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VINAY SONPAL LL.M. SENIOR ADVOCATE BOMBAY
12 Oct 2024
11 Oct 2024
18 Nov 2023
20 May 2021
GST LAW ON IMPORT AND EXPORT
GST LAW
REGARDING EXPORT AND IMPORTS
By Vinay
Sonpal LL.M.
Advocate
PROLOGUE
It is well known to business fraternity and tax professional community,
that the indirect tax reforms were introduced in India by 101st
Amendment to Constitution of India. Consequently, several indirect taxes
subsumed in the Goods and Service Tax regime. The concept was one country , one tax and one market. The field of
legislation for levying tax on sale of goods under Entry 54 of List II of
seventh Schedule of Constitution was restricted to sale of alcoholic liquor for
human consumption and petroleum crude, high speed diesel, motor spirit (commonly
known as petrol) , natural gas , aviation turbine fuel excluding the sale in
the course of interstate trade or commerce or sale in the course of
international trade or commerce.
Earlier, field of legislation to levy excise
duty for all products manufactured in India except alcoholic liquor for human
consumption and opium, Indian hemp, narcotic drugs and narcotics, was in List I
of VII th Schedule to Constitution of India. After the amendment field of
legislation was restricted only to (a) petroleum crude; (b) high speed diesel;
(c) motor spirit (commonly known as petrol); (d) natural gas; (e) aviation
turbine fuel; and (f) tobacco and tobacco products. However, the Article 279(5) provides that
GST Council will recommend the date on which goods and service tax will be levied on
supply of (a) petroleum crude; (b) high speed diesel; (c) motor spirit
(commonly known as petrol); (d) natural gas; (e) aviation turbine fuel will . This
levy shall be addition to the tax on sale of (a) petroleum crude; (b) high
speed diesel; (c) motor spirit (commonly known as petrol); (d) natural gas; (e)
aviation turbine fuel as provided in Item 54 of List II of Seventh Schedule of
Constitution of India ,Consequently, from the date recommended by Council ,(a)
petroleum crude; (b) high speed diesel; (c) motor spirit (commonly known as
petrol); (d) natural gas; (e) aviation turbine fuel will bear central excise
duty, GST and Sales Tax thereby fueling the consumer price index. Now, at
present, States are levying sales tax and Center is levying excise duty.
The field of legislation for tax on sale of
newspapers and advertisement published therein and field of legislation tax on
service i.e service tax, as contained
in Item 92 and 92C respectively of List I
of Seventh Schedule of Constitution were deleted by the 101st
Amendment to Constitution of India.
Article 246A was inserted by 101st Amendment
to Constitution of India .Consequently, the Parliament and every State Legislature is empowered to make laws with respect to goods
and service tax. The States, however, were not provided with power to make laws with respect to goods and
service tax in respect of supply which takes place in inter-state trade or commerce or in international trade. The
powers under Article 245 and 246 were retained and because of non obstante
clause in Article 246A which means the
powers in Article 246A are additional and there is no scope of repugnancy of
Article 245 or 246 vis a vis Article
246A.
Article 366(12-A) defines “goods and service
tax” as tax on supply of goods and/or service except alcoholic liquor for human
consumption.
Pertinent to know that in view Entry 54 read
with Article 366(12A) read with Item 84 of List I, Parliament can levy goods
and service tax on supply of goods and services , Parliament can also levy Excise Duty on ,
and State can levy sales tax on sale of (a) petroleum crude; (b) high speed
diesel; (c) motor spirit (commonly known as petrol); (d) natural gas; (e)
aviation turbine fuel and alcoholic liquor for human consumption. It also means
that Parliament can levy Excise Duty, inter alia , on tobacco, goods and service tax can be
levied , inter alia, on tobacco by Parliament and State Legislature.
Hence (a)
petroleum crude; (b) high speed diesel; (c) motor spirit (commonly known as
petrol); (d) natural gas; (e) aviation turbine fuel and Tobacco shall not be
subsumed in GST and will be independently levied.
The
provision of Integrated Goods and Service Tax Act 2017 is under Article 269A. Explanation
to Article 269A(1) makes the supply of goods or services in the course of
import into territory of India deemed to be in the course of interstate trade
or commerce. Consequently, all provision of levy of tax on supply of goods and
services in the course of interstate trade or commerce in IGST Act shall be
applicable to imports,
Custom
Duty on Imports and Export are not
subsumed in GST. Consequently, Import Duty and GST both will be levied on the
value of imports.
IMPORTS:
Definitions of import of goods and services are
contained in section 2(10) and (11) of IGST Act;
2(10) ‘‘import of goods” with its
grammatical variations and cognate expressions, means bringing goods into India
from a place outside India;
2(11) ‘‘import of services” means the
supply of any service, where––
(i) the
supplier of service is located outside India;
(ii) the
recipient of service is located in India; and
(iii) the place of supply of service is in
India;
As per Section 7(2) supply of goods till the
goods cross custom frontiers of India,
is treated as interstate sale.
As per section 7(4) the supply of services
imported in territory of India is treated as interstate supply.
As per section 13 the place of supply of services
shall be the location of recipient of services, except as provided in section
13(3) to (13).
