Zero rated supplies under GST

Zero Rated d Suppliess under GSST In orderr to promotee exports, Go overnment p provides man ny benefits aand reliefs to o export hou uses time and again. One such h benefit provided by currrent Govern nment is treaatment of export of good ds and/or e treated services as "Zero Rated Suppliess". Any supply of goods aand/or services as an exxport shall be o Rated Supp plies" even th hough such ssupplies are e taxable und der GST in domestic marrket. This as "Zero move reeduces the p prices of com mmodities orr services be eing exported d and increaases compettitiveness of our p product / serrvices in the internationaal market. M Moreover, higgher exportss also meanss greater balance of payment for Governm ment.

Zeero Rate ed S Supplies s

Export of G Goods / / Servic es

Deem med Exp port

Supp ply to SEEZ Unit / Develop per

Export o of Goods / Se ervices: As per section s 2(5) of IGST Act,, 2017 "Expo ort" means taking t goodss out of Indiia to a place e outside India". Application A of zero ratee implies that the expo orter does not n have to charge anyy GST on outward d supplies beeing export. However, he would be able to takee input tax credit for inp puts used for effeccting export.

Deemed d Export: As per Section S 147 of CGST Actt, "The Goveernment maay, on the reecommendattions of the Council, notify ceertain supplies of goodss as deemed exports, wh here goods ssupplied do not leave In ndia, and payment for such su upplies is received eitheer in Indian rrupees or in convertible foreign exchange, if ods are manufactured in India." such goo no. 48/2017 In the Notification N 7 Central Taxx as on 18th Oct 2017, CBEC has n notified fourr type of suppliess as "Deemed d Export". Th hese are listeed below: 1) Supp ply of goods by a registered person aagainst Advance Authorissation 2) Supp ply of capittal goods by b a registeered person against Exxport Promo otion Capitaal Goods Auth horisation 3) Supp ply of goods by a registered person tto Export Oriented Unit (EOU) 4) Supp ply of gold b by a bank or Public Secto or Undertaking specified in the notiffication No. 5 50/2017‐ Custtoms, dated the 30th Jun ne, 2017 (as amended) aggainst Advan nce Authorisation

Explanation:  “Advance Authorisation” means an authorisation issued by the Director General of Foreign Trade under Chapter 4 of the Foreign Trade Policy 2015‐20 for import or domestic procurement of inputs on pre‐import basis for physical exports.  Export Promotion Capital Goods Authorisation means an authorisation issued by the Director General of Foreign Trade under Chapter 5 of the Foreign Trade Policy 2015‐20 for import of capital goods for physical exports.  “Export Oriented Unit” means an Export Oriented Unit or Electronic Hardware Technology Park Unit or Software Technology Park Unit or Bio‐Technology Park Unit approved in accordance with the provisions of Chapter 6 of the Foreign Trade Policy 2015‐20.

All Deeded Export transactions shall be treated as "Zero Rates Supplies" under GST. Supply to SEZ Unit or SEZ Developer: As per section 16 of IGST Act, 2017 all supplies made to an SEZ unit or developer shall be treated as "Zero Rated Supplies". Let us first understand what is an SEZ unit and SEZ developer: Special Economic Zone (SEZ): As per Section 2(19) of IGST Act, Special Economic Zone shall have the same meaning as assigned to it in clause (za) of Section 2 of the Special Economic Zones Act, 2005. 

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SEZ stands for Special Economic Zone. A special economic Zone is a specially established and developed trade area. It is governed by Special Economic Zone Act 2005 and Special Economic Zones Rules, 2006. The core purpose of SEZ is to promote trade and commerce. An SEZ is treated as a foreign territory even though it is located within the geographical boundaries of India. Most importantly it is a duty free area. This means no tax shall be applicable for the units operating within this territory.

Section 26 of the SEZ Act grants exemption, to every SEZ Unit and developer, from any duty of customs under Customs Act, 1962 on goods or services imported into or exported from India, as well as exemption from any tax liveable under GST Regime.

SEZ Unit: An SEZ Unit is a business unit operational within SEZ. It may be a manufacturing concern or a service oriented business unit.

SEZ Developer: An SEZ developer is an entity which is involved in development of an SEZ unit. It could be a person or a State Government which has been granted by the Central Government a letter of approval under sub‐section (10) of section 3 and includes an Authority and a Co‐ Developer The Developer or Co‐Developer shall have at least twenty‐six percent of the equity in the entity proposing to create business, residential or recreational facilities in a Special Economic Zone in case such development is proposed to be carried out through a separate entity or a special purpose vehicle being a company formed and registered under the Companies Act, 1956 (1 of 1956).

Treatme ent of transaactions and IITC for "Zero o Rated Supp plies":

A suppliier effecting zero rated supply for any reasons sstated abovee, has two o options in re elation to claimingg refund of zeero rated supplies.

1. Pay integrated tax on supplies made to SSEZ and then n claim refun nd on the taxxes paid.

2. Supp ply goods / services und der Bond orr Letter of Undertaking U (LUT) without payment of IGST. Then n claim ITC for the GST p paid on inputts and input sservices in reelation to such supplies.

Zero Raated Supplly

With Paymen W nt of IGST

Pay IGST and P then claim m refund

Avail ITC on input A goods an nd services

Bond / LUT without payment of IG GST

Do not ccharge IGST at th he time of sup pply

Claim m ITC on Input ggoods and serrvices