What is Export of services under GST?
As per Section 2(5) of IGST “export of goods along with the cognate expressions and grammatical variations, means taking goods out of India. Export means to trade or to supply goods and services outside the domestic territory of a country.”
Section 2(6) of the IGST defines “export of services under GST” as the provision of any service that meets the following conditions:
- Both the beneficiary and service provider is located outside India
- Either one of them is not located in India
- Both are not just foundations of an unmistakable individual supply of services having a place in Bhutan or Nepal, against payment in Indian currency, is absolved regardless of whether the payment is gotten in Indian currency taking a gander at the business approaches and patterns
- The payment for such assistance has been obtained by the service provider in convertible foreign exchange
Need for GST registration for export of services
Due to the fact that exports are deemed interstate supplies, you would be obliged to register for the Goods and Services Tax (GST). Manufacturers provide things in exchange for payment of IGST or CGST, as well as any applicable SGST or UTGST, which are levied by the government. You must first claim input stage credit for the tax paid on the products and services before you can export them if they are subject to a bond or a LUT.
- Under Section 24(i) of the Central Goods and Service Tax Act, 2017 (hereinafter referred to as the “CGST Act”), anyone making an “Inter-State Taxable Supply” is required to get registration, regardless of whether or not the supply is covered by subsection (1) of Section 22.
GST Registration is not required for individuals who make interstate taxable supplies of up to Rs. 20 lakhs (Rs. 10 lakhs in some states) or less in a financial year, according to Notification No.10/2017 – Integrated Tax, dated October 13, 2017.
- An inter-State Taxable Supply has not been specified by either the Central Goods and Services Tax Act or the Inter-State Goods and Services Tax (IGST) Act. However, in order to determine the meaning of “Interstate Taxable Supply”, we must refer to the definitions of “Interstate supply” and “Taxable Supply” provided in the Act.
- Under Section 7(5) of the Integrated Goods and Service Tax Act, 2017 (hereinafter referred to as the “IGST Act”), an “Inter-State supply” in regard to a “Service” is defined as follows:
“Provision of commodities or services, or both –”
“An example would be when the supplier is based in India but the site of supply is located outside of India.”
“Shall be treated as a provision of products or services, or both, in the course of interstate trade or commerce,” the Constitution states.
- The phrase “taxable supply” is defined in Section 2(108) of the CGST Act as “a supply of commodities or services, or both, that is taxed under this Act.”
- CGST Act defines “Exempt Supply” as follows: “Exempt provision means the supply of any products or services or both that attracts a nil rate of tax or may be entirely exempt from tax under Section 11 of the IGST Act and includes the non-taxable supply.”
- Export of service or goods is not exempt under Section 16 of the IGST Act, and neither government has deemed it exempt in the exemption notification.
- Provided export of services or goods is a tax-exempt supply, the government would not have two export categories: export with IGST and export without IGST, which states explicitly that export is a taxable supply but that exporters may export without IGST if certain conditions are met. This does not, however, exempt the individual from complying with Section 24 of the CGST Act.
How will GST on the export of services be levied?
Prior laws allowed for a duty drawback on taxes paid on inputs used in the export of exempted goods. It took a long time to claim the duty refund. Customs charge on imported inputs and federal excise on selected petroleum or tobacco products used as inputs or fuel for captive power generation will be excluded from the GST duty drawback. The return of the tax paid by exporters on inputs was a source of significant consternation.
The Indian government issued a guideline paper on the subject, which has aided in dispelling questions about the claim of the input tax credit on zero-rated exports. Under the GST, an exporter dealing in zero-rated goods can claim a refund for zero-rated shipments in one of the following ways:
Option 1: Provide products or services, or both, without paying integrated tax, on a bond or Letter of Undertaking, subject to any conditions, safeguards, or procedure that may be imposed, and subsequently demand a refund of the unutilized input tax credit.
Option 2: After fulfilling certain conditions, safeguards, and procedures as may be prescribed, and paying the IGST, any exporter, United Nations, Embassy, or other agencies/bodies as specified in section 55 who supplies goods or services, or both, can claim a refund of the tax paid on the supplied goods or services, or both.
The department updates both electronic and manual shipping bill types to include GSTIN and IGST. On the department’s official website, you may find the revised forms. To strengthen the Indian export business under GST, the Department is also reducing the factory filling procedure and granting essential approvals.
FAQs on Export of services under GST
- How are exports governed by the GST Act?
According to the GST Law, exports of goods or services are classified as follows:
- Inter-State supply and is governed by the IGST Act.
- ‘Zero-Rated Supply,’ which means that goods or services exported, are exempt from GST imposed at either the input or final product stage.
- Is there a difference between the Export Procedure under the GST regime and the previous one for merchant exporters?
Under the GST regime, the distinction between a merchant and a manufacturer exporter would be rendered meaningless. Both a merchant exporter and a manufacturer exporter follow the same approach when it comes to the supplies they make for export.
- During the GST regime, how quickly would a refund in respect of the export of goods or services be granted?
- In case of return of tax on inputs used in exports:
- A refund of 90 percent will be provided provisionally within seven days of the receipt of the refund application acknowledgement letter.
- It will take a maximum of 60 days from the day that the application is received in its entirety to receive the remaining ten percent of the total amount owed.
- If you do not receive a complete refund within 60 days, you will be charged interest at the rate of 6 percent.
- Regarding the reimbursement of IGST paid on exports: Customs would handle the refund claim after it receives information from the common portal indicating that the exporter submitted a proper return in Form GSTR-3. As quickly as practicable, an amount equivalent to the IGST paid on each shipping bill will be credited to the exporter’s bank account.