GST Impact on Exports- Global Boost for Indian Exporters

GST Impact On Exports in India still has some ambiguities to the Exporters. However, with the goal of boosting the quantity of Exports From India, The Union Government has implemented initiatives such as the “Make In India” Policy and various other tax incentives have been framed for the benefit of exporters under GST.

To seek clarity on how GST on export & export GST rate will affect exported goods and the taxation of raw materials and inputs and to alleviate this uncertainty, the Indian government issued a series of notifications related to GST export and guidance regarding the export services under GST and the export of goods under GST.

What Are the Different Ways in Which Exports of Goods and Services Can Be Made?

Following are the ways in which the Export of Goods  can be made-

1. Export Under LUT(Letter of Undertaking) or Bond- GST on Export of Goods and GST on Export of services is applicable under this method, and Exporters do not claim Input Tax Credit.

2. Export with payment of IGST- Exported Goods are subject to IGST payment, but exporters are eligible to claim ITC on such payment.

The exporters under GST prefer 1st method i.e., Export under LUT or Bond because they can avoid blockage of funds in IGST. 

How will GST be levied on the Export of Goods and Services?

GST on Export of Goods

According to the GST Act, the Supply of Goods is treated as exports under GST only if-

1. The Supplier of the Goods is located in India.

2. The Recipient of the Goods is located outside India.

3. The consideration for such Goods is received or receivable in Foreign Exchange, or in Indian rupees wherever permitted by the Reserve Bank of India

4. The Goods are provided outside India.

GST on Export of Services 

According to the GST Act, the Supply of Service is treated as exports under GST only if-

1. The Supplier of the service is located in India.

2. The Recipient of the Service is located outside India.

3. The consideration for such Services is received or receivable in Foreign Exchange, or in Indian rupees wherever permitted by the Reserve Bank of India

4. The service is provided outside India.

5. The supplier of service and the recipient of service are not merely establishments of a distinct person.

Which Supply of Goods and Services are to be considered as Deemed Export? 

Following Supply of Goods and Services will be treated as Deemed export under GST-

1. Supply of Goods against Advance Authorisation/DFIA by a registered Person.

2. Supplies made to an Export Oriented Unit (EOU) or Hardware Technology Park unit, Software Technology Park unit, Biotechnology Park unit, etc.

3. Supply of capital goods by a registered person against Export Promotion Capital Goods Authorisation

4. Supply of gold by a bank or Public Sector Undertaking against Advance Authorisation as per Customs law

Return filing for Deemed Export

For obtaining a refund of tax paid on deemed export under GST, the supplier or recipient is required to file an application in Form GST RFD – 01 with supporting documents. 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 paid on such supplies. In Form GSTR – 3B, deemed export under GST are disclosed in Table 3.1 (b) with other zero-rated supplies.

Tax Treatment of Deemed Export 

All supplies that are considered as deemed export under GST  will be subject to GST at the point of supply. Supplies cannot be made under Bond or LUT without payment of tax. Tax should be paid on such supplies and refund can be claimed on such supplies. 

What Are the Documents Required for Claiming Export Refunds?

In the Case of Zero Rated Supplies

The application shall be accompanied by any of the following documentary evidence in Form GST RFD-01-

• Printout of GST RFD-01A & ARN.

• GSTR-3B/ GSTR-3 Print of Particular Month.

• Statement- 4 as per rule 89(2) (d) & (e)

• Undertaking by the claimant as per para 2.0 of circular 24/2017.

• Endorsement from proper officer evidencing receipt of goods in SEZ (Provision Rule 89).

• Undertaking of no prosecution under Rule 91 (1).

• Tax invoices as per rule 46.

• Undertaking by SEZ developer/ Unit as it has not claimed ITC.

