By Sandeep Kumar Gupta
Service will be treated as export of service when:
Export of service to be treated as interstate supply:
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
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/-.
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.
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
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:
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.