Trade has been an important and sensitive issue all over the world even
before World War II. After World War II world trade took a new shape like the
adaptation of General Agreement on Tariffs’ and Trades or the formation of World
Trade Organisation. International Trade involves both imports and exports and
current account deficit is the main comparison and measurement between import
and export which determines the economic condition of the country. Indian
Government is striving real hard to reduce this deficit. Implementation of Good
and Service Tax (GST) was one of the initiative towards that direction.
In principal for trade, export should not be burdened with domestic taxes.
Export enjoyed a special treatment but implementation of GST demanded that the
input-output chain should not be broken. The exemptions on export have a
tendency to break the chain. Therefore a “zero-rated supply” method is
introduced under the GST by which the Government is trying to address all the
important considerations relating to export of goods and services.
This article aims to give brief overview of GST on Export of Goods and Services
and highlight few interesting aspect of GST on Export of Goods and Services.
Meaning of Export
Export of goods under GST:According to Section 2(5) of IGST,export of goods
with its grammatical variations and cognate expressions, meanstaking goods out
of India to a place outside India.Export essentially means trading or supplying
of goods and services outside the domestic territory of a country.
Export of services under GST: According to Section 2(6) of IGST “Export of
services” means the supply of any service when,-
(i) the supplier of service is located in India;
(ii) the recipient of service is located outside India;
(iii) the place of supply of service is outside India;
(iv) the paymentfor such service has been received by the supplier of service
inconvertible foreign exchange;
(v) the supplier of service and the recipient of service are not merely
establishments of a distinct person
Supply of services having place of supply in Nepal or Bhutan, against payment in
Indian Rupees, is exempted even if the payment is received in Indian Currency
looking at the business practices and trends.
Treatment of Export under GST
Under GST, export of goods or services are treated as follows:
# Inter-State supplyand covered under Section 7(5) of IGST Act. Export
of goods or services are treated as Inter-state supply under GST and
accordingly, IGST is charged on export.
# ‘Zero rated supply’ and covered under Section 16(1) of IGST i.e. the
exported goods or services shall be relieved on GST and levied upon either at
the input stage or maybe at the final product stage.
Zero Rated Supply
As stated above, under Section 16(1) of the IGST Act GST is not applicable on
exports. Therefore, all export supplies of a registered taxpayer under GST would
be classified under "zero-rated supply". According to Section 16(1) Zero-Rated
Supply is an exempted supply but the Input Tax Credit (ITC) would be available
on such supply. Effectively, this means a negative GST or, a GST refund.
Zero-Rated Supply is also applicable to supply of goods and services to Special
Economic Zone (SEZ) developer or a Special Economic Zone Unit.
Routes/Ways to claim the refund
According to Section 16(3) of the IGST Act, person making a Zero Rated Supply
can opt for any of the following two options:
i. To supply goods or services under a bond or, a Letter of
Undertaking (LUT) without paying IGST and then claim a refund of unutilised ITC;
ii. To supply goods or services on payment of IGST and then claim
the GST refunds of such tax paid.
The process for claiming a refund for supply of goods differ from process of
refund in case of supply of services.
The process for manufacturers who supplying the goods are simpler. The shipping
bill of the goods will itself be treated as an application for refund. The
manufacturers will get refund directly into their bank account and no separate
application is required in this process. Further, the GST authorities have
declared that the refund will be credited directly to the bank account of the
exporter registered with the customs even if it is different from the
applicant’s bank account mentioned in his registration particulars. This method
has been adapted by the GST authorities to ensure smooth processing and payment
The process is difficult for the service exporters. The service exporters cannot
get a direct GST refund into their bank accounts. For getting a refund, the
service exporter has to file a set of documents with the jurisdictional GST
officer where the company is situated. Services are usually intangible in nature
therefore there is hardly any documentation trail for export of services, so
this differentiation of process is necessary. When goods are exported, clear
trials with the customs, shipping, transport and other bills are shared with
Government as a usual practice. Thus it becomes easier for the manufacturers to
get a GST refund.
Documents required by the Exporter of the Services to be filed for getting a GST
i. A covering Letter
ii. Bank Realization Certificates or Foreign Inward Remittance
iii. Export Invoices
iv. Form GSTR 3B and GSTR 1
v. Application for Refund in the Form GST RFD 01
vi. cancelled cheque
vii. If GST refunds claims exceed ₹2 lakhs (₹200,000 or ~$3,000) per
quarter a certificate from a Chartered Accountant/Cost Accountant.
