undertaking is to be filed with the department online or offline as per the convenience. Suppose, Mr. A has filed the LTU with the GST department, now he can bill to the client without charging IGST and later on he may claim the refund or take credit of input tax paid. Input tax paid was Rs.36,000/-.

 

  • Export of Services with payment of IGST

Under this route, the IGST shall be paid first and then the refund shall be applied. Suppose, Mr. A has availed this route, now he shall calculate the total tax to be paid and then adjust the same with the input tax credit and then claim the complete refund.

  1. Mr. A will raise an export invoice of $10,000/- to his US customer. (Note: No IGST will be charged on export invoice).
  2. Mr. A will pay IGST on GST portal. (i.e. Rs.117,000/- [($10000*65)*18%]). The amount can also be paid using input credit available.
  3. Now Mr. A will claim refund in GST portal – Rs. 117,000/-

 

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

  • File GST RFD – 1 before expiry of two years from the date of export of services.
  • 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 services 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 services and he further declares that the foreign exchange shall be received in 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 or bond before central tax authority or state tax authority till the administrative mechanism is implemented.

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