Export of goods or services under GST

INTRODUCTION

In this article, we will throw light upon aspects related to exports and its consequences under GST law. Earlier, the exports were exempt under service tax and excise act. But the situation is quite different in the GST. GST act provides the definition of export of goods or services and also specify the manner in which the export is to be dealt with and its reporting in the GST returns.

WHAT IS EXPORT OF GOODS

Section2 (5) of IGST Act defines the export of goods with it grammatical variation and cognate expression means taking out of India to a place outside India.

WHAT IS EXPORT OF SERVICES

Section 2(6) of IGST Act defines Export of Services as Supply of any services when:

(i) The supplier of services is located in India;
(ii) The recipient of services is located outside India;
(iii) The place of supply of services is outside India;
(iv) 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;
(v) 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;

WHAT IS DEEMED EXPORT

“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.

EXAMPLE S OF DEEMED EXPORT

1. Supplies to EOU / STP / EHTP / BTP
2. Supplies against Advance Authorisation/ DFIA
3. Supply of goods to mega power projects against International Competitive Bidding
4. Supplies to United Nation Agencies
5. Supply of goods to nuclear projects through competitive bidding
6. Supply of marine freight containers
7. Supplies against EPCG authorization
8. Supplies to projects against international competitive bidding
9. Supplies to projects with zero customs duty

GST APPLICABILITY ON EXPORT OF GOODS OR SERVICES

As per the provisions of IGST act, Export are to be considered as “ZERO RATED SUPPLIES”. Zero-rated supply does not mean that the goods and services have a tariff rate of ‘0%’ but the recipient to whom the supply is made is entitled to pay ‘0%’ GST to the supplier.

The taxpayer can only report the export of goods or services as ‘ZERO RATED SUPPLY” if they have furnished the “Letter of Undertaking (LUT) to GST department.

The taxpayer have to issue the invoice for export specifically mentioning that the export is being made under LUT NO*******. Without furnishing LUT, an exporter cannot export his goods or services at zero rate.

In the absence of LUT, an exporter shall charge GST at such rate which is applicable to local sales only.

The IGST act have specified two options under which a taxpayer can avail the benefit of refund on account of export of goods or services:

OPTION- 1:-
Export of goods or services or both under letter of undertaking (LUT) without paying any Integrated Tax and can claim the refund of unutilized input credit.

OPTION-2:-
Export of goods and service or both on the payment of Integrated Tax and the exporter can claim the refund of the IGST 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. Which is better explained in graphical manner as below.

EXPORT OF GOODS OR SERVICES UNDER GST

PLACE OF SUPPLY IN CASE OF EXPORT OF GOODS
Section 10(1) of IGST act provides the clear understanding about what shall be considered as a place of supply in case of export of goods. According to the section:

where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient (which means the place at which the goods ultimately reaches)

where the goods are delivered by the supplier to a recipient or to an agent of recipient , before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person; (which means that the place of supply shall be the place of person who has received the goods either it may be an agent of recipient or any other person on behalf of recipient)

where the supply does not involve movement of goods, whether by the supplier or the recipient, the place of supply shall be the location of such goods at the time of the delivery to the recipient;
where the goods are assembled or installed at site, the place of supply shall be the place of such installation or assembly;

where the goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, the place of supply shall be the location at which such goods are taken on board.
PLACE OF SUPPLY IN CASE OF EXPORT OF SERVICES
Section 13 of IGST act explains the place of supply in case of export of services where the location of supplier or receiver is outside the India.

This section provides that the place of supply of service shall be location of service receiver except in the following cases:

1. The place of supply in the following cases shall be the place where the service is actually being performed.

(i) services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services:

when such services are provided from a remote location by way of electronic means, the place of supply shall be the location where goods are situated at the time of supply of services:
Provided further that nothing contained in this clause shall apply in the case of services supplied in respect of goods which are temporarily imported into India for repairs and are exported after repairs without being put to any other use in India, than that which is required for such repairs;

(ii) services supplied to an individual, represented either as the recipient of services or a person acting on behalf of the recipient, which require the physical presence of the recipient or the person acting on his behalf, with the supplier for the supply of services ( for example: Beauty Salon Service: in this kind of services physical presence of recipient is required: place of supply is the place where the service is actually performed)

2. The place of supply of services supplied directly in relation to an immovable property, including services supplied in this regard by experts and estate agents, supply of accommodation by a hotel, inn, guest house, club or campsite, by whatever name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including that of architects or interior decorators, shall be the place where the immovable property is located or intended to be located

3. The place of supply of services supplied by way of admission to, or organization of a cultural, artistic, sporting, scientific, educational or entertainment event, or a celebration, conference, fair, exhibition or similar events, and of services ancillary to such admission or organization, shall be the place where the event is actually held. (for example events: place of supply is the place where the event actually held)

4. Where the services referred to as above are supplied in more than one State or Union territory, the place of supply of such services shall be taken as being in each of the respective States or Union territories and the value of such supplies specific to each State or Union territory shall be in proportion to the value for services separately collected or determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed

5. The place of supply of the following services shall be the location of the supplier of services, namely:-

services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders;
intermediary services; services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month
6. The place of supply of services of transportation of goods, other than by way of mail or courier, shall be the place of destination of such goods

7. The place of supply in respect of passenger transportation services shall be the place where the passenger embarks on the conveyance for a continuous journey

8. The place of supply of services provided on board a conveyance during the course of a passenger transport operation, including services intended to be wholly or substantially consumed while on board, shall be the first scheduled point of departure of that conveyance for the journey.

9. The place of supply of online information and database access or retrieval services shall be the location of the recipient of services Where the location of service receiver is not available in the ordinary course of business than location of service provider shall be consider.

WHERE SHALL WE REPORT THE TRASANCTIONS OF EXPORT IN GSTR-3B AND GSTR-1.
IN GSTR-3B:
Situation 1: Export with payment of Duty: this kind of transactions shall be reported in table 3.1 clause (a) “Outward taxable supplies).

Situation 2: Export without payment of duty i.e. under LUT (Zero rated supplies): this kind of exports shall be reported under table 3.1 clause (b) “Outward taxable supplies (zero rated)”.

IN GSTR-1:
Every invoice of export of goods/service either supplied with payments of IGST or without payment of IGST shall be reported in table 6 (Summary for exports)

Pro Tip
Make sure you report the export of goods or services in GSTR-3B and GSTR-1 correctly to enable yourself to file for refund application. If you have wrongly reported your export in either GSTR-3B or GSTR-1, your refund application may get stuck and you will not be able to receive refund.