What is Deemed Export Under GST?

GST in India has significantly changed the export tax system. With the implementation of GST, the government has streamlined the export process and provided various benefits and incentives to exporters. However, exporters must comply with the procedures and regulations specified under GST to avail of these benefits. 

This article discusses the concept of deemed exports under GST and the various forms of refunds available to exporters. 

The Concept of Deemed Exports under GST

Travelling from India with goods for sale is commonly perceived as an export activity. However, certain sales may not be subject to taxes under the GST system. The government can classify specific deliveries of goods as “deemed exports” through official notifications. This means that even if the products remain in India, their supply will be considered an export. 

Crucial Requirements for Deemed Exports Under GST

• The concept of deemed exports excludes the sale of goods and does not apply to services. 
• The products can be physically exported from India to qualify for this status. 
• The Central Government can designate certain types of product deliveries as deemed exports under Section 147 of the Central Goods and Services Tax Act, 2017 (CGST Act). 
• To qualify, all products must be manufactured or produced within India, and payment can be made in Indian Rupees or any other currency converted to them. 
• It is important to note that obtaining such items while in Bond/LUT is not permitted. 
• Taxes are payable at delivery, and any taxes paid on these materials may be refunded.

Exports treated as “Deemed Exports” under the Goods and Services Tax

The Central Goods and Services Tax Act 2017 designates certain supplies as “deemed exports,” even if the products are not leaving India. This includes products made or produced in India and paid for in Indian Rupees or a converted currency. The taxes on these supplies are due at delivery, and any taxes already paid may be refunded. 

Under CGST notice no. 48/2017, the following supplies are considered presumed exports: sales to a buyer with an AA, capital goods authorisation for export, sales to export-oriented units or technology parks, and gold supplied by a bank or government-owned enterprise in exchange for AA.

It is important to note that the definition of presumed exports under the Foreign Trade Policy is distinct from the definition under GST legislation, and shipments considered presumed exports under the FTP rules may not meet the requirements for such status under the GST rules. In contrast, an export is defined as the shipment of goods outside of India, while a deemed export refers to the supply of goods that are not physically leaving India but are still treated as exports for tax purposes.

GST on Deemed Exports

Presumed export supplies are not automatically considered zero-rated supplies, unlike actual exports. It is anticipated that GST will be charged at the time of supply for all such export supplies. Using a Bond or LUT to make supplies without paying tax is prohibited. It is mandatory to pay tax on such supplies and file for a refund.

Under specific circumstances, the supplier or recipient of goods may apply for a tax refund. However, if the supplier seeks a refund of the tax paid, the receiver is not entitled to receive Input Tax Credit (ITC).

Additional requirements for EOU/STP/HTP considered exports

Before making a supply of goods to an EOU/EHTP/STP/BTP unit, Form The unit must file a to notify the supplier and the jurisdictional GST officer of both the supplier and the receiver. Form A must contain information on the items to be purchased, authorised by the Development Commissioner, and a continuously updated serial number. 

The supplier then sends the products and a tax invoice attached, which the receiver must sign off on. A copy of the tax invoice, endorsed by both parties, must be forwarded to the GST officer with jurisdiction over them. Form B is used by the EOU, EHTP, STP, or BTP unit to track any such received products. It is crucial to adhere to these procedures to ensure compliance with GST regulations and claim refunds appropriately.

Getting a refund for GST on deemed exports

To file a claim for reimbursement, the following documents must be provided as evidence:

1. A statement that includes specific details on the invoices for all deemed export supplies provided by the supplier.
2. Acknowledgement by the tax officer of the jurisdiction in which the Advance Authorization (AA) or Export Promotion Capital Goods (EPCG) holder is located that the deemed export supplies have been received OR, in the case of an Export Oriented Unit (EOU), Electronic Hardware Technology Park (EHTP), Software Technology Park (STP), or Bio-Technology Park (BTP), a copy of the tax invoice signed by the recipient indicating that the deemed export supplies have been received.
3. Assurance from the recipient that no claim for Input Tax Credit (ITC) has been made.
4. An agreement from the recipient that they will not file a claim for a refund concerning such a supply.

Refund form 

To claim a refund of the tax paid on presumed export supplies, either the supplier or the receiver must fill out Form GST RFD – 01 and provide any necessary supporting documents. If the presumed export supplies have been exported, the claim for reimbursement can be filed and managed online. The deadline for filing a refund claim is within two years from the date of the electronic return for the suspected export shipments.

It’s worth noting that CGST notices no. 49/2017, released on 18 October 2017, lists the evidence that the supplier of presumed export supplies must provide to obtain a refund.

A declaration in Statement 5B must be completed and included as part of Annexure I in the RFD-01 refund application.

The Input Tax Credit (ITC) accumulated on the inputs purchased for the production of considered exports must be utilised for the sale of taxable supplies (excluding nil-rated or fully exempted goods). Within six months of the delivery date of such supplies, a certificate of authorisation must be provided to the jurisdictional GST commissioner or any other authorised person.

Reporting Requirements in GSTR – 1 and GSTR – 3B

To report deemed export supplies, the licensed dealer must fill in Table 6C of Form GSTR-1 with the required information, including details about the invoice and tax paid on these supplies.

Table 3.1 (b) of Form GSTR – 3B details considered exports and other zero-rated supplies.

Table 9A is where the details of any adjustments made to B2B considered export invoices must be reported (B2B amendments). Table 9C will be updated to reflect any revised debit or credit memos.

Conclusion

The introduction of GST has significantly changed the country’s export policies. One such change is the concept of deemed exports, which refers to the supply of goods that are not physically exported but are deemed to be exported under certain circumstances. To claim a refund of the tax paid on such supplies, the supplier or the recipient must file an application using Form GST RFD – 01 and provide the necessary documentation. It is important to follow the prescribed procedures and keep all essential documents up to date to avoid any legal consequences. With proper understanding and implementation of the regulations, businesses can continue to export their products under the GST system with ease and efficiency.