GST on Export of Goods & Services

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GST registration will be levied on all goods and services with 0% exemption as per the constitutional amendment. The total absence of exemptions at any stage in the supply chain makes the GST regime unique in the world. To ensure that there is no reduction of tax at any stage, which may result in cascading of taxes, the concept of “zero-rated supplied” has been introduced under GST on Export of Goods & Services.

To break the value chain and ensure that there is no cascading of taxes, bringing down the effective tax rate on most goods and services to zero. In addition, zero-rated supply is exempt from VAT/CST- if purchased for use in business, the supplier has a right to deduce that input from the tax charged on his output. Thus, there is no cascading or string effect.

What is GST on Export of Goods & Services?

Regulation 2(3) of the IGST Act 2015 prescribes two tax rates, one rate for movement of goods by the Central Government and another rate for movement of goods outside the Central Government’s control.

Exporters will be required to upload advance information on outward shipments on a public web portal notified under the IGST Act.

As per Section 2(6) of the IGST Act, “Export of services” means the supply of any service when A service received outside India is taxable per IGST law. Therefore, the input tax credit can be availed if the service supplier has been registered under the IGST laws. If not, then tax is payable and shall be paid in Indian Rupees wherever permitted by RBI.

Features of export under GST registration

  1. If the importing company is registered under GST and eligible for IGST credit, then the goods can be imported under LUT, and IGST can be claimed as a refund.
  2. Using the legal regime of LUT, the export is not, in fact, subject to duty as the authority can be taken that the amount for which refund is claimed has been already paid as taxes.
  3. Once the shipping bill has been filed with the customs, it will be deemed to have been filed after submitting the general export manifest and furnishing a valid return in Form GSTR 3 by the applicant. Also, it may be treated as a provisional import declaration till it is replaced by an import transaction details message (ITDMs).

How are exports treated under GST registration?

Export of service is zero-rated, and GST Registration is not applicable. It means in the export of services under the IGST Act, and the exporter will be allowed to claim a refund on his GST paid on inputs used for rendering services. GST is a tax levied on consumption, and there is no place for credit and refund of input taxes paid in the ordinary course of business.

To avail of this zero-rating benefit, an exporter must pay IGST to purchase goods or services even if he exports such goods or services outside India.

What is Deemed export?

‘Deemed Exports’ enables the exporter to retain his foreign exchange earnings that would otherwise be released back to the Reserve Bank of India in the form of export proceeds. This is done by utilizing the pre-approved Offshore Banking Unit (OBU) mechanism.

The main objectives of the scheme are to promote exports by providing an incentive and supplement the efforts of the exporters by enhancing their creditworthiness. The scheme essentially encompasses credit-linked working capital finance extended by banks in India or overseas branches of Indian scheduled commercial banks.

Concept of Composite and Mixed Supply under GST

If you want any other guidance related to GST Registration or GST Return filing, please feel free to talk to our business advisors at 8881-069-069.

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