Thus all imports and supply of
imported goods till they cross custom frontiers of India are Inter State sale
and thus liable to IGST, on reverse charge basis. It is available for
adjustment as ITC under section 16 read with section 2 (62) which provides that “input tax” in
relation to a registered person, and
includes under clause (a) the integrated
goods and services tax charged on import of goods, but those who do not have outward GST liability will have double jeopardy inasmuch as
, he will have to pay custom duty and in addition IGST. Hitherto, such person
had only to pay custom duty.
It may appear that the supply is from foreign
non taxable territory, then how can India levy tax on supply from non taxable
territory. Answer appears to be that provision of Article 245(2) protects and
provides that no law made by Parliament shall be deemed to be invalid on the
ground that it would have extra territorial jurisdiction.
It must be noted that import of services (not
goods) for consideration not in course or furtherance of business is covered
under the scope of supply u/s 7 (1)(b) of CGST Act which is applicable to IGST
Act as per Section 21(i) of IGST Act.
Under
the pre GST era, the import was not liable to sales tax or purchase tax as per
Article 286 under any State Act. The 101st
Amendment to Constitution of India amended the wordings of Article 286 by
substituting “sale or purchase” with “supply of goods or services or both”.
Therefore, no State can levy tax on supply of goods or services or both on
supply of goods or services or both in the course of import or export. This
prohibition puts restrictions on States power to levy tax under Article
246A(1).However, Article 246(2) puts restriction on State to levy tax on supply
of goods or services or both in the course of interstate trade or commerce. The
Export and Import are treated as Inter State supply of goods or services or
both. This is evident from the Explanation to Article 269A(1) and Section 7(5)
of IGST Act.
Moreover, as per section 7(2), the supply of
goods imported into territory of India , till they cross custom frontiers of
India, are treated as sale in the Course of interstate trade or commerce.
As per Schedule II Item 1(b) and Item 5 (f)
transfer of right without transfer of title or transfer of right to use goods (
e.g. Lease of Goods ) is treated as supply of services. If goods are imported
for use for any purpose (e.g. high seas exploration of oil or gas , High Seas
Drilling of Wells or dredging or an y
performance of any act in land mass in India) shall be treated as supply of
service and liable for IGST.
Schedule I Item 4 provides that even if
services are imported without consideration by a person from a related person or
any other establishment outside India in course or furtherance of business
shall be treated within the scope of supply.
Hence, following import transactions shall be
treated as supply of goods or services or both in the course of interstate
trade or commerce:
1.
Import of
goods or services into India from
outside India;
2.
Export of
goods or services to territory outside India;
3.
Supply of
goods imported before the goods have crossed custom frontiers of India;
4.
Lease of
goods from foreign country for consideration in furtherance of business;
5.
Services imported without consideration by a person
from a related person or any other establishment outside India in course or
furtherance of business;
6.
Import of
services for consideration not in course or furtherance of business.
Now the Section 5, first Proviso
states that the integrated tax on goods imported into India shall be levied and
collected in accordance with the provisions of section 3 of the Customs Tariff
Act, 1975 on the value as determined under the said Act at the point when
duties of customs are levied on the said goods under section 12 of the Customs
Act, 1962.
The goods imported
into India will be liable to IGST but not under IGST Act instead under section
3(7) of Customs Tariff Act. As per Taxation Laws (Amendment) Act, 2017 changes have been brought about in Customs
in the wake of introduction of GST. One
change is that, in addition to basic customs duty levied under section 12 of
Customs Act, section 3 of Customs Tariff
Act , sub-section 7 levies IGST on import of goods.
Customs Act permits goods
that have entered India to be deposited in a bonded warehouse on filing
‘into-bond’ bill of entry without payment of duty. Hence, goods that have
entered India will not attract liability to IGST until they reach the point –
location or time – when bill of entry for home consumption is filed.
In such cases, IGST is to be levied only when ex-bond bill of entry is filed or
until date specified in section 15 is reached. Further, goods imported by SEZ
also do not attract liability to IGST as the goods are ‘not yet’ liable to be
assessed to customs duty.
It is thus clear that the import of goods or
services is liable to IGST. The rate will as per the Notification 1/2017-Integrated
Tax (Rate),dt. 28-06-2017 under the Integrated Goods and Service Tax Act 2017.
By Notification No 10/2017 dt
28.06.2017 in respect of receipt of service from person located in non taxable
territory to any person other than non taxable online recipient , IGST shall be
payable under reverse charge mechanism by any person located in the
taxable territory other than non-taxable online recipient, who is in receipt of
receipt of service.
As per section 5 (1) the IGST tax is payable by taxable person. Taxable person is defined in CGST Act, which is applicable to IGST Act, as per section 2(24) and 21 of IGST Act, to mean that the person who is registered or liable to be registered under section 22 or 24 of CGST Act. The section 24(i) person making interstate taxable supply is also liable to registration. Import is treated as interstate supply. The question whether the exporter in foreign country who is exporting goods to India is liable for registration and consequences of failure to get registered are attracted to exporter to India. Consequently the supplier is foreign country is made liable to registration and tax. This is evident from the fact that all imports of goods and services are made liable to recovered as reverse charge. This fastens liability fundamentally on supplier on supply from non taxable territory.
