GST on Export of Goods & Services

Updated: Jun 18, 2020

We are moving towards the global economy and India is one of the growing economy that aims to ease the business overseas for Indian entrepreneurs. "Make In India" and other government initiatives and subsidies have inspired further investment in the Export business. So when GST was introduced government has considered the growing export business and accordingly extended some benefits under GST. Let's get some gist of GST on the export of Goods and Services.




DEFINITION OF EXPORT OF GOODS UNDER GST

Sub-Section 5 of section 2 of IGST Act, 2017 defines – “Export of Goods”, with its grammatical variations and cognate expressions, means taking out of India to a place outside India.

DEFINITION OF EXPORT OF SERVICES UNDER GST

Sub-Section 6 of Section 2 of IGST Act, 2017 defines – "Export of Services" means the supply of any service when :

(i) the supplier of service is located in India;

(ii) the recipient of service is located outside India;

(iii) the place of supply of service is outside India;

(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange (except in the case where the place of supply is Nepal or Bhutan, in that case, INR is acceptable);

(v) the supplier of service and the recipient of service are not merely establishments of a distinct person

Conditions for Export of Services under GST
TREATMENT OF EXPORT OF GOODS & SERVICES UNDER GST

As per GST Laws Export of Goods & Services has been considered as:

  • INTER-STATE SUPPLY (Sec 7(5) of IGST Act 2017): Export is treated as Inter-state supply and such supply would be liable for IGST.

  • Zero-Rated Supply (Sec 16(1) of IGST Act 2017): GST would not be levied on Goods or Services which are exported out of India.

ZERO-RATED SUPPLY

Zero Rated Supply means:


Zero Rated Supply under Sec 16(1) of IGST act.
  • Export of Goods or Services or both;

  • Supply of Goods or Services to SEZ unit or SEZ Developer

  • Zero Rated Supply is not equal to 0% tax, it means the recipient isn't required to bear GST i.e Recipient would not be required to pay GST to the supplier.

OPTIONS FOR EXPORTER UNDER GST

An Exporter can claim the refund for GST on export under one of the following options:


Refund for GST paid on export of goods or services
Refund of GST for Export
  1. BOND OR LETTER OF UNDERTAKING UNDER GST: A registered Person (exporter) can Export Goods or Services under Bond or Letter of Undertaking (LUT) without payment of GST and then can claim the refund of unused Input Tax Credit (subject to certain conditions and procedures) such refund application can be made online on GST portal.

  2. PAY IGST AND THEN CLAIM REFUND: Any exporter or Embassy or United Nations or other organizations/ bodies/ agencies as specified in section 55 who supplies goods or services, or both (subject to conditions, rules, and procedure) can pay IGST on such goods or services and later on can claim the refund of such GST paid. An exporter shall file a shipping bill for export, such shipping bill is considered as a deemed application for refund of GST

CASES WHERE SUPPLY OF GOOD OR SERVICES ARE NOT CONSIDERED AS EXPORT:

Under certain situations, it may seem like the export of goods or services but it might not be considered as the export under GST. Let's see cases where it is not considered as the export:


Cases where supply of goods or services not considered as Export under GST
  1. Place of Supply in India, Recipient outside India: In such a case since the place of supply is in India it does not satisfy the condition of the supply of service outside India. e.g. Property Located in India is rented out to Person residing in USA in such a case Recipient is in USA and Place of Supply is in India thus not an export.

  2. Supplier-Recipient in India service provided overseas: In such a case since Supplier and Recipient both are in India, it does not satisfy the condition that the recipient must be out of India even when payment is in FOREX such supply will not be considered as the export. e.g A company in India ordering Indian company to provide a service in USA and payment is in FOREX, here Client is recipient, Indian Company is supplier and Place of Supply is the USA.

  3. Supplier Outside India, Service provided overseas and service recipient is in India: e.g. An Indian Company ordering Chinese company to provide service in the USA, in such a case Supplier is in China, Recipient is in India and Place of Supply is the USA.

  4. Consideration in Indian Rupee: As stated above in this topic to call it export of service payment must be in FOREX .e.g. When Reliance India provides service to ABC of t USA and agent of ABC in India makes payment to Reliance India in INR in such case it is not an export of service.

  5. Services to Foreign Branch/Distinct Person: When an Indian company provides service to its branch in the USA it is not considered as export of services and any Input Credit on such supply would not be eligible for Refund.


So in this topic we have tried to summarise and explain the GST on the export of Goods and Services.


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