a PeeP into the Provisions oF deemed exPorts under gst

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A Peep into the provisions of Deemed Exports under GST

*S.S.Satyanarayana

‘Deemed Export’ is not a new term under the indirect tax system. Foreign trade policy entails a detailed discussion and schemes governing the same. Under GST, the term ‘deemed exports’ is defined. In this Article I am endeavoring to highlight the provisions of Deemed Exports under GST, precautions to be taken by the Supplier of Goods to the Exporter and future litigation that may arise.

At the outset the ‘deemed exports’ is confined to goods only and not to services.

Difference between Exports and Deemed Exports :

For example, Taxable Person ‘A’, located in Telangana, supplies goods to Taxable Person ‘B’, located in Gujarat. B, in turn, supplies the goods to a customer ‘C’ located in USA. Supply by A to B is treated as deemed exports. Supply by B to C, being direct export, is considered as zero-rated transaction as per Section 16(1) of IGST Act, 2017. In other words the penultimate supply to the exporter is considered as in the nature of deemed export which is similar to the provisions of Section 5(3) of Central Sales Tax Act, 1956. It may be noted that as per Section 20 of the IGST Act, 2017, certain provisions of the CGST Act, 2017 have been made mutatis mutandis applicable to IGST Act, 2017.

Definitions :

Section 2(39) - “deemed exports” means such supplies of goods as may be notified under section 147. Section 147 — ‘Deemed Exports’ : The Government may, on the recommendations of the Council, notify certain supplies of goods as deemed exports, where goods supplied do not leave India, and payment for such supplies is received either in Indian rupees or in convertible foreign exchange, if such goods are manufactured in India. Notification No. 48/2017-Central Tax dated 18.10.2017 has been issued by the Central

Government wherein categories are defined which are considered as deemed exports: 4 Supply of goods by a registered person against Advance

Authorisation. 4 Supply of capital goods by a registered person against

Export Promotion Capital Goods

Authorisation. 4 Supply of goods by a registered person to Export Oriented Unit. 4 Supply of gold by a bank or Public

Sector Undertaking specified in the Notification No. 50/2017-

Customs.

Additional conditions for deemed exports to EOU/STP/HTP :

4 The EOU/ EHTP/ STP/ BTP unit must give prior intimation by filing

Form-A to the supplier and the jurisdictional GST Officer of the supplier and the recipient. 4 Form-A must bear a running serial number and should contain details of goods to be procured, which is pre-approved by the Development

Commissioner. 4 The supplier must then supply goods through a tax invoice. 4 The tax invoice must be endorsed by the recipient. Endorsed copy of the same must be sent to the supplier and the jurisdictional GST

Officer of the supplier and the recipient. 4 Record of such goods received by

EOU/ EHTP/ STP/ BTP units must be maintained in Form-B.

Applicability of GST :

Regular and direct exports are considered as zero-rated supplies under Section 16(1) of the IGST Act, 2017 i.e GST is exempt and in case IGST is paid for exports, the same will be allowed as a refund. But deemed exports concept as stated in Section 147 of the CGST Act, 2017 are not zerorated supplies under Section 16 of the IGST Act, 2017 and therefore GST has to be paid on such supplies. In the case of deemed exports, although GST is payable, the tax paid can be claimed as refund either by the supplier or by the recipient (Explanation to Section 54 of the CGST Act, 2017). The supplier or the recipient of goods can claim refund of GST charged / paid within 2 years from the date of filing of GST returns disclosing such supplies.

Filing of GST Returns :

Deemed export supplies are required to be disclosed in Table 6C of Form GSTR – 1. The registered dealer has to give invoice details and tax payable on such supplies. In Form GSTR – 3B, deemed exports are to be disclosed in Table 3.1 (b).

Rate of GST and Conditions :

The Notification No. 40/2017-Central Tax (Rate) dated 23rd October, 2017 and Notification No. 41/2017--Integrated Tax (Rate) dated 23rd October, 2017 stipulates the Rate of GST payable and certain conditions to be fulfilled in order to avail the concessional rate of GST payable. Depending upon the location of the supply, the supplier has to charge IGST of 0.1% or CGST 0.05% + SGST 0.05%, as the case may be. Other conditions are identical in both the above Notifications.

Apart from the rate of the GST, the conditions to be fulfilled are:

I. the registered supplier shall supply the goods to the registered recipient through a tax invoice; II. the registered recipient shall export the said goods within a

period of ninety days from the date of issue of a tax invoice by the registered supplier; II. the registered recipient shall indicate the Goods and Services

Tax Identification Number of the registered supplier and the tax invoice number issued by the registered supplier in respect of the said goods in the shipping bill or bill of export, as the case may be; IV. the registered recipient shall be registered with an Export

Promotion Council or a Commodity

Board recognized by the

Department of Commerce; V. the registered recipient shall place an order on registered supplier for procuring goods at concessional rate and a copy of the same shall also be provided to the jurisdictional tax officer of the registered supplier; VI. the registered recipient shall move the said goods from place of registered supplier a. directly to the Port, Inland

Container Deport, Airport or Land

Customs Station from where the said goods are to be exported; or b. directly to a registered warehouse from where the said goods shall be move to the Port, Inland

Container Deport, Airport or Land

Customs Station from where the said goods are to be exported;

VII. if the registered recipient intends to aggregate supplies from multiple registered suppliers and then export, the goods from each registered supplier shall move to a registered warehouse and after aggregation, the registered recipient shall move goods to the Port, Inland Container

Deport, Airport or Land Customs

Station from where they shall be exported; VIII.in case of situation referred to in condition (vii), the registered recipient shall endorse receipt of goods on the tax invoice and also obtain acknowledgement of receipt of goods in the registered warehouse from the warehouse operator and the endorsed tax invoice and the acknowledgment of the warehouse operator shall be provided to the registered supplier as well as to the jurisdictional tax officer of such supplier; and IX. when goods have been exported, the registered recipient shall provide copy of shipping bill or bill of export containing details of Goods and Services Tax

Identification Number (GSTIN) and tax invoice of the registered supplier along with proof of export general manifest or export report having been filed to the registered supplier as well as jurisdictional tax officer of such supplier. Apart from the above, another most important condition that has to be fulfilled in order to avail concessional GST Rate of IGST of 0.1% or CGST 0.05% + SGST 0.05%, as the case may be, is “the registered supplier shall not be eligible for the above mentioned exemption if the registered recipient fails to export the said goods within a period of ninety days from the date of issue of tax invoice”. From the perusal of the above Notifications, it appears that the concessional rate of tax under the deemed export concept can be denied by the Authorities of the supplier, if the recipient exporters of goods fails to export the goods within 90 days from the date of issue of tax invoice. This is the only condition put in the Notifications for denying the benefit of deemed export to the Registered suppliers. However, in practice, the Authorities are taking a view that the benefit of deemed export can also be denied if the recipient exporters fails to comply with the other conditions as stipulated in the Notifications.

Tax Practitioner, Hyderabad*