GST Services for Exporters and ImportersWhat you need to know
There has been a lot of confusion in the industry regarding the import and export of goods as well as services under the Goods and Services Tax, 2017.
Under GST, export and import of services and goods are dealt with differently depending upon the type of goods and services taken or provided.
Let us take a brief tour of the same.
Export
India has always been the major exporter to the international market. Furthermore, if we want to start a business in India dealing in exports , we can get several benefits from the government after getting required registrations. If we talk about GST on exports, then for any business dealing in exports (be it goods or services), it is mandatory under the GST Act to get the registration under GST.
Export of Services
As per Section 2(6) of the IGST Act, 2017,
“export of services means the supply of any service when
a) The supplier of service is located in India
b) The recipient of service is located outside India
c) The place of supply of services is outside India
d) the payment for such service has been received by the supplier of service in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India; and
e) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8”
When all the above mentioned conditions in sec 2(6) fulfils, then only the service would be termed as export of service.
To verify the place of supply of services, we have to refer Section 13 of the IGST Act, which clarifies whether the place of supply of services is within India or outside India.
Explanation I in section 8(2) of the IGST Act, 2017 states that where a person has an establishment in India and any other establishment outside India then such establishments shall be treated as establishment of distinct persons. Where the Indian arm is set up as a liaison office or a branch they would be treated as establishments of the same entity and hence the supply inter se shall not qualify as export of services.
Supply of services where place of supply is Nepal & Bhutan against payment in Indian Rupees are exempted from GST vide Sr.No.10D of notification no.09/2017-Integrated Tax (Rate) dated 28.06.2017 as amended by Notification 42/2017-Integrated Tax (Rate) dated 27.10.2017.
Further, requirement of remittance in foreign exchange has been relaxed by amendment in the definition of “export of services” in section 2(6) of the IGST Act, 2017 vide the IGST (Amendment) Act, 2018. The payment for such service can now be received by the supplier of service in Indian rupees wherever permitted by the Reserve Bank of India.
Now ,lets move to the tax payment part. The question arises as to whether the person has to pay the IGST when engaged in the export of services. There are two options available as per the law
Option 1- Supply goods or services, or both, under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax, and then claim a refund of unutilised input tax credit.
The exporter needs to file an application for refund on the common portal either directly or through the facilitation centernotified by the GST commissioner or by any professional providing GST services in Delhi NCR or any other state.
Option 2- Any exporter or United Nations or Embassy or other agencies/bodies as specified in section 55 who supplies goods or services, or both, after fulfilling certain conditions, safeguards and procedures as may be prescribed; and paying the IGST, can claim refund of such tax paid on the supplied goods or services, or both. The applicant has to apply for the refund as per the conditions specified under section 54 of the CGST Act.
An exporter is required to file a shipping bill for the goods being exported out of India. In this case, the shipping bill is considered as a deemed application for refund for the IGST paid. It would be deemed to have been filed only when the person in charge of the shipment files the export manifest or report, mentioning the number and date of the shipping bills
Export of Goods
Export of goods means taking goods out of India to a place outside India. To qualify supply as export of goods, the only condition is that goods must move outside the country. If goods are supplied within India against the order received from a person residing in a foreign, such supply shall not be treated as export of goods.
The following documents are required for export of goods:
IEC (Import Export Code)- It is issued by DGFT to import or export goods or services.
Export Invoice- An export invoice is a billing document issued by the exporter which contains the same information as a GST invoice with certain additional information
Shipping Bill-A shipping bill is a document filed by the exporter with customs to move goods out of a country.
Bank realization certificate (BRC)- BRC is a confirmation letter issued by banks to confirm that exporter has received payment against exports.
As already mentioned above in the export of services, for export of goods also, two options are available to the person for the payment of IGST.
Import of Goods and services
Contrary to export, import means bringing goods or services in India from a place outside India.Import of goods under GST or import of services under GST will be treated as deemed interState supplies and would be subject to Integrated tax in addition to the applicable Custom duties. IGST on the import of services would be levied under the IGST Act and Levy of the IGST on import of goods would be levied under the Customs Act, 1962 read with the Custom Tariff Act, 1975.
The importer has to deposit IGST on reverse charge basis. Except in case of OIDAR (Online Information Data Access and Retrieval) services, the supplier has to seek registration and pay taxes. The IGST paid on imports will be available as input tax credit to the importer. This can be set off
against the GST outflow on supplies made by the importer. It is imperative to note that the Basic Customs Duty (BCD) shall not be available as input tax credit under GST Act.
The place of supply of goods, imported into India shall be the location of the importer. For eg:- if an importer is located in Delhi, the state tax component of the integrated tax shall accrue to Delhi.
Import of services by a taxable person from a related person or from a distinct person as defined in Section 25 of the CGST Act, 2017, in the course or furtherance of business shall be treated as supply even if it is made without any consideration. Thus,in this case, Business test is required but consideration test is not required to be fulfilled for import of service to be considered as supply.
Disclaimer- The content provided in the above article is for reference purpose only and does not tantamount to any professional advice.
