Understanding Export Invoices: A Comprehensive Guide

Modern businesses are generally familiar with GST regulations for domestic invoices, both within and across states. However, complexities often emerge when the supply destination is outside India. Export invoices are crucial documents that assist customs officials in verifying shipment contents and calculating relevant taxes.

Meaning of an Export Invoice

An export invoice serves as a document detailing the goods or services an exporter provides and the amount an importer owes. Its structure closely resembles a standard tax invoice, with some additional information specific to international trade.

Importance of Raising an Export Invoice

• An export invoice acts as crucial proof for processing insurance claims.
• It provides verifiable evidence of the transaction between the buyer and seller.
• This document is an essential component of the complete set of shipping papers.
• Government authorities utilize export invoices to ascertain the actual value of goods and determine the appropriate taxes.
• Importers rely on the export invoice to facilitate customs clearance in the destination country.

Indian Laws on Export Invoices

A common query is whether commercial and export invoices are interchangeable. An export invoice encompasses various elements, including a commercial invoice, proforma invoice, and packing list. Government bodies use export invoices to assess and calculate applicable taxes and duties. Under GST law, there are three distinct categories of exports:

Export Under Bond/LUT

Exporting goods or services without paying Integrated Goods and Services Tax (IGST) is permissible. Section 96A of the CGST regulations, 2017, outlines the provisions for exporters opting for this method. A Letter of Undertaking (LUT) must be filed when exporting goods or services without IGST payment. LUTs simplify the process for exporters by removing the need to claim refunds and preventing funds from being tied up in tax payments. Any registered person who meets the following criteria must furnish the LUT using GST RFD 11 form:

• Is registered under the GST framework.
• Intends to supply goods without remitting IGST.
• Plans to supply goods internationally, to Special Economic Zones (SEZs), or to locations within India.

Export With IGST

In contrast to the previous approach, exporters are required to pay IGST at the time of export and can subsequently claim a refund. Refunds are applicable for:

• The unutilized portion of the Input Tax Credit (ITC).
• The IGST paid on exported goods and services.

SEZ With IGST

To encourage exports, specific tax relaxations apply to export-related payments. The supply of goods to a Special Economic Zone (SEZ) is considered a zero-rated supply, meaning no taxes are required on such exports.

Time Limit to Raise an Export Invoice Under Indian Law

According to Section 31 of the CGST Act, 2017, the deadline for issuing an export invoice varies based on whether the transaction involves goods or services.

• For supplies involving the physical movement of goods:
  • The invoice must be issued either prior to or at the moment the goods are dispatched for delivery.
• For supplies involving services:
  • The invoice should be issued either before or after the service is rendered, but within a defined timeframe.

Contents of an Export Invoice

An export invoice typically includes the following essential details:

• The exporter's name, address, contact information, and GSTIN.
• The recipient's name, along with both their billing and shipping addresses.
• The invoice's issue date.
• The payment due date.
• The unique invoice number.
• The currency conversion rate from Indian Rupees (INR) to the relevant foreign currency.
• The total invoice value.
• The specific type of export.
• Information from the shipping bill.
• A physical or digital signature of the authorized individual.
• Any additional notes or messages for the importer.

How Packing and Shipping Are Dealt With in an Export Invoice

For international shipments, a packing list is essential to prevent cargo discrepancies. This document, which may accompany a certificate of inspection, supports the movement of goods between businesses. The export invoice itself includes specific information pertaining to packing and shipping. These details typically found in an export invoice are:

• Container number.
• Information concerning the countries of origin and destination.
• The ports of origin and destination.
• Any relevant shipping marks.
• The container seal number.
• A detailed description of the goods, including HSN code, rate, quantity, and units.

Use of Currency in an Export Invoice

According to the RBI Master Directions (RBI/FED/2015-16/11), export invoices are not exclusively limited to foreign currency; they can also be issued in Indian Rupees (INR).

• Invoices can be denominated in either a freely convertible currency or Indian Rupees.
• Export proceeds are typically collected in a freely convertible currency.
• For certain specified exports, proceeds may be realized in INR if the funds are received via a freely convertible Vostro account from a non-resident bank located in any country other than a member of the Asian Clearing Union, Nepal, or Bhutan.