Section 3(7) Custom Tariff Act 1975 provides that any article which is imported into India shall, in addition, be liable to integrated tax at such rate, not exceeding forty per cent as is levyable under section 5 of the Integrated Goods and Services Tax Act, 2017 on a like article on its supply in India, on the value of the imported article as determined under sub-section (8).
By Notification No. 10/2017- Integrated Tax (Rate), IGST shall be paid on reverse charge basis by the recipient of the services. Thus any service supplied by any person who is located in a non-taxable territory to any person, other than non-taxable online recipient, to any person located in the taxable territory, other than non-taxable online recipient, shall be paid by importer of services.
As per the provisions contained in Section 7(1) (b) of the CGST Act, 2017, import of services for a consideration whether or not in the course or furtherance of business shall be considered as a supply. This implies that import of services even for personal consumption would qualify as ‘supply’ and therefore, would be liable to tax. This would not be subject to the threshold limit for registration, as tax would be payable in case of import of services on reverse charge basis, requiring the importer of service to compulsorily obtain registration in terms of Section 24(iii) of the Act. Although import for personal purposes is included in the definition of supply, the entry 10(a) to Notification No. 9/2017-Int (Rate), dated 28.6.2017 exempts import of services under entire Chapter 99 from payment of GST. However, the GST law has ensured that persons who are not engaged in any business activities will not be required to obtain registration and pay tax under reverse charge mechanism, and in turn, requires the supplier of services located outside India, to obtain registration for the OIDAR (online information and database access and retrieval) services only. Thus, in general, import of services without consideration shall not be considered as supply. However, business test is not required to be fulfilled for import of service to be considered as supply. Thus, import of services can be considered as supply based on whether there is consideration or not and whether the service is supplied in the course or furtherance of business.
. Hence, information and database access or retrieval services,
when recipient is non taxable person
the supplier of services shall be liable to pay tax. Thus, in respect of
import of online information and database access or retrieval services (OIDAR)
by unregistered, non-taxable recipients, the supplier located outside India
will be responsible for payment of taxes. The service provider (or
intermediary as the case may be) will be required to take a single registration
for paying IGST under the Simplified Registration Scheme . Notification
no.2/2017 – Integrated tax, dated 19th June 2017 has notified the Principal Commissioner of Central Tax,
Bengaluru West and all the officers subordinate to him as the officers
empowered to grant registration in case of online information and database
access or retrieval services provided or agreed to be provided by a person
located in non-taxable territory and received by a non-taxable online
recipient.
Either foreign supplier will have to take registration or he will have to
appoint a person in India to pay GST.
The person
receiving any such services i.e. OIDAR should pay the IGST to the government
only if he is registered under GST as a taxable person
EXEMPTIONS: By Notification No. 18/2017 -Integrated Tax (Rate) Government exempted services imported by a unit or a developer in the Special Economic Zone for authorised operations, from the whole of the integrated tax levyable thereon under section 5 of the Integrated Goods and Service Tax Act, 2017. By Notification No. 64/2017- Customs , Government exempted all goods imported by a unit or a developer in the Special Economic Zone for authorised operations, from the whole of the integrated tax leviable thereon under sub-section (7) of section 3 of the Customs Tariff Act, 1975 (51 of 1975) read with section 5 of the Integrated Goods and Service Tax Act, 2017 (13 of 2017). The Import of certain services are
exempted as per Notification No 9/2017 (E-10)dt 28.06.2017. Entry 10 provides
exemption as follows:
Services received from a provider
of service located in a non- taxable territory by –
1. The Central Government, State Government,
Union territory, a local authority, a governmental authority; or
2. An
individual in relation to any purpose other than commerce, industry or
any other business or profession;
3. An entity registered under section 12AA of
the Income-tax Act, 1961 (43 of 1961) for the purposes of providing charitable
activities;
4. A person located in a non-taxable territory:
The
exemption is not applicable to –
(i)
online
information and database access or retrieval services received by persons
specified in entry (1) or entry (2) above; or
(ii)
services by way of transportation of goods by
a vessel from a place outside India up
to the customs station of clearance in India received by persons specified in
the entry.
OCEAN FREIGHT ON CIF IMPORTS IS HELD TO BE ULTRA VIRES.
The
levy of reverse charge on the ocean freight in case of CIF export has been
declared ultra vires by Gujarat High Court in Mohit Minerals (P) Ltd. v. UOI 2020-VIL-36-GUJ dt
23-01-2020 in SCA No.726/2018
passed by the High Court of Gujarat at Ahmedabad. However, Union of India has
filed SLP before the Supreme Court and the same is pending. It has been held that no IGST is
leviable on the ocean freight for the services provided by a person located in
a non-taxable territory by way of transportation of goods by a vessel from a
place outside India up to the customs station of clearance in India. Entry 9(ii) of NN-8/2017-IT(R) and Entry 10 of NN-10/2017-IT(R) have
been declared as ultra vires the IGST Act due to lack of competency
Under Section 5(3) of the IGST Act, the
person liable to pay tax can only be “the recipient” of supply. The term
“recipient” has been defined in the CGST Act. Importer
cannot be said to be the recipient of the ocean freight service in the instant
case since the importer has neither availed the service of transportation of
goods nor he is liable to pay consideration for such service. The foreign
shipping line is engaged by foreign exporter. The importer cannot be made
liable to pay tax on a mere premise that the importer is directly or indirectly
recipient of service. The Court observed that it is neither an inter-State
supply under Section 7 nor an intra- State supply under Section 8 of the IGST
Act.
