GST Refund for Exporters

A Comprehensive Guide to GST Refund for Exporters

 

Introduction:

Exporting goods and services is a significant contributor to a country’s economy. In India, the Goods and Services Tax (GST) system has provisions in place to facilitate the export of goods and services by providing refunds to eligible exporters. In this blog, we will delve into the details of how to claim GST refunds on exports, the procedures involved, and the essential documents required for a smooth refund process.

 

Definition of Export as per the GST Act:

According to the IGST Act, export is defined as the act of taking goods or services from India to a location outside the country. These exported goods and services are categorized as “zero-rated supplies,” and exporters can claim refunds on the GST paid for these supplies, effectively setting the GST rate at 0% for exports.

Procedure for Availing GST Refund:

GST consists of two components: central GST and state GST. Additionally, Integrated GST (IGST) is applicable to inter-state supplies of goods and services, as well as imports and exports. Exporters can claim a refund on the IGST charged by following one of two available options:

 

Option 1: Exporting goods and services without payment on the IGST

Under this option, exporters can claim a refund on unutilized input credit. The refund process is typically quick, with refunds usually granted within a fortnight. Exporters need to file GSTR-1 and GSTR-3B, as well as the export general manifest. No separate application is required, as the Shipping Bill itself serves as the application.

 

Option 2: Exporting goods and services on payment of the IGST

In this option, exporters are eligible to claim a refund on the tax paid for the export. To claim a refund in this manner, exporters must file a separate application online using Form RFD-01A. Supporting documents must be submitted manually to GST officials. Refunds are processed based on the verification of these documents. The exporter applies for the refund through the common portal, either directly or through a facilitation center designated by the GST Commissioner. The refund must be paid within 60 days from the receipt of the complete refund application. After this period, an interest of 6% must be paid to the applicant.

 

Documents Required for Availing GST Refund:

To take advantage of the tax benefits available under the GST regime for exporters, certain formalities must be fulfilled:

For Exporting Goods:

1. Import Export Code (IEC) is mandatory.
2. If exporting without paying IGST, a Letter of Undertaking (LUT) or bond must be provided.
3. Purchase orders relevant to the export transaction.
4. Tax invoices with specific details, including:

•     Indication of whether the export is made with or without payment of integrated tax.
•     Exporter’s address, name, and GSTIN.
•     Invoice number and date.
•     Recipient’s name and address, along with destination country and delivery address.
•     Harmonized System of Nomenclature (HSN) code of goods.
•     Description of goods.
•     Quantity and value of the shipped goods.
•     Signature of the exporter or an authorized signatory.
•     A matching shipping bill with the tax invoice details.

For exporting services:

1. If exporting services without paying IGST, a Letter of Undertaking (LUT) or bond must be furnished.
2. A relevant service agreement should be ready for attachment.
3. Tax invoices must include:

•     Description of whether the supply is meant for export with or without payment of integrated tax.
•     Exporter’s name, address, and GSTIN.
•     Invoice number and date.
•     Recipient’s name and address.
•     HSN code of services.
•     Description of services.
•     Total service value with a breakdown, if applicable.
•     Signature of the exporter or an authorized signatory.
•     Proof of receipt of convertible foreign exchange, such as Bank Realization Certificate or Foreign Inward Remittance Certificate.

Failure to maintain these documents can result in the imposition of GST

Conclusion:

In summary, exporters in India can claim a refund on IGST for both duties paid on exports and unutilized input tax credit. By following the prescribed documentation and procedures, exporters can comply with GST law requirements and ensure the smooth receipt of IGST refunds. Exporting goods and services is a vital component of the Indian economy, and the GST system supports this endeavor by providing these essential refund mechanisms.