Export of goods and refund under GST

Because consideration is received in foreign currency, our Government has always focused on making industry friendly policies when it comes to exports.

Zero-rated supply - Supplies which specified in section 16 of IGST Act are called Zero rated supply. It is one where exemption is issued under section 6 of IGST Act.

As per Section 2(5) of the IGST Act Export means taking goods out of India to a place outside India. It is treated as inter-state supply in accordance with section 7(5)(a) of IGST act.

As per Section 16 of the IGST Act, following are treated as zero-rated supplies:

1.     Export of goods or services or both

2.     Supply of goods or services to Special Economic Zone developer or a Special Economic Zone unit.

Nil Rated or subject to 0% tax is not Zero Rated supply.

Section 16(3) provides options to neutralize the incidence of GST on exports:-

·        Rebate Option

·        Refund Option.

Procedure for making zero-rated supply

Refund Option

Exporter who intends to export without payment of IGST is required to furnish LUT, which is applied through common portal in form RFD-11, which will be valid for entire financial year.

Exporter is required to issue Tax Invoice for export of goods, containing particulars "Supply meant for export under bond or Letter of Undertaking without payment of integrated tax"

In addition exporter is required to file shipping bill in form SB-1 (It is issued in four copies).

Exporter is required to export the goods within 3 months from the date of tax invoice. In case the goods are not exported within such time, Rule 96A (1) of the Central Goods and Service Tax Rules, 2017 (‘CGST Rules’) provides that tax along with the interest at 18 per cent is required to be paid within 15 days from the end of this 3 months period or such further period as may be allowed by the Commissioner.

As per Section 54(3)(i) of the CGST Act a registered person may claim refund of ITC for zero-rated supply made without payment of tax, however there are some restriction, which are as follows.

1.     Goods which are subjected to export duty shall not get refund of unutilised ITC.

2.     No refund of unutilised ITC if supplier avail drawback, or claim integrated tax paid on such supplies.

Refund of utilized ITC has to be computed as per the method prescribed under Rules 89(4) of the CGST Rules. The same is reproduced below:

Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net ITC ÷ Adjusted Total Turnover.

A.    "Refund amount" means the maximum admissible refund.

B.    "Net ITC" means input tax credit availed on inputs and input services during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both.

C.     Turnover of zero-rated supply of goods" means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking or the value which is 1.5 times the value of like goods domestically supplied by the same or, similarly placed, supplier, as declared by the supplier, whichever is less, other than the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or (4B) or both.

D.    Turnover of zero-rated supply of services" means the value of zero-rated supply of services made without payment of tax under bond or letter of undertaking, calculated in the following manner, namely:-

Notification is newly inserted dated 23th March 2020 number- 16/2020- central tax which says the value of export of goods maximum to 1.5 times the value of like goods sold domestically.The calculation of 1.5 times the value of export of goods is applicable in the numerator only.There were no such restriction placed earlier.

Rebate Option;-

Any person availing option to export goods on payment of IGST is not required to file separate application of refund. Following procedure has to be followed.

1.     Supplier is required to file shipping Bill.

2.     Export goods should be reported in Table 6A of form GStr-1

3.     Summary Details are to be reported in Table 3.1(b) of form GSTR-3B.

4.     Amount disclosed in 3B should be match with value reported in GSTR-1.

Upon matching the above details on GSTIN & ICEGATE portal, the refund of IGST paid would automatically get credited to the bank Account of the exporter. Therefore proper care should be taken while filling GST return. A professional GST consultant can make GST return in time with 100% accuracy.