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Guide to understanding GST on export of goods from India

In this blog, understand the role of GST in exports and how to claim ITC and other refund procedures.
Packing list for export
The implementation of the Goods and Service Tax (GST) has been a significant act of the Government of India. Under GST, exports are treated as zero-rated supply, which gives exporters eligibility to claim a refund of the GST paid on input (goods or raw material purchased to be utilized in the manufacturing of the final product, i.e. the output)1. All exports are treated as inter-state supplies. The exporter can claim a refund of GST paid in two ways:

• Export under bond/Letter of Undertaking (LUT) without payment of tax and claim a refund of ITC (Input Tax Credit).
• Pay IGST by utilizing ITC at the time of export and then claim a refund of IGST paid.

What is IGST (Integrated Good and Services Tax)?

IGST is Integrated Good and Services Tax, which is nearly equal to the sum of Central GST and State GST. It is levied by the central government on all inter-state transactions of taxable goods and services. IGST helps in maintaining the integrity of the Input Tax Credit (ITC) in inter-state supplies2.

What is ITC (Input Tax credit)?

Input Tax credit happens when the sum of taxes paid on input (goods imported to produce the final product for export) is greater than the tax to be paid on the output (products being exported). GST allows refund of unutilized ITC, in case of zero-rated supply.

Documents required to claim ITC on export of goods under GST

ITC can be availed by a registered exporter after furnishing FORM GSTR-23. Some of the documents required are:
• Invoice issued by the supplier of goods according to the provisions of Section 31 of GST
• Debit note issued by the supplier
• Bill of entry
• Document issued by the Input service distributor as per the rules of GST

How to claim a refund of GST on export under LUT?

Letter of Undertaking or LUT is a document filed by an exporter that allows export of products without the payment of IGST, if the given conditions of export are satisfied. According to notification No. 37/2017-Central Tax, filing LUT for exporting goods and services is mandatory. If an exporter does not have LUT, then IGST needs to be paid4.

How to file an LUT (Letter of Undertaking)?

As per the Central Goods and Service Act 2017, if an exporter wants to export products, then it is mandatory to submit LUT. This, in turn, allows them to claim a GST refund. Once filed, Letter of Undertaking is valid for that particular financial year. Hence, unlike refund process, an exporter does not need to go through the procedural requirements every time an export consignment is carried out. It can be filed on the GST portal.

How to claim a refund for IGST?

When IGST is paid using ITC, a refund can be claimed. To claim this refund, a shipping bill is required. The exporter is required to fill in and submit FORM GSTR-3 on the GST portal. Once the customs department receives the form, they process a claim for a refund. An amount equal to the IGST paid on each shipping bill is credited to the bank account of the exporter5.

The process of filing documents and licenses has been online and paperless to assist exporters with hassle-free international shipping. Similarly, Indian exporters are opting for e-commerce exports via Amazon Global Selling to take their local products to the world easily.

Easy e-commerce exports with Amazon
Global Selling

As an e-commerce exports program, Amazon Global Selling enables Indian sellers and MSMEs to take their products from India to international marketplaces across 200+ countries and territories. From simple registration to attractive listing and hassle-free shipping, Amazon Global Selling offers international tools and solutions, enabling sellers to reach over 300 million customers.

Frequently Asked Questions

What is deemed exports?
Deemed exports are the transactions where goods supplied do not leave the country.
What is export duty?
Export duty is the tax imposed on the products that are exported.
How does GST work in case of different currencies?
Whenever any currency is exchanged with INR, the value of the tax is equal to the difference in buying rate/selling rate and the RBI reference rate for that foreign currency at that time, multiplied by the total value of the item under export. If the RBI reference rate is not available for that country at that time, the tax value will be equal to the gross amount of INR received by the person by exporting after changing the currency.
Published on June 21, 2022.

Sources:
1. http://www.fieo.org/uploads/files/file/dggst1.pdf
2. https://www.cbic.gov.in/resources/htdocs-cbec/gst/51_GST_Flyer_Chapter21.pdf
3. https://www.cbic.gov.in/resources/htdocs-cbec/gst/gst-31.03.17-itc-rules.pdf
4. https://www.cbic.gov.in/resources//htdocs-cbec/gst/notfctn-37-central-tax-english.pdf
5. https://www.fieo.org/view_section.php?lang=0&id=0,30,1795,1797
6. https://www.investindia.gov.in/team-india-blogs/gst-overall-impact-transformation
7. https://cbic-gst.gov.in/sectoral-faq.html
8. https://www.cbic.gov.in/resources//htdocs-cbec/gst/Benefit.pdf
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*Map not to scale. The map has been used for design and representational purpose only, it does not depict the geographical boundaries of the country. These do not conform to the external boundaries of India recognized by the Survey of India.

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