The Goods and Services Tax (GST) framework in India has transformed the landscape of exports, making procedures simpler and more transparent for exporters. Under GST, exports are classified as inter-State supplies and treated as zero-rated, ensuring no tax burden on exporters. The regime eliminates distinctions between merchant and manufacturer exporters and introduces mechanisms like refunds for accumulated Input Tax Credit (ITC) and streamlined documentation processes, including the use of Letters of Undertaking (LUTs). Special Economic Zones (SEZs) and Export-Oriented Units (EOUs) also benefit from GST provisions that facilitate tax exemptions and simplified compliance.
Exporters, whether dealing exclusively in exports or handling mixed operations, must understand how GST impacts their supply chain, tax refunds, and procedural requirements to leverage these benefits effectively. From handling supplies to SEZ units, understanding deemed exports, to the treatment of agent commissions, this guide answers the most frequently asked questions to help businesses navigate GST’s export framework efficiently.
1. How are exports categorized and treated under the GST framework?
Under the GST framework, exports of goods or services are:
- Classified as inter-State supplies and are governed by the IGST Act.
- Treated as “zero-rated supplies,” meaning that GST is not levied on exports, either at the input stage or on the final exported goods or services.
2. Have the export procedures for manufacturer exporters been streamlined under GST?
Yes, the GST regime has significantly simplified export procedures to minimize paperwork and reduce departmental intervention. Key features include:
- Exporters can export goods and services by either:
- Paying IGST and later claiming a refund after export.
- Using a bond or Letter of Undertaking (LUT) to export without IGST payment.
- Exporters who use a bond or LUT can claim refunds of accumulated Input Tax Credit (ITC) due to exports.
- For goods, the filing of a shipping bill with Customs is the primary requirement, replacing the previous ARE-1/ARE-2 forms.
- Export supplies are now self-sealed and self-certified, removing the need for departmental officer intervention.
- Filing the shipping bill acts as a refund application for IGST paid, provided the export general manifest is submitted and Form GSTR-1 & GSTR-3B is filed.
3. Does the GST regime distinguish between merchant exporters and manufacturer exporters in terms of export procedures?
No, under GST, the distinction between merchant exporters and manufacturer exporters has been eliminated. The export procedures are uniform for both, ensuring simplicity and ease of compliance.
4. Why does the GST law not explicitly state that no tax is charged on supplies from a DTA unit to an SEZ unit or developer, even though such supplies are zero-rated?
Supplies to Special Economic Zone (SEZ) units or developers are indeed zero-rated under GST. Such supplies are treated similarly to exports and can be made through:
- Payment of IGST, with the option to claim a refund later.
- Bond or LUT, allowing supply without IGST payment.
The GST law permits these supplies without explicitly stating the non-charging of tax because they fall under the zero-rated supply category, ensuring alignment with the treatment of exports.
5. If a SEZ unit or SEZ developer procures goods or services from an unregistered supplier, are they required to pay IGST under reverse charge?
No, SEZ units or SEZ developers are not required to pay IGST under reverse charge for supplies from unregistered suppliers. Under the IGST Act, supplies to SEZ units or developers are considered inter-State supplies. Suppliers making inter-State supplies must mandatorily register under GST, ensuring that such supplies are covered under the regular GST mechanism without invoking reverse charge provisions.
6. What is the timeline for refunds related to exports of goods or services under GST?
- Refund of tax on inputs used in exports:
- 90% of the refund is provisionally granted within seven days of acknowledging the refund application.
- The remaining 10% is disbursed within 60 days of receipt of a complete application.
- If the refund is not issued within 60 days, interest at 6% per annum is payable to the exporter.
- Refund of IGST paid on exports:
- Once the exporter files a valid return in Form GSTR-3B as well as GSTR-1, Customs processes the refund claim.
- The IGST amount related to each shipping bill is credited directly to the exporter’s bank account.
7. Are exports to Nepal and Bhutan eligible for zero-rating and associated benefits under GST?
Yes, exports to Nepal and Bhutan are treated as zero-rated supplies under GST, provided the goods physically leave India. This makes them eligible for all benefits associated with zero-rated supplies. However, for export of services, GST Law mandates that the supplier must receive payment in convertible foreign exchange for the supply to qualify as an export.
8. What constitutes deemed exports under the GST Law, and has the government notified any categories under this provision?
Deemed exports are defined in Section 2(39) of the CGST Act, 2017, and refer to supplies of goods notified under Section 147 of the Act. These supplies are classified as deemed exports when:
- The goods are manufactured in India and do not leave the country.
