DEEMED EXPORTS UNDER GST

Export of goods, in common parlance, means taking goods outside India. The process of supplying the goods(produced/manufactured in the country) on an international scale is known as Export. Such supply of goods and service contribute to the growth of an economy and thus enjoy the perk of being treated as zero-rated supplies. Such supplies are treated as zero-rated supplies under GST.  However, there is a certain category of supplies, as notified by the Central Government, wherein the supply is treated as an export, even if the goods do not leave the national borders. The Central Government have notified such categories of supplies of goods as deemed exports. This means that such supplies shall be treated as exports even if such goods are not taken outside India.

The Government, on the recommendations of the Council, have notified certain supplies of goods as deemed exports, where goods supplied do not leave India, and payment for such supplies is received either in Indian rupees or inconvertible foreign exchange, if such goods are manufactured in India. Section2(39) of the CGST Act, 2017 defines the term ‘deemed exports”.

Essential conditions to qualify as Deemed Exports Applicable only for the supply of goods (not applicable to services):

1. Goods are not required to be taken outside India.
2. Such supply of goods must be notified by the Central Government as Deemed exports under Section 147 of the Central Goods and Services Tax Act, 2017 (CGST Act).
3. Goods must be manufactured or produced in India. Payment can be received in Indian Rupees or in convertible foreign exchange.
4. Such supplies cannot be made under Bond / LUT.
5. The tax must be paid at the time of supply.
6. Refund of tax paid on such supplies can be claimed either the supplier or the recipient.

In exercise of powers conferred under Section 147 of the CGST Act, the Central Government has issued Notification no. 48/2017-Central Tax dated 18.10.2017wherein the following categories of supply of goods has been declared as Deemed Exports:

A). Supply of goods by a registered person against Advance Authorisation i.e Supplier must be registered under GST and recipient must be an Advance Authorisation holder.
B). Supply of capital goods by a registered person against Export Promotion Capital Goods Authorisation (EPCG)
C). Supply of goods by a registered person to Export Oriented Unit(EOU)/Electronic Hardware Technology Park Unit (EHTP) / Software Technology Park Unit(STP) / Bio-Technology Park Unit (BTP)
D). Supply of gold by a bank or Public Sector Undertaking against Advance Authorisation specified in the notification No. 50/2017-Customs, dated the 30thJune, 2017 (as amended)

The Deemed exports have also been defined under the Foreign Trade Policy 2015 –2020 (FTP). However, the definition of deemed exports as provided by FTP differs from the definition provided under the GST law and should not be confused with, while applying GST provisions. A particular supply of goods can be deemed exports under FTP but may not qualify as deemed exports under GST. For the purposes of the above notification, –

1. “Advance Authorisation” means an authorisation issued by the Director General of Foreign Trade under Chapter 4 of the Foreign Trade Policy 2015-20for import or domestic procurement of inputs on pre-import basis for physical exports. The “Pre-import” condition means that the raw material imported under Advance Authorization is utilized to produce finished goods manufactured in India. Such imported goods are finally exported. This condition has been removed by the government recently.

2. Export Promotion Capital Goods Authorisation means an authorisation issued by the Director General of Foreign Trade under Chapter 5 of the Foreign Trade Policy 2015-20 for import of capital goods for physical exports.

3. “Export Oriented Unit” includes Export Oriented Unit or Electronic Hardware Technology Park Unit or Software Technology Park Unit or Bio-Technology Park Unit approved in accordance with the provisions of Chapter 6 of the Foreign Trade Policy 2015-20.  

Taxability of deemed exports under GST

Deemed export supplies are not zero-rated supplies. All deemed export supplies will be subject to GST at the point of supply. Supplies cannot be made under Bond / LUT without payment of tax. Tax should be paid on such supply and then be claimed as refund. Subject to certain conditions, Refund of taxpaid can be claimed by either of the following persons:
1. Supplier of goods OR

2. Recipient of goods.

Note: The recipient is not eligible to claim the input tax credit (ITC) in case refund of tax paid is being claimed by the supplier.

Additional conditions for deemed exports to EOU/STP/EHTP/BTP

1. The EOU/ EHTP/ STP/ BTP unit must give prior intimation by filing Form A(Appended herewith) to the supplier and the jurisdictional GST officer of supplier and recipient as a recipient.
2. Form A must bear a running serial number and contain details of goods to be procured, which is pre-approved by the Development Commissioner.
3. The supplier must then supply goods under the cover of a tax invoice.
4. The tax invoice must be endorsed by the recipient. Endorsed copy of the same must be sent to the supplier and jurisdictional GST officer of supplier and recipient as a recipient.
5. Record of such goods received by EOU/ EHTP/ STP/ BTP unit must be maintained in Form B

Refund of GST paid on deemed exports:-

As per 3rd proviso to Rule 89(1) of CGST Rules, 2017, application for refund incase of deemed exports can either be filed by the recipient of deemed export supplies.
Alternatively, the supplier of such deemed exports supplies can also file the refund application, in cases where the recipient does not avail of input tax credit on such supplies and furnishes an undertaking to the effect that the supplier may claim the refund. It may be noted that Notification no.49/2017-Central tax dated 18.10.2017 also lays down the list of evidences which are required to be produced by the supplier of deemed export supplies for claiming refund.

