Deemed Export And GST

 

What Is Deemed Export (Pre- GST)

Deemed export is the concept of foreign trade policy of India and was dealt

• from 27th August, 2009 till 31st March 2015 as per the chapter 8 of the FTP 2009-2014 and was defined under Para 8.2 of the said FTP.
• with effect from 1st April 2017 as per chapter 7 of the FTP 2015-2020 and was defined under Para 7.02 of the said FTP.

In simple deemed export refers to transactions specified under Para 8.2 of FTP 2009-2014 or Para 7.2 of FTP 2015-2020, in which goods do not leave country, and payment for such transaction is received either in Indian rupees or in free foreign exchange.

Example of deemed export (Pre GST under FTP)

• Supply of goods against advance authorization/EPCG
• Supply of goods to EOU/STP/EHTP/BTP
• Supply of Goods to any project in respect of which import is allowed at zero customs duty in term of N/N 12/2012-Customs dated 17.03.2017, if the supply is made under international competitive bidding (ICB) procedure.

Definition of deemed export was borrowed in central excise from FTP, there was no specific definition in central excise.

 

What Was Benefits Of The Deemed Export (Pre GST)

Few Deemed export was exempted from payment of central excise duty (CENVAT) or if exemption was not available then the refund of terminal excise duty (TED) was available. In addition, deemed export was also countable towards export obligation imposed against advance/ EPCG authorization and was also countable for calculation of net foreign exchange earning of EOU additionally deemed export drawback was also available.

It was general concept that, if the final product was exempted then no CANVAT was available in central excise, however opposite to this rule in case of deemed export even if deemed export is exempted from payment of excise duty, CENVAT of tax paid on input was available in terms of Rule 3(6) of the CENVAT credit Rules, 2004 read with various notification.

 

Deemed Export (Post GST)

Section 147 of the CGST Act, empower the Central Government to notify certain supply of goods as deemed export on the recommendation of GST council. In exercise of the stated power CBEC vide Notification No. 48/2017-Central Tax dated 18th October, 2017 notify the following transactions as the deemed export.

• Supply of goods against advance authorization.
• Supply of goods against Export promotion of capital Goods.
• Supply of goods to export oriented undertaking
• Supply of gold by a bank or Public Sector Undertaking specified in the notification No. 50/2017-Customs, dated the 30th June, 2017 (as amended) against Advance Authorization.

Now, in post GST regime deemed export is defined in FTP as well as under Section 147 of the CGST Act, 2017.Definition of deemed export as per FTP is broader as compared to the definition of deemed export under GST, as only few selected supply specified above (a to c) is borrowed from FTP as deemed export under GST, the benefits of deemed export as defined under Para 7.2 of FTP 2015-2020, is curtailed as per the DGFT trade notice 11/2018 dated 30.06.2017.

In pre GST regime under FTP invalidation letter (for availing the exemption) or the Advance release order (ARO for availing the refund), which is issued from the regional office of the DGFT, is required for procuring the goods from indigenous supplier against advance/EPCG authorization. In GST regime only ARO will be issued for procuring the goods from indigenous supplier against advance/EPCG authorization, as there would be no exemption only refund is available under GST for supply against advance/EPCG authorization. This documentation is in addition to normal formalities (such as tax invoice etc.) of GST.

 

Benefits For The Deemed Export As Per GST Laws Are As Under:

• Refund of Tax paid on deemed export in terms of explanation (1) of Section 54 of the CGST Act.
• Countable towards export obligation of Advance/EPCG authorization and also to be counted for determination of net foreign exchange earnings by EOU.(As per FTP provision)
• Input tax credit will be available for tax paid on input, Input services, capital goods used for making the deemed export.

 

Who Will Claim The Refund Of GST Paid On Deemed Export:

In terms of third proviso of rule 89 refund of GST paid on deemed export supplies shall be claimed by

• the recipient of deemed export supplies; or
• the supplier of deemed export supplies in cases where the recipient does not avail of input tax credit on such supplies and furnishes an undertaking to the effect that the supplier may claim the refund (No objection certificate).

It is general rule that the refundable amount is credited to consumer welfare fund and to be paid to the applicant only in scenario listed in Sec 54(8) (doctrine of unjust enrichment) have to be satisfied that is the refundable amount must be shown in the books of account as refundable that is not treated as cost, in other word incidence of the duty is not passed on to any other person.

 

Documents Required For Claiming GST Refund On Account Of Deemed Export Supply.

• a statement containing the number and date of invoices along with such other evidence as may be notified in this behalf, in a case where the refund is on account of deemed exports.
• Acknowledgment by the Tax officer of holder of the Advance Authorization or Export Promotion Capital Goods Authorization that said supply is receipt by the holder of the authorization.
• A copy of the tax invoice under which such supplies have been made by the supplier, duly signed by the recipient Export Oriented Unit that said deemed export supplies have been received by it.
• An undertaking by the recipient of deemed export supplies that no input tax credit on such supplies has been availed of by him.
  If the refund is applied by the supplier following additional documents is also required:
• An undertaking by the recipient of deemed export supplies that he shall not claim the refund in respect of such supplies and the supplier may claim the refund.

 

Documents Required For Satisfaction Of DGFT For Fulfilment Of Export Obligation Towards Advance/EPCG Authorization On Account Of Deemed Export

• Acknowledgment by the Tax officer of holder of the Advance Authorization or Export Promotion Capital Goods Authorization that said supply is receipt by the holder of the authorization

 

Time Limit Of Application For Refund In Case Of Deemed Export

Refund of GST paid on deemed export is not automatic as there will be no shipping bill is required to be field in case of deemed export, a separate application in form RFD-1 to be applied for refund, within 2 year from the date of filling of return relating to such deemed export. Disclosure of deemed export in GST return

 

Table-6 Of The GSTR Return-1 As Introduced By The N/N 45/2017 – CT Dated 13.10.2017

GSTIN of Recipient	Invoice Details			Shipping bill/ Bill of export		Integrated Tax			Cess
	No.	Date	Value	No.	Date	Rate	Taxable Value	Amount
1	2	3	4	5	6	7	8	9	10
6A. Exports
6B. Supplies made to SEZ unit or SEZ Developer
6C. Deemed exports

 

In notified form only integrated tax is specified in regard to deemed export which is prone to litigation, because type of levy will depends upon place of supply and location of supplier. Further deemed export cannot be equated with the physical export, if so then deemed export can also be made under LUT without payment of tax which is not intention, deemed export is subject to levy of GST which is eligible for refund. Further, deemed export is not only subject to the IGST, as it can be intra state as well as interstate in terms of section 7 read with section 8 of the IGST Act, so CGST and SGST can also be levied if deemed export is intra state supply. So there is need to suitably amend the form GSTR-I.