The current Indian government has set a target of enhancing the output and quality of exports through the “Make in India” initiative, which includes providing tax benefits to exporters. However, there is still a sense of uncertainty among exporters regarding the impact of the GST regime on their industry, specifically on the products being exported and the tax payable on the raw materials/inputs used.
To address this ambiguity, the Indian government released a set of notifications and guidance notes on June 28, 2017, outlining the applicability of CGST, SGST, UTGST, and cess, along with GST rates. These guidelines are meant to provide clarity to the public and alleviate any confusion among traders about the implications of the GST on their exports.
GST on Exports: How Will It Be Levied?
Under the GST regime, the export of goods or services is considered a zero-rated supply, and no GST is levied on it. In the previous tax laws, exporters could claim duty drawback on tax paid on inputs used to export exempted goods, which was a complex process. However, under GST, duty drawback is only available for customs duty paid on imported inputs or central excise paid on specific petroleum or tobacco products used as fuel for captive power generation. To address the confusion surrounding the refund of tax paid by exporters on inputs, the Indian government issued a guidance note clarifying the claim of the input tax credit on zero-rated exports.
Exporters dealing in zero-rated goods under GST can claim a refund for zero-rated supplies through two options. The first option is to supply goods or services under a bond or Letter of Undertaking without payment of integrated tax, subject to certain prescribed conditions and procedures, and then claim a refund of unused input tax credit. The second option is for any exporter who fulfils specific conditions and procedures and pays IGST, to claim a refund of the tax paid on the supplied goods or services.
Exporters must apply for a refund on the common portal, either directly or through a facilitation centre notified by the GST commissioner, along with an export manifest or report filed under the Customs Act. A shipping bill is also necessary for goods being exported out of India, and the modified forms are available on the official department website. The Indian government is also simplifying the factory stuffing procedure and necessary permissions to encourage and boost the Indian export industry under GST.
Deemed Exports
- Under GST, certain supplies of goods or services to specific entities are treated as exports.
- Examples of such entities include Export Oriented Undertakings (EOUs), Hardware/Software/Biotechnology Technology Park Units, and registered persons against Advance Authorisation or Export Promotion Capital Goods Authorisation.
- Banks or Public Sector Undertakings can supply gold against Advance Authorisation under Customs law and be treated as exports under GST.
- The procedures for filing returns for deemed exports under GST are the same as those for general exports.
Documents Required For Claiming Refund On Exports
| List of Documents for Claiming Refund |
| 1. Copy of return evidencing payment of duty |
| 2. Copy of invoice |
| 3. Document proving that the burden of paying tax has not been passed on (CA certification or self-certification) |
| 4. Any other document required by the government |
Conclusion
The implementation of GST has streamlined the input tax credit process, enabling India’s export industry to offer competitive prices internationally. Additionally, the availability of input tax credits on services further enhances the industry’s cost efficiency.