The
payment of IGST is available for adjustment as ITC u/s 16 of CGST Act read with
section 2(62)(a) against out put supply liabilities. However, when the importer
is not engaged in activities liable for GST or its output supply of goods and
/or services are not liable to GST, though IGST available for ITC, the importer
has to bear the burden over and above IGST..
CGST
Circular No. 98/17/2019 issued on 23 April 2019 has clarified the
order of ITC utilisation for each tax head. Section 49A provides that ITC under the IGST shall be first utilised
for any tax liability before ITC under CGST or SGST or UGST is utilised. Section 49B provides for power to the Government to
frame rules for order and manner of utilization of ITC .Consequently, rule 88A
has been inserted which provide. The importer can utilise the amount of Integrated
Tax paid on import against the liabilities under any of the GST Acts subject to provisions of Section 49,49A and
49B and Rule 88A.
SUPPLY IN COURSE OF
IMPORT:
The
Article 286 provides for prohibition to State to levy tax on import of goods or
services into or export of goods and services out of India. Hence, no State
Government levy tax on import of goods or services into or export of goods and
services out of India.
Therefore
tax is provided under IGST Act in respect of import of goods or services into or
export of goods and services out of India.
The
provisions of section 7(2) provides that any supply of imported goods before
the goods cross custom frontiers of India, shall be treated as interstate
supply. Here the goods have been unloaded on the air port or sea port but have
not custom frontiers India i.e Bill of Entry is not yet filed , either for home
consumption or warehousing, as the case may be, and supply occurs, then in that
case though goods are in the Indian Territory , the transaction shall be
treated as interstate supply. This is akin to provisions of section 5(2) of the
Central Sales Tax Act 1956. Here the deeming fiction is about interstate supply
and not import. The term crossing custom
frontiers of India is defined in section
2(ab) of CST Act 1956 shall be applicable. The Bombay High Court in The
Commissioner Of Sales Tax,. vs M/S Radhasons International by judgment dt 8
February, 2019 has held that once the bill of entry is filed
either for home consumption or warehousing, goods are deemed to have crossed
custom frontiers of India.
Correspondingly,
provisions in Schedule III of CGST Act in item 8 provides for exclusion of such
transaction from the purview of intra state supply.
Supply of warehoused goods to any person before clearance for home
consumption and Supply of goods by the
consignee to any other person, by endorsement of documents of title to the
goods, after the goods have been dispatched from the port of origin located
outside India but before clearance for home consumption are outside the ambit
of CGST Act.
Schedule
III under CGST Act is amended with effect from 1.2.2019 and Entry 8 has been
added so as to provide that following transaction shall neither be supply of
goods or services.
(a)
supply of
warehoused goods to any person before clearance for home consumption and
(b)
supply of
goods by the consignee to any other person, by endorsement of documents of
title to the goods, after the goods have been dispatched from the port of
origin located outside India but before clearance for home consumption.
It appears that this Entry 8 of Schedule III
is in contract to provision of section 7(2) of IGST Act. To reconcile both the
Acts are different and one provision in the CGST Act does not appear to follow
provisions of IGST Act except as provided in Section 21 of IGST Act. The Section 21(i) referes to scope of supply.
The Section 7 of CGST refers to Scope of Supply which refers to Schedules.
Whether the Schedule III overrides
Section 7(2) of IGST Act is a question to be deliberated. If so, intermediary
transactions shall not be liable to IGST.
As per second proviso to Rule
138A(1) provides
that in case of imported goods, the person in charge of a conveyance
shall also carry a copy of the bill of entry filed by the importer of such
goods and shall indicate the number and date of the bill of entry in Part A of FORM GST EWB-01
EXPORTS:
Section 2 of
IGST defines:
2(5) “export
of goods” with its grammatical variations and cognate expressions, means
taking goods out of India to a place outside India;
2(6) “export
of services” means the supply of any service when,––
(i) the
supplier of service is located in India;
(ii) the
recipient of service is located outside India;
(iii) the
place of supply of service is outside India;
(iv) the
payment for such service has been received by the supplier of service in convertible
foreign exchange or Indian Rupees wherever permitted by Reserve Bank of India;
(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;
{Section 8, Explanation 1.––provides that
where an establishment in India and any
other establishment outside India; then such establishments shall be treated as
establishments of distinct persons.]
Condition No.
(iv) and (v) are not provided in respect of export of goods..However, as per
Rule 96B the Refund availed on export needs to be reversed and paid back to
Government along with applicable interest , if the export proceeds in respect
of exported goods are not realised within the time permitted by FEMA. But it is
actually realised belated the refund reverted back shall be again refunded but
interest charged at the time of reversion of refund shall not be refunded.
