12 Oct 2018Posted By: Mudit Handa


What is the Concept of Deemed Exports in GST?

It is beyond any doubt that the apex body to assess and mitigate various issues with respect of Goods & Service Tax, i.e. the GST council has always formulated and duly brought into effect all the required indirect tax reforms in their regular meetings. In this regard, the GST provisions have been regularly amended or changed so as to make them more viable and feasible in all the spheres of the economy.

 

One such amendment was made to the Central Goods and Services Tax Act 2017 in the form of Section 147 of the CGST/SGST Act, 2017. This section explains in detail the concept of ‘Deemed Exports’ under GST.

 

#1. What is the concept of ‘Deemed Exports’ under GST?

As per the GST laws, the term ‘Deemed Exports’ refers to supplies of those goods; not services; that are manufactured in India but do not leave India. The payment for such goods is accepted either in Indian currency or in the form of a foreign exchange. Such supplies are notified as deemed exports.

#2. How are deemed exports treated under GST?

Under the GST law, if any exporter having a GST registration and an Import Export Code is conducting exports of the Deemed exports, he must consider the following aspects-

  1. As compared to the regular exports, the Deemed exports are not done on a zero-rated basis.
  2. Hence, those goods that are notified for supply as a ‘deemed export’ shall be subject to the levy of IGST i.e. such exports will definitely attract the IGST liability towards the exporter.
  3. The supplies of ‘deemed export’ can’t be made with an LUT bond.
  4. However, the input credit of IGST paid on the supplies notified as ‘Deemed export’ can be claimed by either the consignor or the consignee of the said goods.
  5. The application for IGST refund has to be filed by the consignor or the consignee, whosoever has  GST registration.
  6. However, the application for IGST refund is subject to certain conditions in respect of deemed export supplies.

 

#3. Which type of supplies are notified as deemed exports?

As per the Finance Ministry’s Notification No. 48/2017 under the head ‘Central Tax’, the following type of supplies have been covered under deemed exports-

 

S.no.

Description of supply

(I)

(II)

1

Supply of goods by an individual who has GST registration, against the Advance Authorization

2

Supply of capital goods by  an individual who has GST registration, against Export Promotion Capital Goods (EPCG) Authorisation

3

Supply of any goods by a registered taxpayer to Export Oriented Unit (EOU)

4

Gold Supply made by a bank or a PSU as per the notification No. 50/2017 under the head ‘Customs’, against Advance Authorization


#4. What does Advance Authorization mean?

In the context of import-export trade, Advance Authorisation refers to an authorisation issued by the Director General of Foreign Trade (DGFT) under the Foreign Trade Policy (FTP) 2015-20 for import or domestic procurement of inputs on a pre-import basis for the purpose of export.   

 

The above-mentioned provisions shall be applicable on all the traders who have GST registration and want to deal in export of goods specified as deemed exports with a unique Import Export Code.

 

In case you need any guidance on GST registration or IEC Registration, feel free to contact us at 8881-069-069.

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