Exporters are allowed to claim an input tax credit on all inputs used to produce goods or render the services without charging GST to their customers. However, these benefits are available subject to prescribed conditions, safeguards and procedures.
By Tanvi Loond
Under the GST regime, export of goods and services are deemed as inter-state supplies and are subject to Integrated GST (IGST). All supplies of goods and services which qualify as export of goods or services are zero-rated, that is, these transactions attract a GST rate of zero per cent. Therefore, exporters are allowed to claim an input tax credit on all inputs used to produce goods or render the services without charging GST to their customers. However, these benefits are available subject to prescribed conditions, safeguards and procedures. Here’s all you need to know about your GST refund.
Conditions for a supply to be qualified as an export: A supply of service will be considered as an export of service only if:
- Supplier of service is located in India.
- Recipient of service is located outside India.
- Place of supply of service is outside India.
- Payment for such service has been received by the supplier in convertible foreign exchange.
- Supplier of service and the recipient of service are not merely establishments of a distinct person.
A supply of goods is considered as an export if the place of supply is located outside India. Repatriation of convertible foreign exchange is not mandatory in case of export of goods.
Registration: As specified in notification number 10/2017- Integrated Tax, It is mandatory for all exporters to register under GST if the aggregate turnover exceeds Rs 20 lakh (Rs 10 lakh in special category states).
In order to avail the option of export without payment of IGST, a bond or Letter of Undertaking (LUT) should be furnished prior to the export. It is used to establish that goods will be exported within three months 15 days from invoice date and foreign currency for services will be received within one year 15 days of the invoice date.
A bond is to be submitted on a non-judicial stamp paper for each export and should be supported by a bank guarantee of an amount not exceeding 15 per cent of the bond amount. A LUT is valid for one year and is to be submitted on the company letterhead. It can be filed by all exporters except those who are prosecuted for a specific amount.
Refund: If you are making a zero-rated supply, you shall be eligible to claim a refund under either of the options. First, you may supply goods or services or both under bond or LUT, subject to the prescribed conditions, without payment of IGST and claim a refund of the unutilized input tax credit of Central GST, state GST/union territory GST and Integrated GST. Second, you may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of IGST and claim a refund of such tax paid on goods or services or both supplied.
Requisite documents: In case of export of services, a Bank Realization Certificate (BRC) or a Foreign Inward Remittance Certificate (FIRC) is required to support the refund claimed. A BRC is issued by your authorized bank on each invoice and a FIRC is a certificate issued by the bank against any inward remittance received against an export.
In case of export of goods, there is no requirement of a separate application for refund of IGST paid. The shipping bill and Export General Manifest (EGM) filed by an exporter are deemed to be an application for refund. Further, valid GSTR1 and GSTR 3B should have been filed by the exporter to claim a refund as the validated information is electronically transferred from the GST portal to the customs portal, that is, ICEGATE.
(Tanvi Loond is the Founder and CEO at Insta C.A. Views are the author’s own.)