As per section 13 the place of supply of services
shall be the location of recipient of services. However, in certain
circumstances as enumerated in S 13(3)to (13), place of supply shall be deemed
to be as provided in each sub-section:
|
Sr No. |
Sub
Section |
Type of
services |
Place of
supply |
|
1 |
3 |
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: and 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. |
The location where the services are actually performed |
|
2 |
4 |
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. |
The place where the immovable property is
located or intended to be located |
|
3 |
5 |
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 |
The place where the event is actually held |
|
4 |
6 |
Where any services referred to in sub-section (3) or
sub-section (4) or sub-section (5) is supplied at more than one location |
The location in the taxable territory |
|
5 |
7 |
Where the services referred to in sub-section (3) or
sub-section (4) or sub-section (5) are supplied in more than one State or
Union territory, |
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 |
|
6 |
8 |
services supplied by (a) banking company, or a financial institution, or a
nonbanking financial company, to account holders; (b) intermediary services; (c) services consisting of hiring of means of
transport, including yachts but excluding aircrafts and vessels, up to a
period of one month. |
Location
of supplier of services. |
|
7 |
9 |
The place of supply of services of transportation of
goods, other than by way of mail or courier, |
Place of destination of such goods |
|
8 |
10 |
The place of supply in respect of passenger
transportation services |
The place where the passenger embarks on the conveyance
for a continuous journey. |
|
9 |
11 |
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, |
The first
scheduled point of departure of that conveyance for the journey |
|
10 |
12 |
The place of supply of online information and database
access or retrieval services |
The location of the recipient of services |
The effect of this Section 13(3)
to (13) is that the definition of supply of services in the course of export as
contained in Section 2(6) specially clause(iii) will be qualified and thus
place of supply may fall in India.
Therefore , such supply shall not fulfill the definition of “export of
services” . Consequently benefits such as refund u/s 54 will not be available.
As per section 7(5) when in case of supply of goods or services where supplier is
located in India and the place of supply is outside India or in case of supply
to or by SEZ developer or unit , are treated as interstate supply.
Exports are
liable for IGST and are available for clearance without payment of IGST under
LUT or Bond and exporter is entitled to refund of unutilised ITC in respect of
the goods or services. From 1.4.2021 the provision for availability of
clearance on payment of IGST has been restricted only to notified goods or
notified taxable persons.
In respect
of export of goods, there is no difficulty in determining whether it is export
or not .The definition is clear and unambiguous. When the goods are taken out of
India to a place outside India for consideration in the course of or
furtherance of business, it will be treated as export. Hence, provisions of
Section 49(5), Section 54 of CGST Act for refund and Section 16 of IGST Act for zero rated
supply will apply.
In respect
of supply of services, though supply of goods or services are inter state sale
as per section 7(5)(a), to treat supply of service as export, five conditions
under section 2(6) will have to be satisfied before it can be treated as export
to attract provisions of Section 49(5), Section 54 of CGST Act for refund and Section 16 of IGST Act for zero rated
supply will apply.
Export
being inter state supply is liable to pay IGST.
However, the input tax credit available can be adjusted against the
liability of IGST on export, and it can be done also even if the export supply
is exempt supply.[Section 16(2)].
So far as the Export Invoice is
required to contain all particulars , endorsements and requirements as specified for tax invoice as
per section 31 read with Second Proviso to the Rule 46.
In respect of goods taken out of India for exhibition
purpose such as in trade fair, Board has issued a Circular No. 108/27/2019
dated 18.07.2019 clarifying the
procedure .t has been clarified Such
activity except when it is covered under Schedule I of the CGST Act does not constitute
supply as no consideration is involved at that point in time and consequently
same cannot be considered as Zero rated supply under section 16 of the IGST
Act.
DEEMED EXPORTS
Section 147 provides for deemed exports. The
Government may, on the recommendations of the Council, notify certain supplies
of goods as deemed exports, where goods supplied do not leave India, and
payment for such supplies is received either in Indian rupees or in convertible
foreign exchange, if such goods are manufactured in India.
This akin to
pen ultimate sale under section 5(3) of CST Act.
Notification no. 48/2017-Central Tax dated
18.10.2017 wherein the following categories of supply of goods have been
declared as Deemed Exports: -
Description
of Supply
01. Supply
of goods by a registered person against Advance Authorisation
02. Supply
of capital goods by a registered person against Export Promotion Capital Goods
Authorisation
03. Supply
of goods by a registered person to Export Oriented Unit
04. Supply of gold by a bank or Public Sector Undertaking
specified in the notification No. 50/2017-Customs, dated the 30th June, 2017
(as amended) against Advance Authorisation
For the purposes of the above notification, –
1. “Advance Authorisation” means an authorisation issued by the
Director General of Foreign Trade under Chapter 4 of the Foreign Trade Policy
2015-20 for import or domestic procurement of inputs on pre-import basis for
physical exports.
2. Export Promotion Capital
Goods Authorisation means an authorisation issued by the Director General of
Foreign Trade under Chapter 5 of the Foreign Trade Policy 2015-20 for import of
capital goods for physical exports.