In Case of Deemed Export 

In Case of Deemed export under GST the application shall be accompanied by any of the following documentary evidence in Form GST RFD-01, as applicable-

• Declaration of GST RFD-01 – (Claimed out not exceed ITC)

• Undertaking as per notification No. 49/2017 by receipt of the supply saying no claim of Refund & ITC

• Statement -5B Rule 89(2) (g)

• Print out of GSTR- 3B/ GSTR-3

• Print out of GSTR RFD-01 & / ARN

• The undertaking of no prosecution Rule 91(i)

• Undertaking by the claimant as per Para 2.0 of circular 24/2017

In Case of Export Through Payment of IGST

In Case of Export under GST through payment of IGST, the application shall be accompanied by the following documentary evidence-

• Print out of Form- GSTR - RFD-01A & ARN.

• GSTR-3B/ GSTR-3/ GSTR 1 of a particular month

• Undertaking as peTr para 2.0 of circular 24/2017

• The undertaking of no prosecution as per Rule 91 (1).

• Statement 3 (Rule 89 (2) (b) & (c).

• Statement 3A Rule 89 (4) (Calculation of refund).

• Export Invoices & input service invoices.

• BRC/ FRC Details.

• Declaration 1: Application for refund has not been filed with any other authority.

• Declaration 2: No refund has been claimed against the relevant invoices (ITC)

• Declaration 3: Applicant has not contravened rule 91(1) Requirement of no prosecution for last 5 years 

• Declaration 4:as per Form GST RFD-01 from 

• Declaration 5: Drawback not availed

• Declaration 6: Declaration on unjust enrichment

What are Cases where GST is not Levied on Exports?

In general terms, GST is levied on all goods and services except where specific or general exemptions are given under the Act. This means there is no case where GST is not levied on goods and services. However, there are certain cases where GST may not be levied on exports.

1. In the case of zero-rated supplies where the rate of tax on Exports is 0%. The exporter can also claim ITC on inputs or input services used in connection with the outward supplies.

2. There are some incentive schemes by the government of India that promote the export of goods and services namely- Merchandise Exports from India Scheme (MEIS) and Service Exports from India Scheme (SEIS). These schemes do not provide a direct exemption of GST on Export but incentives or benefits available to the exporters.

3. In case of payment of IGST on the export of Goods or Services, Exporter can claim IGST paid on outward supplies which is also an indirect benefit to the exporters.

Availability of Input Tax Credits for Exporters

When Goods are Exported by the Exporter with Payment of IGST, in that case, ITC is available to the exporter. However, if the goods are Goods are exported under LUT or Bond the ITC is not available for the Exporter. Also when goods are exported under Zero Rated Supply or export of services under GST without payment of tax, the ITC is not available for the Exporter.

How Did GST Impact the Export Competitiveness in India?

India’s Export figures have been impacted positively after the introduction of GST in India. Let's look at some of the critical aspects affecting export performance-

1. Price of the product and Competitiveness- 

• GST has helped in reducing the cascading effect by subsuming central indirect taxes which earlier used to inflate the cost.

• The introduction of GST simplified the tax structure which lowered the compliance burden that also helped in reducing price.

• Availability of ITC also helped in lowering the cost of production.

2. Usage of Technology

The use of technology to automate and integrate GST compliance procedures, the use of upgraded ERP models integrated with GST, etc is helping Exporters to become more efficient.

What Is the Role of GST in the Export Promotion of India?

The Government of India has introduced several export promotion measures using GST levers to provide targeted benefits. Some of the key initiatives are:

1. Merchandise Exports from India Scheme (MEIS)

2. Service Exports from India Scheme (SEIS)

3. Export Promotion Capital Goods (EPCG)

4. Advance Authorization (AA) Scheme

5. Export-Oriented Units (EOU)

Conclusion

GST law in India has helped Export significantly through various ways such as easing the compliance burden of GST return Filing and GST payments, providing ITC, introducing several promotion measures, providing refunds, export of services under GST, etc. The GST is also supported by synchronized policy incentives across trade fiscal and monetary areas. GST Act provides for GST rate on export of goods and export of services under GST. Continuous improvement in GST followed by measures supporting it in the future will lead to long-term export competitiveness for Indian goods and services.

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