Taxation of Deemed Exports Under GST

Deemed exports are not a new term in the indirect tax system. Under the GST, the term deemed exports are defined in the IGST Act. These supplies aren’t zero-rated by default. GST will be applicable to all deemed exports at the point of delivery.

The (supplier) of the goods may claim a refund of the tax paid on that supply. But once the reimbursement has been requested by the supplier, the acquirer will not be able to claim the ITC on the same amount. Such a supply of goods and services contributes to the growth of an economy. There is a certain category of supplies, in which the supply is considered an export, even if the goods do not leave national borders. Such a supply of products is notable as deemed GST exports.

Therefore, the government has taken various measures from time to time to encourage the country’s exports. The government provided tax benefits for them in order to boost the exports of the country. This blog will explain deemed exports and zero-rated supplies under GST:

Supplies declared as deemed exports under GST:

• Supply of goods by a registered person against prior authorization (AA), i.e. supplier must be registered under GST and consignee must hold prior authorization.
• Supply of capital goods by the registered person against the authorization of the export promotion of capital goods (EPCG).
• Supply of goods by the registered person to the export-oriented unit (EOU) / to the unit of the electronic types of equipment.
• Supply of gold by the Bank or a public sector company against AA.

Benefits under deemed exports:

Deemed Exports are eligible for the following benefits for the supply of goods:

1. a) Special Imprest license / Advanced intermediate license.
2. b) In FOB value, the “Special import permit” at 6 per cent. 
3. c) Deemed export drawbacks
4. d) Refund of terminal excise duties
5. e) Advanced authorisation holder

Special conditions to quality under Deemed export:

• In deemed exports, it is applicable to the supply of goods.
• The goods wouldn’t be transported outside India.
• Such supply of goods might be notified by the central government as deemed exports under Article 147 of the Central Goods and Services Tax Act 2017 (CGST Act).
• Payment can be received in Indian rupees or convertible currency.
• Such supplies aren’t made under Bond / LUT.
• The tax should be paid at the time of supply.
• Refunds of tax paid on these supplies are claimed from the recipient.
• The supplier must then deliver the goods under cover of a tax invoice.
• An endorsed copy thereof must be sent to the supplier and consignee’s GST official.

Refund of GST Paid on Deemed Exports:

• To obtain a refund of the tax paid on deemed exports, the supplier is required to file a claim using form GST RFD-01 with supporting documentation. 
• In the event that the supplier requests a refund of the tax paid on deemed exports, the following documents are a must.
• A statement containing invoice details for deemed export supplies made by the supplier.
• Commitment from the purchaser that no ITC has been requested.
• Commitment from the recipient not to request reimbursement for these supplies.

Refund forms:

Manual filing and processing of reimbursement requests for deemed export supplies are permitted until the reimbursement module is operational. The claim for reimbursement may be filed within two years from the date on which the declaration for such deemed export supplies should provide.

To claim a Refund:

There are instances where the (supplier) of deemed exporting has taken advantage of the tax credit in respect of those supplies. The recipient of the deemed export supplies may claim reimbursement of the ITC for other inputs services.