Exports and Imports
GST FAQ 3rd Edition – December, 2018 – GST Frequently Asked Questions (FAQs)
GST
21. Exports and Imports
21.1 Exports
Q 1. How are exports be treated under GST?
Ans. All exports are deemed as inter-State supplies. Exports of goods and services are treated as zero rated supplies. The exporter has the option either to export under bond/Letter of Undertaking without payment of tax and claim refund of ITC or pay IGST by utilizing ITC or in cash at the time of export and claim refund of IGST paid.
Q 2. What is Zero Rating?
Ans. By zero rating it is meant that the entire value chain of the supply is exempt from tax. This means that in case of zero rating, not only is the output exempt from payment of tax, there is no bar on taking/availing credit of taxes paid on the input side for making/providing the output supply. The concept of zero rating of supplies requires the supplies as well as the inputs or input services used in supplying the supplies
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tax on the outward exempted supplies, however, the input supplies used for making exempt supplies to be taxed
No tax on the outward supplies; Input supplies also to be tax free
Credit of input tax needs to be reversed, if taken; No ITC on the exempted supplies
Credit of input tax may be availed for making zero-rated supplies, even if such supply is an exempt supply ITC allowed on zero-rated supplies
Value of exempt supplies, for apportionment of ITC, shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.
Value of zero rated supplies shall be added along with the taxable supplies for apportionment of ITC
Any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under the CGST or IGST Act shall not be liable to registration
A person excl
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GSTIN (wherever registered with GST) at the time of import/export of goods. The PAN level aggregation of data would automatically happen in the system. The IEC holders shall quote their PAN number (instead of IEC) in all their future correspondence as well as documentation with DGFT.
Q 6. What IEC number is to be used for special category of importers like government, individual importing for personal use etc in terms of para 2.07(b) of Handbook of Procedure by DGFT?
Ans. DGFT has modified the para 2.07(b) and has allotted revised permanent IEC number for such category of importers vide DGFT Public Notice No. 09/2015-20 dated 29th June, 2017. The same can be used for import /export by the categories of importers/exporters mentioned therein.
For instance, persons /Institutions /Hospitals importing or exporting goods for personal use, not connected with trade or manufacture or agriculture, earlier using IEC no. 0100000053 now have to use IIHIE0153E as IEC.
Q 7. What is export o
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rritory of India shall comprise
(a) The territories of the states
(b) The Union Territories specified in the First Schedule
(c) Such other territories as may be acquired
Article 1 of the Constitution makes it clear that the territories of the States and that of the Union Territories are fixed in terms of First Schedule to the Constitution. India is a Union of States however the territory of India is not limited to the territories of the respective States but also includes other territories as may be acquired.
The Maritime Zone Act vide section 3(1) thereof provides that the sovereignty of India extends to territorial waters, sea bed and subsoil underlying such waters and the air space over such waters. The limit of territorial waters is fixed at 12 nautical miles from the baseline as per Section 3(2) of the Maritime Zone Act.
The continental shelf of India comprises the seabed and subsoil of the submarine areas that extend beyond the limit of its territorial waters throughout
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tate of Karnataka and Ors. on 23 January, 2004 = 2004 (1) TMI 649 – KARNATAKA HIGH COURT before Karnataka High Court, the Court held that State of Karnataka had taxation powers over territorial waters. The matter was appealed against before the Supreme Court and the Supreme Court in Civil Appeal No. 3383/2004 has stayed the order of the High Court. The Hon'ble Supreme Court on 13.1.2016 = 2016 (1) TMI 1395 – SUPREME COURT OF INDIA while hearing this case had observed as follows:
“any pronouncement of the court would have far reaching implications not only for central state relationship but the federal character and separation of legislative powers of the union and the States”.
The GST Council in its ninth meeting held on 16th January, 2017 took the decision that the territorial water within the twelve nautical miles shall be treated as the territory of the Union of India unless the Hon'ble Supreme Court decides otherwise in the on-going litigation on the issue but the power
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nt of tax on furnishing of a declaration form?
Ans. No, there is no such provision in GST. Tax has to be payable on their inward supplies and they can claim refund of the accumulated ITC.
However, there is a 0.1% scheme in which a supplier can supply goods to an exporter by paying only 0.1% GST and claim refund of unutilised ITC. The exporter in such a scenario cannot export on payment of integrated tax and take refund. He has to adopt the LUT/Bond route only.
Q 11. What is the 0.1% scheme for procurement of exports by merchant exporters?
Ans. It is a scheme for merchant exporters who have an option to pay nominal GST of 0.1% for procuring goods from domestic suppliers for export vide Notification 40/2017-Central Tax (Rate) and 41/2017-Integrated Tax (Rate) both dated 23.10.2017.
Exemption from payment of GST on so much of the tax leviable on such goods as is in excess of the amount calculated @0.1%, is granted, subject to fulfilment of following conditions:
* Supply on a tax in
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ms Station from where the said goods are to be exported;
* if the registered recipient intends to aggregate supplies from multiple registered suppliers and then export, the goods from each registered supplier shall move to a registered warehouse and after aggregation, the registered recipient shall move goods to the Port, Inland Container Deport, Airport or Land Customs Station from where they shall be exported;
* in case of situation referred to in above condition, the registered recipient shall endorse receipt of goods on the tax invoice and also obtain acknowledgement of receipt of goods in the registered warehouse from the warehouse operator and the endorsed tax invoice and the acknowledgment of the warehouse operator shall be provided to the registered supplier as well as to the jurisdictional tax officer of such supplier; and
* when goods have been exported, the registered recipient shall provide copy of shipping bill or bill of export containing details of Goods and Servic
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he goods exported out of India are subjected to export duty; or
* ii) the exporter claims drawback of CGST or refund of IGST paid on such export.