3. “Export Oriented Unit” means an Export Oriented Unit or
Electronic Hardware Technology Park Unit or Software Technology Park Unit or
Bio-Technology Park Unit approved in accordance with the provisions of Chapter
6 of the Foreign Trade Policy 2015-20.
Deemed export concept
is applicable only when the goods in question are manufactured in India. Therefore, although
where the goods are of the nature that
are notified by the Government as goods which
qualify as “deemed exports” , if
such goods are not manufactured in India
they shall not enjoy the benefit
of being treated deemed export..
The export
of goods or services is treated as zero rated supply. Supply of goods or
services to Developer of SEZ or Unit in SEZ are also treated as zero rated
supply. “Zero rated supply” is a term and that does not mean that it is NIL
rated IGST is not payable. It only means
that benefits of Section 16 of IGST Act will be available to transaction which
fall under zero rated supply. The benefits are:
1.
He is entitled to clear the goods for export without payment of
IGST under Bond or LOU under Rule 96A..
2.
He can claim refund of unutilisied tax credit.
3.
He can pay IGST and claim refund of such tax paid.(This is
discontinued wef 1.4.2021 except for notified goods or notified persons)
For Example.
“A” is
manufacturer of TV Sets:
“A” Exports television
less than 32” worth Rs 30,00,000.00.
IGST
liability @ 18% 5,40,000.00
In first
option he can execute Bond or LUT and export without payment of IGST and subsequently
claim refund of ITC related to input of this products. It is difficult to give
working of the ITC related to input for export when there are intra state and
interstate sales also. Hence, this mode is cumbersome.
Second,
option is make payment of IGST of Rs
5,40,000.00 after deducting available ITC and then claim refund of Rs
5,40,000.00 which will cover payment of IGST and ITC.
Section
49(5), Section 54 of CGST Act for refund
and Section 16 of IGST Act for zero rated supply read with . Rule 89(4)
( for LOU or Bond) of the CGST Rules, 2017 as amended vide Notification No.
47/2017- Central Tax dated 18.10.2017 allows supplier of such supplies to claim refund of
tax paid thereon.
Refund of
tax paid on export is provided in Section 49(6) and S 54(3)(i) of CGST Act read
with section 16 of IGST Act. The Relevant rules are Rule 89,96,96A and 96B.
Amendment is
section 16 of IGST by Finance Act 2021 has made in definition of zero rated
supply where by the supply of goods or services to SEZ developer or SEZ unit shall be treated as zero rated supply
only when the same is for authorised operations . Earlier words for authorised
operations was not condition precedent.
Now after
amendment for exporters only one option available to the exporter that is he
has clear the goods only under Bond Or LUT. The second option of paying the
IGST and claim the refund has been restricted for the assesses who have been
notified as class of goods or services or class of taxable persons who can
export on payment of IGST and claim refund of the taxes so paid.
Consequently
reading definition of Section 2(59) and 2(62), in LUT or Bond mode the ITC will
not be available on the capital goods. Now determination of refund of
unutilised ITC related to the export goods or services is going to be tug of
war between taxable person and department. One more change is made by providing
for realisation of export value of goods exported . If the amount of value of goods exported is not realised as provided as per FEMA , then
exporter has to refund within 30 day of expiry of time provided for realisation as per FEMA, the amount so
refunded with interest and when realisation occurs then he can claim refund
again but interest paid shall not be refunded.
SPECIAL PROVISIONS FOR EXPORT UNDER BOND OR LETTER OF UNDERTAKING:
The Rule 96A. provides for special provisions
for export under bond or LOU.
Ø Any
registered person availing the option to supply goods or services for export
without payment of integrated tax shall furnish, prior to export, a bond or a
Letter of Undertaking in FORM GST RFD-11
Ø To the
jurisdictional Commissioner,
(i)
binding himself to pay the tax due along with the interest within a period of —
(a)
fifteen days after the expiry of three months
or such further period as may be allowed by the Commissioner,] from the
date of issue of the invoice for export, if the goods are not exported out of
India; or
(b) fifteen days after the expiry of one year,
or such further period as may be allowed by the Commissioner, from the date of
issue of the invoice for export, if the payment of such services is not
received by the exporter in convertible foreign exchange [or in Indian rupees,
wherever permitted by the Reserve Bank of India
Ø . The
details of the export invoices contained in FORM GSTR-1 furnished on the common
portal shall be electronically transmitted to the system designated by Customs
and a confirmation that the goods covered by the said invoices have been
exported out of India shall be electronically transmitted to the common portal
from the said system.
v However,
where the date for furnishing the details of outward supplies in FORM GSTR-1
for a tax period has been extended , the supplier shall furnish the information
relating to exports as specified in Table 6A of FORM GSTR-1 after the return in
FORM GSTR-3B has been furnished and the same shall be transmitted
electronically by the common portal to the system designated by the Customs:
v However, the
information in Table 6A furnished shall
be auto-drafted in FORM GSTR-1 for the said tax period
Ø Where the
goods are not exported within the time specified in sub-rule (1) and the
registered person fails to pay the amount mentioned in the said sub-rule, the
export as allowed under bond or Letter of Undertaking shall be withdrawn
forthwith and the said amount shall be recovered from the registered person in
accordance with the provisions of section 79. (4)
Ø The export
as allowed under bond or Letter of Undertaking withdrawn shall be restored immediately when the
registered person pays the amount due.
