Imports and Exports under GST

Import and Export of Goods and Services

CMA Sandeep Kumar                                                                     

Section 2(2) words and expressions not defined in this Act shall have the meaning assigned to them in the Central Goods and service Tax Act, 2016

Terms “Export of gods” and “import of goods” have been defined as under vide Section 2 of the central GST Act, 2016:

“Export of Goods” with its grammatical variations and cognate expressions, means taking out of India to a place outside India- Section 2(43)

“Import of Goods” with its grammatical variations and cognate expressions, means bringing and India from place outside India 2(51).

 



Export and import of service has been defined under Section 2 of the GST Law which has been reproduced as under:

  • The supply of any service shall be treated as an “import of service” if,
  • The supplier of service is located outside India,
  • The recipient of service is located in India,
  • The place of supply of service is in India, and
  • The supplier of service and the recipient of service are not merely establishments of a distinct person;

Explanation 1:- An establishment of a person in India and any of his other establishment outside India shall be treated as establishments of distinct persons.

Explanation 2:- A person carrying on a business through a branch or agency or representational office in any territory shall be treated as having an establishment in that territory.

Section 2(52) of the Central GST Act

  • The supply of any service shall be treated as “export of service” B when
  • The supplier of service is located in India,
  • The recipient of service is located outside India,
  • The place of supply of service is outside India,
  • The payment for such service has been received by the supplier of service in convertible foreign exchange, and
  • The supplier of service and recipient

Explanation:For the purposes of clause (e) an establishment of a person in India and any of his other establishment outside India shall be treated as establishments of distinct persons.

Section 2(44) of the Central GST Act, 2016

Note: place of supply of services shall be determined vide Section 6 of the IGST Act 2016.

 

Supply of goods/services in the course of import and export has been considered as Inter-State trade or commerce and provision of IGST shall be applicable. In this respect once again kind attention is drawn towards the following definition of IGST:

Section 2(c) of IGST Act, 2016

“Integrated Goods and Services Tax” (IGST) means tax levied under this Act on the supply of any goods and /or services in the course of inter State trade or commerce.

Explanation 1 – A supply of goods and/or services in the course of Import into the territory of India shall be deemed to be a supply of goods and/ or services in the course of inter-state trade or commerce.

Explanation 2 – An export of goods and/ or services shall be deemed to be a supply of goods and/ or services in the course of inter-state trade or commerce.

Tax Structure and Input Credit

Since the import of goods/services would be deemed as inter-state supply of goods and thus shall be subjected to the levy of IGST. However the import of goods shall continue to attract Basic Customs Duty (BCD) in addition to IGST.

The manufacturer, service provider and trader of goods who imports goods/services shall be eligible to offset IGST paid on import of goods/services against his output liability. However, credit of BCD will not be available under proposed GST law as well.

Note:- In the opinion of speaker, same rate of IGST shall be applicable in both cases i.e. import of goods/ services from non-taxable territory and inter-state supply of goods/services form non-taxable territory and interstate supply of goods/services within India as no separate rates are prescribed in the proposed GST law.

Section 2(109) of the proposed Central Act, 2016

“Zero rated supply” means a supply of any goods and/ or services on which no tax is payable but credit of the input tax related to that supply is admissible;





GST shall not be charged on goods/services exported from India. In Case, the supply of goods qualifies as export out of India as per the Place of Supply Rules the transaction shall be treated as “zero rated supply”.

The supplier shall be allowed to export the goods/services without charging any tax, and can avail the CGST/SGST and IGST credits paid on inputs and input services. If he is unable to utilize the credit then he can go for refund of credits as per section 38 of proposed Central GST Act, 2016

Section 38:- Refund of Tax

  • Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application in that regard to the proper officer of IGST/CGST/SGST before the expiry of two years from the relevant date in such form and in such manner as may be prescribed:

Provided that the limitation of two years shall not apply where such tax or interest or the amount referred to above has been paid under protest.

  • Subject to the provisions of sub-section (8), a taxable person may claim refund of any unutilized input tax credit at the end of any tax period:

Provided that no refund of unutilized input tax credit shall be allowed in cases other than exports or in cases where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on outputs:

Provided further that no refund of unutilized input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty.

Impact on GST on Import and Export

  • Even after introduction of GST following duties may not be subsumed under GST regime and they may continue to be levied as at present:
  • Basic Customs Duty
  • Anti Dumping Duty
  • Safeguard Duties
  • The GST will streamline the import framework in India as various custom duties will be subsumed into IGST and will make cross border trade easier.
  • GST will ensure proper compliance at different levels. Trader who sells imported goods in India will also be able to claim input tax credit on IGST, reducing costs even further.