All the above-mentioned documents are all mandatory, GST refund cannot be
claimed without these documents.
Process for claiming a GST refund
The application for GST refund has to be forwarded to the proper officer with
all the documents above mentioned. It must include
i. A statement containing the date and number of invoices and
the Bank Realization Certificates or, Foreign Inward Remittance Certificates.
The officer shall within 3 days of filing, issue an acknowledgment, in Form GST
The officer shall make an order, in Form GST RFD-04, sanctioning the amount of
refund on a provisional basis, within a period of 7 days from filing of the
The officer, will issue payment advice, in Form GST RFD-05 which will be
electronically credited to the bank account of the applicant as mentioned in the
application. Ninety percent of the amountis credited at this stage.
Remaining ten percent of the amount is payable after a scrutiny of the documents
(verification of all physical documents with the available online data in the
GST portal). Then form GST RFD-06 will be issued sanctioning the balance ten
percent amount if all the documents are found in order with the online data
available in the GST portal.
In case of supply of goods, a claim must be filed within, expiry of 2 years from
the date of exports.
For exporters of service the relevant date is either:
i. The date of completion of services, or
ii. The date of receipt of the advance, in cases where, the
advance has been received prior to the date of issue of invoice.
Typically therefore, if a service exporter receives an advances, it is
beneficial for him to apply, at that stage itself.
In case of delays of the refund due,
i. Cases beyond sixty days will get an interest at the notified
rate not exceeding 6% till the date of refund if the refund has been sanctioned.
ii. Cases which may be adjudicated by Appellate or Adjudicating
authority interest shall be paid at the notified rates not exceeding 9% till the
date of refund.
Analysis and Features
i. Practically, zero-rated supply does mean that goods and the
services under the tariff rate of ‘0%’ rather it means the manufacturer or the
service exporter is liable to a refund on the GST paid for the goods or the
services or is entitled to pay ‘0%’ GST by virtue of the LUT and claim a refund
on the unutilised ITC.
ii. It is also discussed under section 17(2) of the CGST Act,
that the ITC will not be available to the supplies where the rate tax is ‘0%’.
iii. Essentially the concept of zero-rated supplies is introduced
under GST on the basis of the prevalent laws of the Central Excise and Service
Taxes. GST is based on the input-output chain of taxes, and direct exemption of
GST on the export of supplies would have broken the chain thus the method of
zero-rated supplies are introduced under GST. It is believed that the
introduction of this method of zero-rated supplies will ease the difficulty of
the suppliers and promote international trade.
iv. There are a few instances where the zero-rated supply is not
applicable, such instances are mentioned below:
a. When the place of service is in India but it is been provided to a
person located outside India. For example, a property is located in Mumbai given
on lease to a person residing in London; or where an agent is residing in India,
providing service to a person residing in London exporting goods to UAE.
b. In cases where the consideration for a service is received in Indian
Currency or maybe in such currency other than convertible currency. For example-
A Consultancy Firm supplies service to an entity outside Indian but the payment
is made by the Indian Branch of the overseas entity in Indian Rupees.
c. Where the supply of services was to a foreign branch which would not be
covered as export of services due to the specific exclusion from “export of
service”. This will involve reversing the input tax credits as such supply of
service, would be considered as non-taxable.
v.Under the reverse mechanism of GST, when an unregistered
person supplies goods or services to a registered person the registered person
becomes liable to GST on such supply. This mechanism actually discourages the
exporters from making any purchase from unregistered vendors such as small
enterprises. This mechanism increases operational and compliance difficulties
for the exporters, as they first need to pay the reverse charge and then claim a
GST had a direct impact on exports of goods and services in India because a huge
amount of revenue is associated with this industry and the economy of the
country is also directly related to the foreign exchange earned from this
industry. Initially when the GST was implemented, several exporters faced major
difficulties in understanding the procedure and claiming refunds. This resulted
in large blocks of working capital being held up, until refunds are correctly
applied for and then received.
The government is trying to alleviate the difficulties faced by the exporter by
releasing clarification notes on this. Several changes have also been suggested
by the Parliamentary Standing Committee on Commerce to remove the drawbacks in
 Ramandeep Singh Bhatia, GST on Export of Goods and Services (10 February
 Dakshita Mehta,India: GST Refunds For Service Exporters - A Guide (23
 One Hundred and Thirty-Ninth Report on Impact of Goods and Service Tax on
Exports (19 December 2017), Department –Related Parliamentary Standing Committee