Ø The Board,
by way of notification, may specify the conditions and safeguards under which a
Letter of Undertaking may be furnished in place of a bond.
Ø Circular No.
26/2017- Customs dated 1st July, 2017 has clarified that the procedure as
prescribed under rule 96A of the said rules requires to be followed for the
export of goods from 1st July, 2017.
Ø By Circular No.
2/2/2017-GST 4 th July, 2017 it is stated that the acceptance of the
Bond/Letter of Undertaking required to be furnished by the exporter under rule
96A of the said rules shall be done by the jurisdictional Deputy/Assistant
Commissioner.
Ø These provisions shall apply, mutatis mutandis, in respect of
zero-rated supply of goods or services or both to a Special Economic Zone
developer or a Special Economic Zone unit without payment of integrated tax.
DETAILED
ANALYSIS OF RULES FOR REFUND OF GST ON EXPORT.
The taxable person is entitled to
refund of unutilised input tax credit in respect of zero rated supplies without
payment of tax under S. 54(3) of CGST
Act and S. 16(3)(a) of IGST Act, and in respect of refund of IGST paid on
export, he is entitled to refund under S.16(3)(b) read with S 54 of CGST Act..
Section 54 of CGST and Section 16 of IGST r/w Rules 89 to 96B, provide for refund of GST
on goods or services exported out of
India. First proviso to section 54(3) at threshold provides no
refund of unutilized input tax credit shall be allowed in cases where the goods
exported out of India are subjected to export duty.
REFUND IN CASE OF EXPORT OF GOODS AND
SERVICES:
A.
Refund of GST, other than IGST paid on export
of goods or services , of unutilied tax credit for goods or services, exported
out of India.(Rule 89.)
The refunds,
u/s 54, of unutilised ITC, which are entitled to be refunded to any person, on
export of goods, except the refund of IGST, and except where export is subject
to export duty, are to be granted on an application in Form GST REF 01 , to be made at the end of tax period i.e. end
of the period for which return is required to be furnished , before 2 years (S.54) of relevant date. The relevant
date is defined in S 54. The relevant date is as follows:
For Export
of Goods:
(i)
In case of export by goods by sea or air, the date on which ship
or air craft leaves India;
(ii)
In case of export of goods by land, the date on which the goods
pass frontiers of India;
(iii)
In case of export of goods by Post, the date of dispatch of goods;
(iv)
In case of deemed export, the date on which return for such deemed
export is filed;
For Export
of Services:
(i)
Where services are supplied prior to receipt of consideration .
the date receipt of consideration in convertible foreign exchange or Indian
Rupees if permissible by RBI;
(ii)
In case of advance payment of consideration , the date of issue of
invoice;
Upon making
an application for refund of unutilised ITC , the electronic credit register is
to be debited with the amount of claim. It appears that there is no provision
for reversing the debit in case, refund application is rejected for any reason.
The Rule
89(4) provides for formula for
calculating the amount to be refunded.
If the claim
for refund is less than two lakh Rupees, the claimant may file
declaration, in lieu of documentary evidence to the effect that the claimant
has not incidence of such tax claimed as refund has not been passed on to any
other person.
The refund
is compulsorily granted within sixty days of the date of receipt of
application complete in all respect.
B.
Refund of IGST paid on goods or services
exported out of India.[Rule 96]
REFUND IN
CASE OF EXPORT OF GOODS:
Ø The shipping
bill filed by an exporter of goods shall be deemed to be an application
for refund of integrated tax paid on the goods exported out of India (Rule 96).
[ It is not applicable to the goods exported under LUT or Bond without payment
of IGST. This category will file GST-RFD-1.]Hence, no separate application is
required to be filed when IGST is paid on export.
Ø Such
application shall be deemed to have been filed only when:-
(a) the person
in charge of the conveyance carrying the export goods duly files a departure
manifest or an export manifest or an
export report covering the number and the date of shipping bills or bills of
export; and
(b) the applicant has furnished a valid return in
FORM GSTR-3 or FORM GSTR-3B, as the case may be;
Ø The details
of the relevant export invoices in respect of export of goods contained in FORM
GSTR-1 shall be transmitted electronically by the common portal to the system
designated by the Customs and the said system shall electronically transmit to
the common portal, a confirmation that the goods covered by the said invoices
have been exported out of India.
Ø However,
where the date for furnishing the details of outward supplies in FORM GSTR-1
for a tax period has been extended section 37 of the Act, the supplier shall furnish
the information relating to exports as specified in Table 6A of FORM GSTR-1
after the return in FORM GSTR-3B has been furnished and the same shall be
transmitted electronically by the common portal to the system designated by the
Customs:
Ø However, the information in Table 6A furnished
under the first proviso shall be auto-drafted in FORM GSTR-1 for the said tax
period.
