GST on Export and Import

Impact of GST on Imports and Exports in India

In the pre-GST regime, the imports of goods and services were subject to multiple state and federal levies such as customs duty, countervailing duty (equivalent to excise duty), and special additional duty (equivalent to value added tax). The single integrated goods and services tax (IGST) under the GST has replaced all these taxes.

The import of certain goods, however, continue to attract basic customs duty, education cess, and other protective taxes, such as the anti-dumping duty and safe-guard duty, in addition to the IGST.

Meaning of Import and Export of Goods under GST

Sub-Section 5 of section 2 of IGST Act, 2017 defines – “Export of Goods”, with its grammatical variations and cognate expressions, means taking out of India to a place outside India.

Sub-Section 10 of section 2 of IGST Act, 2017 defines – “import of the goods” with its grammatical variations and cognate expressions, means bringing goods into India from a place outside India.

Meaning of Import and Export of Services under GST

“Import of Services” as defined in IGST Act, 2017 means the supply of any service, when –

·       The place of supply of service is in India

·       The supplier of service is located outside India;

·       The recipient of service is located in India; and

·       Supplies which do not form part of export of goods or services

          Where the place of supply of service is within India but to a person located outside India. For an instance – a property located in Delhi rented out to a person residing in New York; agent residing in India and providing service to a person in Dubai exporting goods to China.

Where the consideration for the supply of services is received in Indian currency or in such a currency other than convertible currency. For an instance, supply of service (consultancy service) by a consulting firm in India to an entity outside India, where the payment made by Indian branch of overseas entity is in Indian rupees.

          Supply of services to the foreign branch would not be covered as export of services due to specific exclusion as “export of service”. This could involve reversing the input credits as such supply of service would be considered as non-taxable and not as zero-rated.

The definition of import of service given under GST also excludes services imported from a foreign branch. 

Deemed Exports under GST

Indian suppliers of services and manufacturers of goods have to quote in competition with foreign suppliers of goods and services. Such Bids evaluation is done without considering the customs duty. Since such supply of goods and services are financed for specific projects (projects financed) with the free foreign exchange, these supplies are considered as ‘deemed exports’.

Similarly, supplies made to Export Oriented Units also known as EOUs and services do not leave the country. Suppliers get their payment in Indian currency and not in foreign exchange.

“Deemed exports” generally refer to those transactions under which supply of goods do not leave the country, and payment for such supplies is received in Indian Rupees shall be treated as ‘deemed exports’, provided that goods are manufactured or produced in India.

Treatment of Exports under GST

As per the provisions contained under IGST law, export of goods or services or both are to be regarded as “zero-rated supplies” and a person being a registered taxable person exporting such goods or services or both shall be allowed to claim the refund of the GST paid under one of the following two options:

Export of goods or services or both under bond or letter of undertaking (LUT) without paying any Integrated Tax and can claim the refund of unutilized input credit.

Export of goods and service or both on the payment of Integrated Tax and the exporter can claim the refund of the GST paid on such goods and services so exported. The above-mentioned refunds will be subject to certain rules, procedures, and safeguards as may be prescribed.

Integrated Goods and Services Tax

Imports under GST are treated as inter-state supply. Since GST is a destination-based tax, Integrated Goods and Services Tax (IGST) is levied in the state where the imported goods are consumed and imported services are received.

IGST can be paid using input tax credit of central goods and services tax (CGST), state goods and services tax (SGST), and IGST. The input tax credit is the credit that dealers can avail for taxes paid on their purchases, at the time of paying final tax on their sales.

In the case of CGST and SGST, no cross utilization of input tax credit is allowed. This means that input tax credit of CGST can only be utilized for CGST and IGST, and an input tax credit of SGST can only be utilized to pay for SGST and IGST.

Tax returns

An importer is required to file monthly tax returns under GST. Under the previous law, the importer was required to file returns under state tax law for the purchase of goods (import of goods) and under central tax laws for claiming countervailing duties. While filing monthly returns, importers must declare the goods imported in table-5 of the GSTR-2 form, and services imported in table-6 of the GSTR-2 form.

Exemptions

Previously, the transportation of goods by aircraft and inbound shipment was not liable to service tax. Under GST, there is no such exemption.

Impact on exports

Under GST, exports are treated as ‘zero-rated supplies’. That is, supplies on which the GST rate is fixed as zero. If GST is paid at any point of supply against exports from India, a trader may either export without the payment of IGST under bond or letter of undertaking or may pay the IGST and claim a refund later.

In both cases, an exporter must provide details of the GST invoices in the shipping bill. The invoice must contain the following details:

·       Name, address, and GSTIN of the supplier;

·       Name and address of the recipient;

·       Invoice number and date;

·       HSN code of the goods along with description;

·       Total value and quantity of goods, and,

·       The signature of the supplier.

To claim the refund of IGST, the exporter can file the details of the tax paid, GST invoice, and shipping bill in table 6A in the form GSTR-1 of the relevant month.

Ref:

1. Balachandran V - Indirect Taxes

2. ICAI - Indirect Taxes

3. ICSI - Indirect Taxes

4. ICMAI - Indirect Taxes

5. LPU - Indirect Taxes

6. ClearTax.Com

7. Taxmann.Com

8. TaxGuru.Com

9. Quora.Com

10. cbic.gov.in