Definition of Export as per the GST Act
The IGST Act defines export as the taking out of goods or services from India to a place outside India. As per the Act, goods and services that are exported are considered “zero-rated supplies”. Taxable persons who export such goods and services are also eligible for claiming refunds on the GST paid. Thus, the GST rate is 0% for exports.
Procedure for availing GST Refund
GST has two components, central GST and state GST. Further, Integrated GST is applicable on inter-state supplies of goods and services, as well as on imports and exports of India. However, the exporter can claim a refund on the IGST charged, and this can be done using one of the two available options:
Exporting goods and services without payment on the IGST
Under this an exporter is allowed to claim a refund on the unutilized input credit. If the refund is claimed on duty paid, the refund is quite quick and gets granted usually within a fortnight. The exporter needs to file the GSTR-1 and 3B and also file the export general manifest. No separate application is required as the Shipping Bill itself is considered as an application. The exporter files the shipping bill for goods exported outside of India. The deemed application will only be considered filed when the exporter, the Custom House Agent or whoever is in charge of the shipment has filed the export report or manifest that states the date and number of the shipping bills.
Exporting goods and services on payment of the IGST
The exporter is eligible for claiming a refund on the tax paid on such export. In case of refund claim without payment of IGST and for input credit, the exporter files a separate application online in the form of RFD-01A. A hard copy of the application along with supporting documents needs to be submitted manually to GST officials. In this case, the refund is made based on the verification of filed documents.
The exporter then has to apply for the refund through the common portal, either directly or through the facilitation centre notified by the GST Commissioner. A refund once applied has to be paid within 60 days from the date of receipt of complete refund application. Beyond that time frame, an interest of 6% has to be paid to the applicant.
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Documents required for availing GST Refund
To avail the tax benefits available to the exporter under the GST regime, the exporter will have to ensure that certain formalities are fulfilled from his/her end.
While exporting goods
The exporter has to ensure certain things which include:-
The exporter must have an Import Export Code (IEC)
If the export is carried out without paying IGST, then a LUT or bond has to be furnished
Purchase orders relevant to the export transaction
The exporter will have to issue tax invoices with details such as:-
- Indication of whether the export is made with or without payment of the integrated tax
- The exporter’s address, name and GSTIN
- Number and date of the invoice
- Recipient’s name and address, along with the destination country and delivery address
- Harmonized System of Nomenclature (HSN) code of goods, along with their description
- Size and amount of the shipped goods indicating the number of units
- The sum of the value of all the goods along with a breakdown of cost per unit
- Signature of the exporter or an authorised signatory
- A shipping bill with details matching the tax invoice
- The shipping bill filed will be treated as a refund claim provided-
- The exporter carrying out the export files an export manifest
- He or she files form GSTR-3 or GSTR-3B in the appropriate manner
While exporting services
If the delivery of service qualifies as export under Section 2(6) of the 2017 IGST Act, then the following factors must be considered by the service exporter.
If the service export is made without the payment of IGST, a Letter of Undertaking or bond must be furnished
The exporter has to ensure the availability of a relevant service agreement, ready to be attached
The exporter has to issue a tax invoice providing the following details-
- Endorsement describing whether the supply is meant for export with or without payment of integrated tax
- Name, address, and the GSTIN of the exporter
- Invoice number and date
- Name and address of the recipient
- HSN Code of services along with their description
- The total service value along with the stage-wise breakdown or milestones, if any,
- Signature of the exporter or the authorised signatory of the exporter
- As a proof of receipt of convertible foreign exchange, the exporter will have to maintain documents such as Bank Realisation Certificate or Foreign Inward Remittance Certificate within the given period, which could typically be a year from the date of export. If the exporter fails to do so, GST will become applicable.
As clear from the above, exporters can claim a refund on IGST for the (i) duties paid on exports and (ii) unutilised input tax credit.
By following this documentation and procedure, a goods or services exporter can comply with the requirements of GST law and also stay on course to receive the refund on IGST.
Also Read: ECGC - Getting your Export Credit Insurance