Q 14. Will the principle of unjust enrichment apply to exports?
Ans. The principle of unjust enrichment is not applicable in case of exports of goods or services as the recipient is located outside the taxable territory.
However, in respect of supplies to SEZs, section 54(8) has been amended vide CGST (Amendment) Act, 2018 so as to make the principle of unjust enrichment applicable. Thus, from the date of coming of the CGST(Amendment) Act, 2018 into force, the principle of unjust enrichment will be applicable in in case of refunds against supplies to SEZs, even though such supplies are zero rated.
Q 15. What is deemed export under GST Law? Whether any supply has been categorized as deemed export by the Government?
Ans. Deemed export has been defined under Section 2(39) of CGST Act, 2017 as supplies of goods as may be notified und
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A supplier of deemed export supplies has to submit following documents for claiming refund:
(i) Acknowledgment by the jurisdictional Tax officer of the Advance Authorisation holder or Export Promotion Capital Goods Authorisation holder, as the case may be, that the said deemed export supplies have been received by the said Advance Authorisation or Export Promotion Capital Goods Authorisation holder, or a copy of the tax invoice under which such supplies have been made by the supplier, duly signed by the recipient Export Oriented Unit that said deemed export supplies have been received by it.
(ii) An undertaking by the recipient of deemed export supplies that no input tax credit on such supplies has been availed of by him.
(iii) An undertaking by the recipient of deemed export supplies that he shall not claim the refund in respect of such supplies and the supplier may claim the refund.
(Notification No. 49/2017-Central Tax dated 18th October, 2017)
Q 17. When an exporter cannot use
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Customs), except for capital goods)
In the above cases, he needs to avail refund of unutilised ITC as per Rule 89(4A) / (4B) (Notification No. 54/2018 – Central Tax dated 09.10.2018)
Q 18. What would be the GST rate if the product procured by merchant exporter at 0.1 per cent is further exported on payment of IGST?
Ans. The option of payment of IGST and taking refund is not available in case the exporter has procured the goods under 0.1% scheme. He should avail the LUT facility while exporting such goods so that there is no tax liability at the time of export.
Q 19. Can we export under normal procedure without availing the benefit of 0.1 per cent while procuring goods for exports?
Ans. Yes, the facility of procuring goods at 0.1 per cent is an optional facility which is available subject to adhering to the conditions mentioned in Notification no. 41/2017-Integrated Tax (Rate) dated 23rd October, 2017. In case, an exporter wants to procure the goods for exports on payment of applic
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ose the Bond/LUT route and not payment of integrated tax route. Once the goods are exported, refund of unutilized credit can be availed under Section 16(3)(a) of IGST Act, 2017 and Section 54 of the CGST Act, 2017 and the rules made there.
Q 22. What is the rate of duty on sale of MEIS/SEIS scrips?
Ans. The MEIS/SEIS scrips are classifiable under HSN code 4907 and the sale of such scrips is exempted vide S. No. 122A of Notification No. 2/2017-Central Tax (Rate) dated 28.06.2017, as amended vide Notification No. 35/2017-Central Tax (Rate) dated 13.10.2017.
Q 23. Whether sale of DFIA scrips liable to GST?
Ans. As per Notification No. 35/2017-Central Tax (Rate) dated 13.10.2017, “Duty Credit scrips” are exempted from GST. DFIA scrips are not “Duty Credit scrips” and therefore are leviable to GST @ 12%.
Q 24. Can a person opting for composition scheme make supply of goods to SEZ?
Ans. No, because all supplies to SEZ are treated as interState supplies. A person paying tax under compo
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red in India, the commission paid to him will not be taxable.
Q 26. Whether commission received by a buying agent for helping procuring goods from an exporter is exempted from GST?
Ans. Situation I- Buying agent is located in India: The buying commission received by buying agent in India from the importer overseas in foreign exchange will be taxable as the agent is covered in definition of intermediary and therefore place of supply is in India.
Situation II- Buying agent is located outside India: The buying commission received will not be taxable as place of supply will be outside India.
Q 27. Does GST be payable on goods not intended to be sold, taken out for participation in overseas exhibitions and trade fairs and brought back into India after exhibition?
Ans. GST is not payable in such cases. Exporters will need exhibition participation letter and no foreign exchange involved letter from the concerned bank for the purpose of exchange control requirements.
At the time of re-im
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plier's account so that GST could be paid by the supplier on the basis of the amount transferred in his e-Wallet by the exporter. The working capital requirement in the ecosystem would get reduced by the amount of the notional credit given in the e-Wallets. This credit would be used to pay IGST, GST etc. The details of the scheme are being worked out and will be announced later.
Q 29. Whether section 16 of the IGST applicable to exports in respect of compensation cess?
Ans. Section 11(2) of the GST (Compensation to States) Act, 2017 provides that provisions of IGST Act, and the rules made thereunder, shall, mutatis mutandis, apply in relation to the levy and collection of the cess leviable under section 8 on the inter-State supply of goods and services as they apply in relation to the levy and collection of integrated tax on such inter-State supplies under the said Act.
Thus, provisions of section 16 of the IGST Act, 2017, relating to zero rated supply will apply mutatis mutandis fo
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