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GST on export of goods and services

Under the GST law, export of goods/ services or both is treated as-

• Inter-State supply and accordingly covered and chargeable under the IGST Act; and
• Zero-rated supply i.e., goods/ services or both exported shall be relieved of the GST levied upon them either at the input stage or at the final product stage.

​That means if IGST is paid on export the same will be made zero-rated by refunding IGST tax paid on export. Whereas, if goods are exported without payment of IGST (exempted), GST involved in inputs and input services used therein will be refunded.

The present article clears up the basic provisions attached with the GST law on exports of goods/ services or both.

Meaning of the terms ‘Export of Goods’; ‘Export of Services’; ‘Zero-rated Supply’ and ‘deemed export’-

Understanding all the four terms i.e., ‘Export of Goods’; ‘Export of Services’; ‘Zero-rated Supply’ and ‘deemed export’ is very important for understanding the provisions of GST on exports. All the terms are explained hereunder-

Section 2(5) of the IGST Act defines the term ‘Export of Goods’ which simply means taking goods out of India to a place outside India.

Whereas, section 2(6) of the IGST Act defines the term ‘Export of Services’, the same means supply of service, when all the following is satisfied-

• The supplier of service is located in India,
• The recipient of service is located out of India,
• The place of supply of service is out of India,
• The payment is received by the supplier in convertible foreign exchange,
• The supplier and the recipient of service are not merely establishments of a distinct person.

As seen above, under GST, exports are treated as ‘Zero-rated supply’. The provisions of section 2(23) read with section 16(1) covers the definition of ‘Zero-rated supply’. Accordingly, ‘zero-rated supply’ means-

• Export of goods/ services or both; or
• Supply of goods/ services or both only for authorized operations to a Special Economic Zone Developer/ Special Economic Zone Unit. 

Now, coming to the term ‘deemed exports’, it refers to the supplies of goods (not services) manufactured in India and notified as deemed exports under section 147 of the CGST Act. Accordingly, essential conditions to qualify as ‘deemed exports’ are summarized hereunder-

• It is applicable only to the supply of goods.
• Goods manufactured/ produced in India are not required to be taken out of India for being treated as export.
• Supply of goods must be notified under section 147.
• Payment can be received in Indian currency or in convertible foreign currency.
• Supply of goods can be made on payment of tax only. That means supply against LUT/ bond is not possible.

In terms of notification no. 48/2017- Central Tax dated 18^th October 2017, following supplies are notified as deemed exports under GST-

1. The registered person supplying goods against Advance Authorization (i.e., AA).
2. The registered person supplying capital goods against Export Promotion Capital Goods Authorization (i.e., EPCG).
3. The registered person supplying goods to any of the followings-
   1. Export Oriented Unit (i.e., EOU);
   2. Electronic Hardware Technology Park (i.e., EHTP) Unit;
   3. Software Technology Park (i.e., STP) Unit; and
   4. Bio-Technology Park (i.e., BTP) Unit.
4. Bank or public sector undertaking supplying gold against AA.

Options to export under GST-

For exporting the goods/ services or both, the following two options are available to the exporters-

Option 1 – Export of goods or services or both on payment of IGST [Section 16(3)(b) of the IGST Act]-

• In terms of section 16(3)(b), the registered person can export goods/ services or both on payment of tax (i.e., IGST).
• The registered person can claim the refund of IGST paid on export of goods/ services or both in accordance with provisions of section 54 of the CGST Act, 2017.

Option 2 – Export of goods or services or both without payment of IGST [Section 16(3)(a) of IGST Act read with Rule 96A of CGST Rules]-

• The goods/ services or both are supplied without payment of tax (IGST).
• Accordingly, the registered person is required to furnish a bond or a Letter of Undertaking (i.e., LUT).
• Notably, the said bond/ LUT should be submitted before the export of such goods/ services or both.
• The bond/ LUT is to be submitted to the jurisdictional Commissioner in Form GST RFD-11.
• Notably, as per notification no. 37/2017- Central Tax dated 4^th October 2017, following is eligibility/ non-eligibility of the category of person who can furnish only LUT in place of a bond are as under-

Eligibility

All the registered person except the category of person stated below.

Non-eligibility

Following category of person who satisfies both the below criteria will not be eligible to furnish LUT in place of a bond- Criteria 1 – The person who is prosecuted for any offence under any of the following law- The Central Goods and Services Tax Act, 2017; The Integrated Goods and Services Tax Act, 2017; or Any of the existing law in force. Criteria 2 – The amount of tax evaded exceeds INR 250 Lakhs.

• Accordingly, the bond/ LUT binds the exporter to pay the tax along with applicable interest under the following situation-

Situation	Time period within tax along with interest needs to be paid
When goods are not exported out of India	Within a period of 15 days after expiry of 3 months from the date of issue of invoice for export. Notably, Commissioner can extend the above period.
When the payment of service is not received in convertible foreign exchange	Within a period of 15 days after expiry of 1 year from the date of issue of invoice for export. Notably, Commissioner can extend the above period.

• Some facts about LUT and Bond-

LUT

Bond

LUT will be valid for the entire financial year. There is no need to submit any physical document to the jurisdictional officer for acceptance of LUT [Refer Circular no. 40/14/2018-GST dated 6th April 2018]. A LUT will be deemed to be accepted as soon as an acknowledgement mentioning Application Reference Number (i.e., ARN) is generated online [Refer Circular no. 40/14/2018-GST dated 6th April 2018].

The running bond is to be maintained. The bond amount should be sufficient to cover the self-assessed estimated tax liability on export. In case the bond amount is not sufficient, the person is required to submit a fresh bond.

• Notably, under this option, the person will be eligible to claim a refund of unutilized input tax credit (i.e., ITC).

Thanku very much. But I was expecting some more on export any way there might be limitations of words.
Thanks once again .

Can you plz write article on GST Applicability on Hospitality business eg: Hotel, Restaurant, Banquet Halls etc

Replied to Pankaj Rawat

You can expect your article in next week.

Pls write on Export of Service to parent company in US or othr country nd its implcation /controversy as per section 8 igst act "distinct person"

Very good article. Can you plz write an article on how to complain to Department with regard to Vendor's GST non compliance if they default to pay Tax or Returns not submitted.

My Account and Validity
Reg. No. : 12193
Reg. Date : Jan 1, 2020
Name : m-murali

nice article.
why not provide the option to download in pdf format as they do in another similar website TAXGURU.COM

If i have applied LUT in April-21 and I m doing Export In Aug-21 . Can i export with LUT ?

An individual residing in India supplying civil structural designing service to some one at abroad thro electronic media and receiving payment in foreign money. Is the service is taxable and whether he has to register under IGST Act - any body can please clarify.

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