What would be the Impact of GST on exports?


GST has entered into the country system a year ago with an aim of introducing only one tax among the whole nation. Because of this new penetration to the society, every industry faced numerous problems regarding the new regime. Because of the sudden invasion of the new tax regime, taxes for commodities have increased for a certain period of time.

But this GST simplified the various procedural requirements in the taxation, because of single tax nature all over the country. For export businesses, it turned out into user-friendly one. In the following article, we are going to see the effects of GST on export business.

Exports under GST law

Export is simply the supplying of goods and services outside the boundary of the country. As there are several variations in the goods traded between different countries, certain rules and regulations are there to monitor.

Under IGST action section2 (6), exports are defined as,

The service supplier should be located in India,

The service recipient should be located outside India,

Place of service supply should be outside India,

Payment for the accomplished services should be received by the supplier in convertible foreign exchange currency,

Both the supplier and recipient of services should be the establishment of distinct personalities.

In some cases like the supply of services is located in Nepal or Bhutan, where the payment is not in Indian rupees is exempted, if the payment is processed in Indian currency. For the calculation of multiple tax norms for exports, GST billing software assists a lot to get more insights into the process.

Zero-rated exports

This is one of the biggest advantages of GST on export, as it deals exports as the zero-rated supply. If the exports are not treated as zero-rated, the supply chain will break at all the times of sales to the exporter. This lead to issues in availing input tax credit. Therefore by treating exports under zero percent rates, exporters can get credit for the input tax while purchasing raw materials and various other products.

Simplifying the records and compliance

There are two categories of GST returns namely Sahai and Sugam. Based on these categories, the filings process are so simplified and GST council also launched a new way to quarterly file the GST returns in a very simplified format for all the taxpayers. This kind of approach reduces the cost of compliances and also eases the cumbersome record filing processes.

Availability of refunds

Goods and Service Tax Network has launched the utility Table 6A under the form GSTR-1 which is used to claim the refunds from exporters. The table 6A form asses the exports related data under the GSTR 3B and table 6A of GSTR-1. The exporter who exports any of the goods or services is able to claim a refund of Integrated GST, which is paid at the time of export by filling out relevant details in the GST invoice and shipping bill in the form GSTR1 for the selected period of months.

Input tax credit availability

Under the GST, a person who is selling the products has the benefit of availing a separate credit for the tax which is paid for buying the raw materials and inputs. This is a big advantage which can drastically minimize the cost of production, as the tax is paid only for the added value at each stage instead of paying for the whole cost of the product which is being taxed again.

Cash and other delays due to non-approval of invoices

To get the benefits of the input tax credit, the seller has to upload the invoices and that should be viewed by the buyer, further, they may accept or reject that. The facilities are processing in a continuous manner but several delays are rising out due to disregard of buyers and other difficulties prevailing on the website.

Exporters have to pay IGST before the goods are ready to export and then the only refund can be claimed at further stages. If there any absence of input tax credit, it is mandatory to submit the bonds and letter of undertaking for exporters.

Deemed exports

Indian suppliers have huge competition with foreign suppliers of goods and services manufacturing. Bids evaluations are done in absence of considering the customs duty. Deemed exports are the supply of any goods and services in which those projects are financed with the foreign exchange. Alike, supplies which are exported to Export Oriented Units (EOU) and other services which do not leave the country are considered as deemed exports.

Suppliers can avail their payment only by means of Indian currency and not through a foreign exchange. The transactions for the supply of goods which are not leaving the country and payment for that kind of supplies received in Indian rupees are normally treated as deemed exports. All these are applicable only when the manufacturers of goods are done in India.

Under Foreign Trade Policy 2015-2020, Supplies to EOU / STP / EHTP / BTP, against Advance Authorization/ DFIA, goods to mega power projects against International Competitive Bidding, United Nation Agencies, goods to nuclear projects through competitive bidding, marine freight containers, supplying against EPCG authorization, project against international competitive bidding, projects with zero customs duty are treated as deemed exports.


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