Exports under GST
Under GST, Exports of Goods and Services is termed as Zero-rated Supply.
There is a difference between exempt supply and zero-rated supply. Zero-rated supply means that the full value chain is zero taxed i.e. there is no tax to be paid on output supply and also the input GST paid on purchases etc. is also liable to be refunded.
Whereas in the case of exempt supply, the outward supply is exempt but the inward supply is liable to GST and no input credit is available for the same.
In the case of export, the exporter has the option of either paying IGST at the time of export and claim a refund of net IGST paid or can export under bond/LUT without making any payment of IGST and claim the ITC on inputs paid.
There are three types of Exports of Goods :
Physical exports mean taking goods from India to a place outside India. The place outside India should be more than 200 nautical miles from the coastal baseline.
In the case of physical export, the exporter can either pay IGST at the time of export and claim refund of net IGST or can export the bond/LUT without making any payment of IGST and claim the ITC on inputs paid.
The Govt. has notified certain categories of supply to be deemed exports under section 147 of the CGST Act. These are treated as deemed exports because the goods do not leave India.
The notified deemed exports are as under :
(a) Supply of Goods by a registered person under Advance Authorisation Scheme
(b) Supply of Capital goods by a registered person under EPCG (Export promotion capital goods authorization)
(c) Supply of goods by the Registered person to EOU (Export oriented unit)
One important thing to note is that the deemed exports are not zero-rated perse i.e. payment of tax has to be made on supply of these goods and they can not be supplied under LUT/Bond. However, later the refund of tax can be taken either by supplier or receiver.
Merchant exporter basically means exporting the goods through a third party involved which is known as merchant exporter. Ther is a tax of 0.1% on the supply of goods through merchant exporters. (i.e. 0.1% IGST or 0.05% CGST and 0.05% SGST)
The merchant exporter will be eligible to take credit of 0.1% of tax paid to the supplier. However, he shall export the goods on bond/LUT only and can not export the same on the basis of payment of tax.
Also, the supplier who pays 0.1% tax will be allowed to take a refund of GST paid on inputs.
There are certain conditions prescribed vide notification 40/2017 & 41/2017 dtd. 23/10/2017 which must be fulfilled by the supplier so that the concessional rate of 0.1% can be taken. They are as under :
1. There should be a tax invoice.
2. The goods must be exported by the merchant exporter within 90 days of the tax invoice.
3. The merchant exporter shall indicate the tax invoice no. and GSTIN of the supplier in the bill of export.
4. The merchant exporter shall place an order with the supplier with the concessional rate of tax and a copy of the order shall also be provided to the jurisdiction tax officer of the supplier.
5.The Exporter shall be registered with the Export Promotion council.
6. The Merchant exporter shall move the goods from the place of supplier directly to the place of export i.e. Port, Airplort Inland container deport, etc.
7.After the export, the merchant exporter shall provide a copy of the bill of export containing the details of GSTIN and invoice no. of supplier along with the export report to the supplier as well as the jurisdictional tax officer of the supplier.
After having looked at the export of goods and different categories of export of goods, we now look at what is export of services under GST.
As per Section 2(6), services will be treated as export of services if the following conditions are satisfied :
(a) Services must be supplied to a recipient outside India from a supplier in India.
(b) The place of supply of service must be outside India
(c) The service consideration must be received in foreign exchange or Indian rupees if permitted by the Reserve Bank of India.
(d) The transaction must be two distinct people i.e. not between two establishments of the same entity
Thus all the above conditions must be satisfied for services to be termed as export of services.
In the case of Head Office and Branch transactions, they are between two establishments of the same entity, hence they may not be termed as export of services subject to IGST.
However Notification no. 9/2017 exempts the services provided by the Indian Establishment to Foreign Establishment if the play of supply of services is outside India.