Exports under GST have been granted several concessions in the form either complete exemption from the GST or refund of GST if paid on such exports. Export sales are termed as “zero rated sales” in GST meaning ultimate impact of exports will be zero.
Broadly there are three categories of export benefits under the GST:
- Export without payment of IGST
- Export with payment of IGST with a right to claim the refund
- Refund of unutilised input tax credit of input taxes paid on inputs used in the export sales
The refund of IGST or unutilised taxes paid on zero rated sales was originally supposed to be carried out automatically through the common portal (www.gst.gov.in). However, as mentioned in Circular No. 17/17/2017 dated 15 November 2017, due to non availability of refund module automated processing of refunds were replaced with manual processing. In my view it is not even manual it is a hybrid system involving components of automatic and manual systems.
Refund of integrated taxes paid on export of goods
As per Para 2.2, refund of integrated taxes paid on export of goods is dependent on the following:
- Filing of shipping bill
- Filing of export manifest or report
- Filing of Form 3B
The refund accordingly will be processed by customs systems and not by the common portal.
Refund of integrated taxes paid on supply of goods to SEZ or export of services
As per Para 2.3, refund of integrated taxes paid on supply of goods to SEZ or export of services is dependent on the following:
- Application of refund in common portal
- Application Reference Number (ARN) will be generated in common portal
- RFD 01A application shall be submitted along with the ARN so generated in common portal
Thus refund mechanism in respect of the above supplies is semi-manual i.e. inclusive of both manual and automated components.
Refund of unutilised input tax credit
As per Para 2.4, refund of input taxes paid on zero rated sales and which remain unutilised shall be dependent on the following:
- Application of refund in common portal
- Application Reference Number (ARN) will be generated in common portal
- RFD 01A application shall be submitted along with the ARN so generated in common portal
Thus refund mechanism in respect of the above supplies is semi-manual i.e. inclusive of both manual and automated components.
Deemed exports
Section 147 of the Central Goods and Services Tax Act, 2017 empowers the Government to notify certain supplies as deemed exports even though they do not leave India and the amount is also not received in convertible foreign exchange. However, the only conditions being such goods are manufactured in India.
Accordingly, Notification No. 48/2017-Central Tax dated 18 October 2017 was issued in this regard which regarded four categories of supplies as deemed exports. These supplies have their roots originated from Foreign Trade Policy.
Section 54 of the CGST Act, 2017 which deals with refund recognise deemed exports eligible for refund. Accordingly, the processing of refund of taxes paid on such deemed exports is supposed to automated, however Circular No.24/24/2017-GST dated 21 December 2017 issued by the Government of India in this regard clarified that the refund claims will be processed manually.
Following requirements have to be fulfilled for claiming such refunds:
- Application of refund in common portal
- Application Reference Number (ARN) will be generated in common portal
- RFD 01A application shall be submitted along with the ARN so generated in common portal
- Filing of GSTR 1 is must
- Submission of manual undertaking each time along with refund application
Exemption of taxes paid on supply of goods meant for exports
The Government issued notifications Notification No. 41/2017–Integrated Tax (Rate) dated 23 October 2017 and parallel notification under Central and State GST granting exemption to the players involved in export supply chain.
Accordingly, the Central or State or Integrated tax in respect of supplies by registered supplier to a registered recipient for export are exempt to an extent of excess of amount calculated at the rate of 0.1%. However, both the supplier and the recipient need to follow certain conditions in these regard.
Government of India has issued Circular No. 37/11/2018-GST dated 15 March 2018 to clarify exported related refund issues.
As per this circular there are 14 areas where clarifications have been issued by the Government.
Thus refund mechanism in respect of the above supplies is semi-manual i.e. inclusive of both manual and automated components.
These clarifications are mainly procedural in nature which is expected to help the tax payers and as well as departmental officers in coming to a common understanding on what documents are required in this regard. Para 14 of the circular even published the checklist of documents required along with refund applications which shall bring some clarity in this regard.