Ø Upon the receipt of the information regarding
the furnishing of a valid return in FORM GSTR-3 or FORM GSTR-3B, as the case
may be from the common portal, the system designated by the Customs or the
proper officer of Customs, as the case may be, shall process the claim of
refund in respect of export of goods and an amount equal to the integrated tax
paid in respect of each shipping bill or bill of export shall be
electronically credited to the bank account of the applicant mentioned in
his registration particulars and as intimated to the Customs authorities.
Ø The claim
for refund shall be withheld where,-
(a) a request has been received
from the jurisdictional Commissioner of central tax, State tax or Union
territory tax to withhold the payment of refund due to the person claiming
refund in accordance with the provisions of sub-section (10) or sub-section
(11) of section 54; or
(b)
the proper officer of Customs determines that the goods were exported in
violation of the provisions of the Customs Act, 1962.
Ø Where refund
is withheld in accordance with the provisions of clause (a) above the proper
officer of integrated tax at the Customs station shall intimate the applicant
and the jurisdictional Commissioner of central tax, State tax or Union
territory tax, as the case may be, and a copy of such intimation shall be
transmitted to the common portal.
Ø Upon transmission of the such intimation , the proper officer of central tax or State
tax or Union territory tax, as the case may be, shall pass an order in Part B
of FORM GST RFD-07.
Ø Where the applicant becomes entitled to refund
of the amount withheld under clause (a) above, the concerned jurisdictional
officer of central tax, State tax or Union territory tax, shall
proceed to refund the amount after passing an order in FORM GST RFD-06.
Ø The Central Government may pay refund of the
integrated tax to the Government of Bhutan on the exports to Bhutan for such
class of goods as may be notified in this behalf and where such refund is paid
to the Government of Bhutan, in that case the exporter shall not be paid any refund of
the integrated tax.
REFUND IN
CASE OF EXPORT OF SERVICES Rule 96(9).
Ø The
application for refund of integrated tax paid on the services exported
out of India shall be filed in FORM GST RFD-01 and shall be dealt with in
accordance with the provisions of rule 89.
Ø The persons claiming refund of integrated tax
paid on exports of goods or services should not have :
(a)
received supplies on which the benefit has been availed, under
following Notifications of the
Government of India, Ministry of Finance :
(I)
Notification No. 48/2017-Central Tax, dated the 18th October, 2017
except so far it relates to receipt of capital goods by such person against
Export Promotion Capital Goods Scheme or
(II)
Notification No. 40/2017-Central Tax (Rate), dated the 23rd
October, 2017, or
(III)
Notification No. 41/2017-Integrated Tax (Rate), dated the 23rd
October, 2017,
;
(b)
availed the benefit under (except so far it relates to receipt of
capital goods by such person against Export Promotion Capital Goods Scheme.)::
(I)
Notification No. 78/2017-Customs, dated the 13th October, 2017, or
(II)
Notification No.
79/2017-Customs, dated the 13th October, 2017 for:
Ø In the
Explanation it is provided for the purpose of this sub-rule, the benefit of the
notifications mentioned therein shall not be considered to have been availed
only where the registered person has paid Integrated Goods and Services Tax and
Compensation Cess on inputs and has availed exemption of only Basic Customs
Duty (BCD) under the said notifications.
PROVISONAL
REFUND:
As per Section
54(6) read with rule 91, if the claimant is not prosecuted for offence under
the Act or under existing law for evasion of tax exceeding Rs 2,50,000/- in
last five years of the year for which refund relates, he is entitled to
provisional refund of 90 % of the claim made.
RECOVERY OF
REFUNDS GRANTED:
The Rule 96B
provides recovery of refund of unutilised input tax credit or integrated tax
paid on export of goods where export proceeds not realised.
Ø Where any
refund of unutilised input tax credit on account of export of goods or of
integrated tax paid on export of goods has been paid to an applicant but the
sale proceeds in respect of such export goods have not been realised, in full
or in part, in India within the period allowed under the Foreign Exchange
Management Act, 1999 (42 of 1999), including any extension of such period, the
person to whom the refund has been made shall deposit the amount so refunded,
to the extent of non-realisation of sale proceeds, along with applicable
interest within thirty days of the expiry of the said period or, as the case
may be, the extended period,
Ø If taxable
person fails to deposit the amount refunded shall be recovered along
with interest under section 50 in accordance with the provisions of section 73
or 74 of the Act.
Ø If the Reserve Bank of India writes off the
requirement of realisation of sale proceeds on merits, the refund paid to the
applicant shall not be recovered.
Ø Where the sale proceeds are subsequently realised
by the applicant, in full or part, after the amount of refund has been
recovered and the applicant shall produce evidence about such realisation within a
period of three months from the date of realisation of sale proceeds, the
amount so recovered shall be refunded by the proper officer, to the applicant
to the extent of realisation of sale
proceeds, provided the sale proceeds have been realised within such extended
period as permitted by the Reserve Bank of India
REFUND CLAIM
IS NOT MANDATORY:
One must
keep in mind that refund is alternate to adjust ITC against GST dues. If no
refund application is made or no refund granted, say within a period of two
years as provided in section 54, the amount of ITC will not extinguish and the
same remains available for adjustment against GST dues.
The author
has made efforts to bring all statutory provisions in respect of export and
import under one umbrella.
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