- Payment for the supplies is received in Indian rupees or convertible foreign exchange.
As of now, the government has not notified any specific supplies as deemed exports under Section 147.
9. Will the EOU scheme continue under GST, and are EOUs required to register under GST?
Yes, the Export-Oriented Unit (EOU) scheme remains operational under GST. EOUs are treated like any other supplier under GST, and all provisions of the GST law apply to them, including the requirement for GST registration. While the scheme’s Basic Customs Duty (BCD) exemption on imports continues, EOUs must comply with GST regulations applicable to their operations.
10. What tax exemptions are available to EOUs under the GST regime?
Under GST, duty-free imports for EOUs are limited to Basic Customs Duty (BCD). Exemptions from additional duties of Customs under sections 3(1), 3(3), and 3(5) of the Customs Tariff Act, 1975, and from Central Excise duty are available for goods specified in the Fourth Schedule of the Central Excise Act. EOUs must pay IGST or CGST with SGST on supplies received but can claim Input Tax Credit (ITC) on these taxes like any other GST-registered person.
11. Are supplies to or from an EOU exempt from GST?
No, GST applies to both supplies to and from EOUs.
- Supplies to EOUs: IGST or CGST with SGST is payable by the supplier, and the EOU can claim ITC on these taxes.
- Supplies from EOUs: These are subject to GST, except zero-rated supplies under Section 16 of the IGST Act, which include physical exports or supplies to SEZ units or developers for authorized operations.
12. What is the process for EOUs to import goods without paying customs duties under GST?
EOUs must adhere to the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017, to benefit from duty-free imports. Compliance with these rules ensures smooth processing of duty exemptions.
13. Can EOUs transfer goods to other EOUs or send them for job work? How is GST handled in such cases?
Yes, EOUs can transfer goods to other EOUs, which is treated as any other supply under GST. Additionally, EOUs can send goods for job work as per Section 143 of the CGST Act, 2017, and Rule 45 of the CGST Rules, 2017. GST liability is discharged according to these provisions.
14. Is GST registration mandatory for an exporter dealing exclusively in exports, such as M/s DEF with no domestic clearances?
Yes, under the GST regime, exports are classified as inter-State supplies. Therefore, entities like M/s DEF must obtain GST registration, irrespective of their domestic sales status.
15. How does GST treat exempt excisable goods exported by manufacturers, and can input stage credits be claimed?
Exporters of exempt excisable goods can claim input stage credits for zero-rated supplies under GST. Once the goods are exported, unutilized ITC can be refunded as per Section 16(3)(a) of the IGST Act, 2017, and Section 54 of the CGST Act, 2017.
16. What changes will GST bring to the process for merchant exporters purchasing goods against CT-1/ARE-1?
Under GST, the taxable event is the supply of goods. Merchant exporters must register for GST. Goods purchased from manufacturers will include IGST or CGST and SGST/UTGST, which can be claimed as ITC. Exporters can export goods:
- Under bond or LUT without payment of IGST and claim a refund of unutilized ITC.
- By paying IGST and claiming a refund of the tax paid.
17. How will exporters be compensated for taxes paid on inputs, semi-finished goods, and finished goods without duty-paying documents at GST implementation?
For exports within three months of GST rollout, higher duty drawback rates (composite AIR) are available, provided:
- No ITC of CGST/IGST is claimed.
- No refund of IGST on export goods is sought.
- No CENVAT credit is carried forward.
18. What is the status of drawback claims for supplies to SEZ units and developers under GST?
There is no change under GST. Drawback claims by DTA suppliers must be filed with the jurisdictional Customs authorities.
19. Can EOUs clear goods in the Domestic Tariff Area (DTA)?
Yes, EOUs can clear goods in the DTA as per provisions in the Foreign Trade Policy. GST is applicable to such clearances.
20. Is GST payable on goods procured by exporters from unregistered persons, including job workers?
Yes, GST is payable by the exporter under the reverse charge mechanism. However, the exporter can claim ITC on the GST paid and utilize it or apply for a refund.
21. Is GST applicable to commission earned by agents of foreign buyers in India?
Yes, GST applies to such commissions since the service is provided in India, and the place of supply is also within India. The agents must comply with GST provisions and pay tax accordingly.
Conclusion
Understanding GST’s impact on exports is crucial for businesses to remain compliant and maximize benefits like ITC refunds, tax exemptions, and duty drawback claims. The streamlined processes and zero-rated supply provisions ensure that exports remain a key driver of economic growth under GST. Stay updated with the latest GST insights and compliance tips by following TaxGroww.