GST ON IMPORT AND EXPORT

The current Indian government’s goal is to increase the quantity and efficiency of India’s exports, as shown by the “Make in India” policy and the multiple tax credits available to exporters. Even though the GST ON IMPORT AND EXPORT was implemented on July 1, there is still some uncertainty among exporters about how the new regime would affect their business.

Traders want to know how GST can impact the goods they export, as well as the amount of tax they will have to pay on the raw materials and inputs they use. On June 28, 2017, the Indian government issued a series of notifications and a clarification notice to the public regarding the applicability of the CGST, SGST, UTGST, and cess and GST rates.

GST ON EXPORT

Section 2 of the IGST states:

  • 2(5) “Export of goods” refers to the transport of goods from India to another region, as well as its grammatical variants and cognate expressions.
  • 2(6) The term “export of services” refers to the provision of any service when––
  1. the service provider is based in India;
  1. the service recipient is based outside of India;
  1. the location of supply of service is provided outside of India;
  1. the payment for such service is earned by the service provider in convertible foreign currency or Indian rupees, as allowed by the Reserve Bank of India;
  1. In compliance with Explanation 1 in section 8, the supplier of service and the purchaser of service are not simply entities of a single person.
  1. Section 8, Explanation 1.––provides that when an entity in India and any other entity outside India exist, they must be considered as separate entities.

When it comes to goods export, deciding whether they are exported or not is simple. The meaning is precise and unmistakable. It is considered export when products are brought out of India to a location outside of India for consideration in the course of or in furtherance of industry. As a result, Section 49(5) of the CGST Act, Section 54 of the IGST Act, and Section 16 of the IGST Act provide for refunds and zero taxation, respectively.

Though the supply of goods or services is an interstate transaction under section 7(5)(a), the supply of services must meet five requirements under section 2(6) until it can be considered as export and subject to the provisions of Section 49(5), Section 54 of the CGST Act for reimbursement, and Section 16 of the IGST Act for zero-rated supply.

Section 16(2) of the Act- However, the applicable input tax credit can be offset against the IGST obligation on sale, and this can be achieved even though the export supply is excluded.

Insofar as the Export Invoice is needed to include all specifics, endorsements, and conditions as defined for a tax invoice under section 31 read with Rule 46’s Second Proviso,

DEEMED GST

Deemed exports are covered by Section 147. On the Council’s advice, the Government may declare such suppliers of goods as deemed exports, where the goods supplied do not leave India and payment is made in Indian rupees or convertible foreign exchange if the goods are produced in India.

Under GST, supplies of goods or services to the following will be considered exports.

  • Supply of products by a registered individual under the terms of an Advance Authorization
  • An export-oriented undertaking (EOU) or a Hardware Technology Park unit, Software Technology Park unit, or Biotechnology Park unit receives the supply.
  • Supply of capital goods by a registered person in violation of the Export Promotion  Authorization for Capital Goods
  • Customs law prohibits a bank or a public sector undertaking from supplying gold without prior authorization.
  • GST returns for considered exports must be filed in accordance with the general protocols for export under GST.

IN-DEPTH ANALYSIS OF THE RULES FOR GST REFUND ON EXPORT

Under S. 54(3) of the CGST Act and S. 16(3)(a) of the IGST Act, the taxable individual is entitled to a refund of unutilized input tax credit in respect of zero-rated supplies without payment of tax, and he is also entitled to a refund of IGST paid on export under S. 16(3)(b) read with S. 54 of the CGST Act.

  • RULE 89- GST (other than IGST) charged on goods or services exported out of India is refunded in the form of an unutilized tax credit on goods or services exported out of India. 

Refunds of unutilized ITC, which are liable to be refunded to any citizen, on the export of goods, except for IGST refunds and where export is subject to export duty, are to be issued on an application in Form GST REF 01, to be submitted at the end of the tax year, i.e. end of the period for which a return is expected to be filed, before 2 years (S.54) of the applicable date.

  • Rule 96- GST charged on goods or services shipped out of India is refunded
  • A shipping bill submitted by a goods exporter is regarded as an appeal for a refund of integrated tax paid on goods shipped out of India. 
  • The refund demand would be denied until the following conditions are met:
  • a request has been received from the jurisdictional Commissioner of central tax, state tax, or union territory tax to refuse payment of a refund payable to the individual requesting a refund under the provisions of section 54, sub-sections (10) or (11); or
  • The goods were exported in excess of the Customs Act of 1962, according to the proper officer of Customs.
  •  Rule 96 (9)- REFUND IN THE EVENT OF SERVICE EXPORT

The claim for a refund of combined tax paid on services exported out of India must be submitted in FORM GST RFD-01 and must be processed in compliance with rule 89. Those seeking a refund of consolidated tax charged on goods or services exported do not have:

  1. The following Notifications of the Government of India, Ministry of Finance, were issued supplies on which the benefit was claimed:
  1. Notification No. 48/2017-Central Tax, dated October 18, 2017, except insofar as it relates to capital goods received by such individual under the Export Promotion Capital Goods Scheme or
  1. Notification No. 78/2017-Customs, dated the 13th October 2017, or 
  1. Notification No. 41/2017-Integrated Tax (Rate), dated the 23rd October 2017, 

(b) availed the benefit under (except so far as it relates to the receipt of capital goods by such individual against the Export Promotion Capital Goods Scheme.):

The benefit of the notifications listed therein shall not be deemed to have been availed only where the registered individual has paid Integrated Goods and Services Tax and Compensation Cess on inputs and has only received an exemption of Basic Customs Duty (BCD) under the said notifications, according to the Explanation.

