Understanding GST Provisions for International Trade: Imports, Exports, and Deemed Exports

This article details the Goods and Services Tax (GST) provisions governing both the import and export of goods and services, providing essential information for businesses involved in international trade.

Meaning of Import and Export of Goods Under GST

According to Sub-Section 5 of section 2 of the IGST Act, 2017, the term 'Export of Goods' refers to moving goods from India to a location outside the country. Conversely, 'Import of Goods,' as defined in Sub-Section 10 of section 2 of the same Act, means bringing goods into India from an external location.

Meaning of Import and Export of Services Under GST

Sub-section 11 of the IGST Act, 2017, defines 'Import of Services' as the provision of any service where:

• The service's place of supply is within India.
• The service provider is situated outside India.
• The service recipient is located in India.

Supplies Not Considered Exports of Goods or Services

Certain transactions do not qualify as exports of goods or services: - Services supplied within India to a person located outside India. For example, renting a Delhi property to a New York resident, or an Indian agent providing services to a Dubai client exporting goods to China. - Services for which payment is received in Indian currency rather than a convertible foreign currency. An example is an Indian consulting firm providing services to an overseas entity, but receiving payment in Indian rupees from the entity's Indian branch. - Service supplies to a foreign branch are explicitly excluded from 'export of service.' This exclusion may require reversing input credits, as such supplies are considered non-taxable, not zero-rated. The GST definition of service import also explicitly excludes services obtained from a foreign branch.

Deemed Exports Under GST

Indian suppliers often compete with foreign counterparts in bids where customs duty is not a factor. When goods and services are supplied for specific projects, particularly those funded with free foreign exchange, these supplies are designated as 'deemed exports.' Similarly, supplies to Export Oriented Units (EOUs) and services that do not physically leave India, where suppliers receive payment in Indian currency instead of foreign exchange, are also treated as deemed exports. The term 'deemed exports' specifically applies to transactions where goods manufactured or produced in India do not exit the country, and payment is made in Indian Rupees.

As per the Foreign Trade Policy 2015-2020, the following categories are considered deemed exports: - Supplies made to Export Oriented Units (EOU), Software Technology Parks (STP), Electronic Hardware Technology Parks (EHTP), or Bio-Technology Parks (BTP). - Supplies against Advance Authorisation or Duty-Free Import Authorisation (DFIA). - Supply of goods to mega power projects procured through International Competitive Bidding (ICB). - Supplies directed to United Nations Agencies. - Supply of goods to nuclear projects selected via competitive bidding. - Supply of marine freight containers. - Supplies made under an Export Promotion Capital Goods (EPCG) authorization. - Supplies to projects awarded through international competitive bidding. - Supplies for projects with zero customs duty.

Treatment of Exports Under GST

Under IGST law, both the export of goods and services are classified as 'zero-rated supplies.' Registered taxable persons who export such items are entitled to claim a refund of the GST paid. This refund can be pursued through one of two methods:

• Option 1: Exporting goods or services under a bond or Letter of Undertaking (LUT) without paying Integrated Tax. In this scenario, the exporter can claim a refund for any unutilized input tax credit.
• Option 2: Exporting goods or services upon payment of Integrated Tax. The exporter can then claim a refund of the GST paid on the exported goods and services.

Both refund options are subject to specific rules, procedures, and safeguards.

For Option 1, the registered taxable person (exporter) must submit a refund application via the common portal, either directly or through a GST commissioner-notified facilitation center. An export manifest, as required by the existing Customs Act, must be filed before submitting the refund application.

For Option 2, an exporter, Embassy, United Nations entity, or other specified organization under section 55, who supplies goods or services after fulfilling prescribed conditions and paying IGST, can claim a refund of that GST. The applicant must file a refund application as per Section 54 of the CGST Act. The shipping bill filed for goods exported from India is considered a 'deemed application' for the tax paid refund. This deemed application is valid only when the person responsible for the shipment files the export manifest or report, including the shipping bill number and date.

Forms for Refund

The Goods and Services Tax Network (GSTN) has introduced Table 6A within Form GSTR-1 for exporters to claim refunds. This utility allows taxpayers to submit export-related data for the relevant period, facilitating GST refund processing based on declarations made in Form GSTR-3B and Table 6A of GSTR-1. Exporters of goods or services can claim a refund of Integrated GST paid during export by accurately entering details from their tax paid GST invoices and shipping bills into their Form GSTR-1 for the corresponding month.