 In case the supplier is claiming are fund of tax paid on deemed exports, the following details/ documents must be produced:
1. A statement containing Invoice-wise details of deemed export supplies made by the supplier.
2. Acknowledgement by jurisdiction tax officer of AA or EPCG holder that the said deemed export supplies have been received OR in case of EOU/ EHTP/ STP/BTP/ Copy of tax invoice signed by the recipient that said deemed export supplies have been received.
3. Undertaking by the recipient that no ITC has been claimed.
4. Undertaking by the recipient that it shall not claim a refund in respect of such supplies. (Appended herewith).
5. Undertaking by the recipient that supplier may claim the refund.

Refund Forms

For obtaining a refund of tax paid on deemed exports, the supplier or recipient is required to file an application in Form GST RFD – 01 with supporting documents. Manual filing and processing of refund claims in case of deemed export supplies are permitted till the refund module is fully operational. The refund claim can be filed within two years from the date on which return relating to such deemed export supplies is furnished electronically.

GST Refund Process For Deemed Export Supplies

Rule 89 of the CGST Rules, 2017 as amended vide Notification No. 47/2017-Central Tax dated 18.10.2017 allows either the recipient or supplier of such supplies to claim refund of tax paid thereon. certain supplies of goods have been notified as deemed export supplies vide Notification No. 48/2017-CentralTax dated 18.10.2017. procedure and safeguards in respect of supplies to EOU /EHTP / STP / BTP units prescribed vide Circular no. 14/14/2017-GST dated06.11.2017

Maintenance of Records

The recipient EOU/EHTP/STP/BTP unit shall maintain records of such deemed export supplies in digital form, based upon data elements contained in “Form-B”(appended herewith). The software for maintenance of digital records shall incorporate the feature of audit trail. While the data elements contained in the Form-B are mandatory, the recipient units will be free to add or continue with any additional data fields, as per their commercial requirements. All recipient units are required to enter data accurately and immediately upon the goods being received in, utilized by or removed from the said unit. The digital records should be kept updated, accurate, complete and available at the said unit at all times for verification by the proper officer, whenever required. A digital copy of Form – B containing transactions for the month, shall be provided to the jurisdictional GST officer, each month (by the 10th of month)in a CD or Pen drive, as convenient to the said unit. 3. The above procedure and safeguards are in addition to the terms and conditions to be adhered to by a EOU / EHTP / STP / BTP unit in terms of the Foreign Trade Policy, 2015-20 and the duty exemption notification being availed by such unit.

Recipient is claiming a Refund: There are cases where the supplier of deemed export supplies has availed the benefit of tax credit in respect of such supplies. In such a case, the recipient of deemed export supplies can claim the refund of ITC in respect of other inputs or input services. Such inputs or input services are used in making zero rated supplies of goods or services. Furthermore, these supplies are other than the ones on which the supplier has already availed the benefit. Rule 89(4A) of the CGST Rules, 2017 as amended vide Notification no. 75/2017-Central Tax dated29.12.2017 (w.e.f 23.10.2017), the recipient of deemed export supplies can claim refund of input tax credit availed in respect of other inputs or input services used in making zero-rated supply of goods or services or both, in case of deemed export supplies on which the supplier has availed the benefit of notification No. 48/2017-Central Tax dated 18.10.2017. Further Rule 96(9) of the CGST Rules, 2017 as amended vide Notification no. 75/2017-Central Tax dated29.12.2017 (w.e.f 23.10.2017) also provides that the recipient of deemed export supplies on which the supplier has availed the benefit of notification No.48/2017-Central Tax dated 18.10.2017 cannot export on payment of integrated tax. This takes place only when the supplier of deemed export supplies has already availed the benefit of tax credit.

Time Limit For Filing the Refund Claim

For obtaining refund either the recipient or supplier of deemed export supplies has to file an application in FORM GST RFD-01 through the Common Portal, either directly or through a Facilitation Centre notified by the Commissioner before the expiry of two years from, the date on which the return relating to such deemed export supplies is to be furnished electronically. The application has to be accompanied by a statement containing the number and date of invoices along with such other evidences as may be notified in this behalf as explained in the above said para. Due to the non-availability of the refund module on the common portal, it has been decided by the competent authority, that the applications/documents/forms pertaining to refund claims on account of deemed export supplies shall be filed and processed manually till further orders. Circular No. 17/17/2017-GST dated 15.11.2017 and Circular no. 24/24/2017-GSTdated 21.12.2017 prescribing the detailed procedure have been issued in this regard.

Reporting tables in GSTR-1 and GSTR-3Bfor Deemed Export Supply

Detail in regard of Deemed Export shall be disclosed in following tables: (i)Table 3.1 (b) of GSTR-3B and (ii) Table 6C of GSTR-1

Undertaking

Undertakings by the Recipient:- If the Recipient claims refund then undertaking by the Recipient shall be – “I hereby declare that the refund has been claimed only for those invoices which have been detailed in statement 5B for the tax period for which refund is being claimed and the amount does not exceed the amount of input tax credit availed in the valid return filed for the said tax period. I also declare that the supplier has not claimed refund with respect to the said supplies.

Undertakings by the Supplier: Undertakings – If the Supplier claims refund then undertaking by the Supplier shall be “I hereby declare that the refund has been claimed only for those invoices which have been detailed in statement 5B for the tax period for which refund is being claimed. I also declare that the recipient shall not claim any refund with respect of the said supplies and also, the recipient has not availed any input tax credit on such supplies.