  • PROVISIONAL REFUND

Whether the claimant is not charged for violation of tax beyond Rs 2,50,000/- in the last five years of the year for which the refund is claimed, he is entitled to a provisional refund of 90% of the amount claimed under Section 54(6) read with Rule 91.

Documents Needed for Export Refund Claims

The below is a list of documents that must be sent in order to receive a refund – 

  1. A copy of the return proving duty charge 
  1. An invoice copy 
  1. Proof that the cost of paying taxes has not been passed on to anyone (CA certification or self-certification). 
  1. Any such document that the government needs.

GST ON IMPORT

Sections 2(10) and (11) of the IGST Act provide definitions of goods and services imported:

  • 2(10) The term “import of goods,” with its grammatical variants and cognate expressions, refers to the process of bringing goods into India from outside the country.
  • 2(11) The term “import of services” refers to the provision of any service, where––
  1. the service provider is based outside of India;
  2. the service recipient is based in India; and
  3. the location of service provision is India;

Education cess, safeguard tax, general customs duty, anti-dumping duty, and other fees would not affect the import of goods and products. The above-mentioned costs will now be included in the GST umbrella.

The IGST (Integrated Goods and Services Tax) Act of 2017 describes importation as carrying goods into India from other countries. As a result, all shipments are deemed, inter-state suppliers. Both imported commodities will be subject to the IGST, or any relevant customs duty. 

The IGST Act, 2017, describes the import of services as the provision of a service by a provider who is located outside the company, but the purchaser of the services is based in India, and the location at which the service is provided is also within the country’s geographical boundaries.

IMPORT OF GOODS

Following the enforcement of GST, charges such as safeguard tax, education cess, simple customs duty, anti-dumping duty, and so on would have no effect on commodity imports. GST will cover all of these extra customs duties.

Article 269A of the GST regime specifies that if goods or services are imported into India, they will be called a supply under interstate commerce or exchange and will be subject to integrated tax. For example, if the assessable value of a product imported into the country is Rs.500, the standard customs duty is 10%, and the consolidated tax rate is 18%, the taxes would be calculated as follows:

Rs.500 is the assessable value.

Rs.50 as a basic customs duty

The value of the consolidated tax levy is Rs.500 + Rs.50 = Rs.550.

18% of Rs.550 equals Rs.99 in Integrated Tax.

Rs.50 + Rs.99 = Rs.149 in overall taxes

In addition to these duties, goods could be subject to a GST-imposed extra cess. This tax would be imposed on the value selected for the consolidated tax levy. In the preceding example.

IMPORT OF SERVICES

The supply of a service by a provider located outside the company, but the purchaser of the services are based in India, and the location at which the service is provided is also within the country’s geographical borders, is referred to as the import of services.

The provisions of Section 7(1)(b) of the Central Goods and Services Tax Act, 2017, state that where services are purchased for a fee, they are considered a supply, regardless of whether they are used in the course of business. When services are imported without consideration, they are not considered a supply. Businesses, on the other hand, are not required to carry out the required checks in order for service imports to be considered a supply.

Furthermore, under the provisions of Schedule,1 of the Central Goods and Services Tax Act, 2017, services imported by registered taxable individuals from relatives or distinct individuals as specified in Section 25 of the Central Goods and Services Tax Act, 2017, in the course of a company will be deemed a supply regardless of whether or not it has been made without consideration.

An importer who is enrolled under the GST regime will use the IGST imposed on them as an input tax credit while importing products. The input tax credit could be used to pay taxes like CGST, SGST, and IGST during the importer’s external supply of goods.

Before passing it to others in the supply chain, the importer will take advantage of the GST Compensation Cess and the IGST input tax credit. The importer, on the other hand, would not be able to take advantage of the simple customs duty allowance. In any case, if the importer wants to claim GST Compensation Cess and IGST as input tax credits, he or she must declare GSTIN (GST Registration Number)  in the Bill of Entry.

GSTN issues temporary IDs that can be used during the transition phase, but importers should make sure their GSTIN registration process is complete. Since the GSTIN declared in the Bill of Entry is the basis for the availability of input tax credit, registered entities can only claim an input tax credit if they file Form GSTR 2, which includes all applicable details as specified in the Invoice Rules, or any related material.

CONCLUSION

These are the core provisions governing the calculation of the place of supply in the event of service import or export. This would make the essence of international transactions more clear. Transactions would also make it easier to track the various utilities available online.

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