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Deemed exports under GST: Everything you need to know

Deemed exports under GST refers to transactions where goods are supplied within the country but treated as exports for tax purposes. Learn more in this blog.

Deemed exports under GST in India are supplies treated as exports even though they are not exported outside the country. Such goods are eligible for benefits and incentives similar to actual exports, with concessional GST rates. Recipients can claim refunds or use duty drawback scheme following compliance and documentation requirements.

What is deemed exports under GST?

Deemed exports under GST refers to transactions where goods are supplied within the country but treated as exports for taxation purposes. Despite not crossing borders, they qualify for tax benefits and incentives offered by the government¹.

What categories of transactions qualify as deemed exports?

The categories of transactions that qualify as deemed exports are determined by the government of India under the provisions of Central Government Notification No. 48/2017- Central Tax. These categories include²:

Supply to Advance Authorisation (AA) holder:

When a supplier registered under GST provides goods to an AA holder, it qualifies as a deemed export. This applies to cases where the recipient holds an AA for the import of goods without payment of customs duty.

Supplying capital goods to a recipient holding an Export Promotion Capital Goods Authorisation (EPCG):

It is considered a deemed export under GST as EPCG enables the import of capital goods at a reduced customs duty rate, aiming to enhance export competitiveness.

Supply to units in specific economic zones:

Transactions where a person registered under GST supplies goods to Export Oriented Units (EOUs), Electronic Hardware Technology Park Units (EHTPs), Software Technology Park Units (STPs), or Bio-Technology Park Units (BTPs) are considered deemed exports GST.

Supply of gold by a bank or PSU against Advance Authorisation (AA):

In cases where a bank or Public Sector Undertaking (PSU) supplies gold against an AA, it is categorized as a deemed export GST. This typically involves the supply of gold for manufacturing or export purposes.

Additional conditions for deemed exports to EHTP/STP/BTP units

For transactions to be considered as deemed exports under GST in the case of EHTP/STP/BTP units or EOUs, certain additional conditions must be met⁴:

Prior intimation:

The recipient must provide prior intimation by filing Form A, informing the supplier and relevant GST officers about the details of the goods procured.

Pre-approval by Development Commissioner:

The transaction must be pre-approved by the Development Commissioner.

Tax invoice and supply:

The supplier can issue a tax invoice and proceed with supplying the goods.

Endorsement of tax invoice:

Upon receiving the goods, the recipient should endorse the tax invoice and send a copy to the supplier and relevant GST officers.

How are deemed exports taxed under GST?

Deemed exports under GST are subject to a different taxation approach compared to regular exports. They are not classified as zero-rated supplies. Therefore, the supplier must pay the applicable tax during the transaction, but they can later claim a refund.

Procedure to claim a refund on deemed exports under GST

To claim a refund on the tax paid for deemed exports under GST, the supplier must provide the following documentation³:

Detailed statement:

A comprehensive statement containing invoice-wise information on the goods supplied as deemed exports should be prepared.

Acknowledgment by tax officer:

The supplier needs to obtain an acknowledgment from the tax officer who has jurisdiction over the Advance Authorisation (AA) or Export Promotion Capital Goods (EPCG) holder recipient.

Copy of signed tax invoice:

In the case of Export Oriented Units (EOUs), Electronic Hardware Technology Park Units (EHTPs), Software Technology Park Units (STPs), or Bio-Technology Park Units (BTPs), a copy of the tax invoice, duly signed by the recipient, must be submitted.

Letter of Undertaking (LoU) - No ITC claimed:

The recipient of the goods should provide a Letter of Undertaking stating that no Input Tax Credit (ITC) has been claimed for the said transaction.

Letter of Undertaking (LoU) - No refund claim:

Additionally, the recipient must furnish a Letter of Undertaking stating that they will not claim a refund for the said transaction.

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Frequently Asked Questions

When and how will the RFD-01 refund be processed?

After submitting a refund application in Form RFD-01 and receiving an Application Reference Number (ARN), the application is assigned to a Refund Processing Officer for review. Once approved by the Jurisdictional Authority, the refund amount is issued. Taxpayers can track the progress of their refund application using the monitor status feature.

What is the time limit for filing a refund claim for deemed exports under GST?

The refund claim for deemed exports under GST can be filed within two years from the date of filing the return. It is important to adhere to this time limit to ensure timely processing of the refund application.

Published on July 29, 2023.

Sources:
1. https://www.meity.gov.in/writereaddata/files/DeemedExportScheme(1).pdf
2. https://taxguru.in/goods-and-service-tax/deemed-exports-gst-complete-detailed-analysis.html
3. https://www.dripcapital.com/en-in/resources/blog/deemed-exports-meaning-eligibility-benefits
4. https://cleartax.in/s/gst-taxation-deemed-exports

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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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