We here under providing update on Import & Exports under Goods & Service Tax laws.
Definition of India in GST:
Section 2 (56) of CGST Act, 2017 defines “India“, which means the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and sub-soil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 (80 of 1976), and the air space above its territory and territorial waters.
Meaning of Export & Import of Goods:
Section 2 (5) defines of IGST Act, 2017 defines – “Export of Goods”, with its grammatical variations and cognate expressions, means taking out of India to a place outside India.
Section 2 (10) defines of IGST Act, 2017 defines – “import of goods” with its grammatical variations and cognate expressions, means bringing goods into India from a place outside India.
Meaning of Export & Import of Services:
“Import of Services” as defined under Section 2 (11) of IGST Act, 2017 means the supply of any service, when –
1.The supplier of service is located outside India;
2.The recipient of service is located in India; and
3.The place of supply of service is in India
Meaning of Export & Import of Services:
“Export of Services” as defined under Section 2 (6) of IGST Act, 2017 means the supply of any service, when –
1.the supplier of service is located in India;
2.the recipient of service is located outside India;
3.the place of supply of service is outside India;
4.the payment for such service has been received by the supplier of service in convertible foreign exchange; and
5.the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;
6.Explanation 1.— For the purposes of this Act, where a person has,—
· an establishment in India and any other establishment outside India;
· an establishment in a State or Union territory and any other establishment outside that State; or
· an establishment in a State or Union territory and any other establishment being a business vertical registered within that State or Union territory then such establishments shall be treated as establishments of distinct persons.
For example: Reliance Consultants in Mumbai, Maharashtra, provides business consultancy services to ABC Engineering in Australia. The payment for the service has been received in Australian Dollars.
In this case, Location of supplier: Mumbai, Maharashtra
Location of recipient: Australia
Place of supply: Place of supply will be the location of the recipient, i.e. Australia.
Payment for the service: Payment for the service has been received in convertible foreign exchange, i.e. Australian Dollars.
Treatment of Exports under GST:
As per the provisions of IGST law, export of goods and/or services are to be treated as “zero rated supplies” and a registered taxable person exporting goods or services shall be eligible to claim refund under one of the following two options:
· Export under bond or letter of undertaking without payment of Integrated Tax and claim refund of unutilized input tax credit.
· Export on payment of Integrated Tax and claim refund of the tax so paid on goods and services exported. The aforesaid refunds will be subject to rules, safeguards and procedures as may be prescribed.
· Exports are being zero rated, and therefore input taxes paid would be allowed as refund. However, to determine whether the services qualify as export, it would be important to analyze the conditions prescribed for “export of service”.
Scheme of Taxation on Imports:
As per provisions of the IGST law import of goods into India shall be deemed to be a supply in the course of inter-State trade or commerce. It has also been provided that Integrated Tax on goods imported into India shall be levied and collected in accordance with the provisions of Section 3 of the Customs Tariff Act, 1975 at the point when duties of Customs are levied on the said goods under the Customs Act, 1962, on a value as determined under the Customs Tariff Act, 1975. The Taxation Laws (Amendment) Act, 2017 provides that IGST on imports will be levied at value of imported article as determined under the Customs Act plus duty of customs and any other sum chargeable in addition to customs duty (excluding GST and GST Cess). This in effect makes levy of IGST at par with present levy of CVD which is on basic value plus customs duty.
As per the definition of ‘supply’ under CGST law, import of services for a consideration whether or not in the course or furtherance of business is deemed to be supply and as per the IGST law, supply of services in the course of import into the territory of India, shall be deemed as supply of services in the course of inter- State trade or commerce. Accordingly, Integrated Tax would be levied on import of services. Although the provisions are yet to be notified, the Integrated Tax on import of services would be payable by the recipient under reverse charge. Further, there would be no change in applicability of countervailing duty levied under section 9BB of the Customs Tariff Act, 1975 (and different from the additional duty of Customs levied under section 3, ibid., also known as CVD), anti-dumping or safeguard duties, where ever imposed by the Government.
Taxes on Import to continue after GST:
Even after introduction of GST following duties may not be subsumed under GST regime and they may continue to be levied as usual. These duties are:
· Basic Customs Duty
· Anti-Dumping Duty
· Safeguard Duties
Exemptions for SEZ units:
a. IGST Exemption:
Any supply to SEZ Unit has been made exempt vide Notification No. 64/2017 – Customs dated 5th July, 2017.
Any supply from SEZ Unit to DTA shall be treated as Imports and would be taxable under Reverse Charge Basis at the end of the recipient.
Rest other thing it will be considered as part of India.
Therefore, suppliers of goods or services or both to any recipient in the SEZ can avail the following:
• Make supply under bond or LUT without payment of IGST and claim credit of ITC; or
• Make supply on payment of IGST and claim refund of taxes paid.
Refund of input tax credit in case of export of goods:
· In case of zero rated supplies made without payment of tax, refund of input tax credit will be available as per proviso (i) to section 54(2) of CGST Act.
· No refund of unitized input tax credit shall be allowed in cases other than exports including zero rated supplies or in cases where the credit has accumulated on account of rate tax on inputs being higher than the rate of tax on output supplies, other than nil rated or fully exempt supplies – first proviso to section 54(3) of CGST Act.
· No refund of unutilized input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty – second proviso to section 54(3) of CGST Act.
· No refund of input tax credit shall be allowed if the supplier of goods or services avails duty drawback of CGST / SGST / UTGST or claims refund of IGST paid on such supplies – third proviso to section 54 (3) of CGST Act.
· Drawback – “Drawback” in relation to any goods manufactured in India and exported, means the rebate of duty, tax or cess chargeable on any imported inputs or on any domestic inputs or input services used in the manufacture of such goods – section 2(42) of CGST Act.
Deemed exports refer to those transactions in which goods supplied do not leave country, and payment for such supplies is received in para 7.02 of Foreign Trade Policy 2015-2020 shall be regarded as ‘deemed exports’, provided that goods are manufactured in India.
As per Foreign Trade Policy 2015-2020, followings are treated as deemed exports:
· Supplies against Advance Authorization/ DFIA
· Supplies to EOU / STP / EHTP / BTP
· Supplies against EPCG authorization
· Supply of marine freight containers
· Supplies to projects against international competitive bidding
· Supplies to projects with zero customs duty
· Supply of goods to mega power projects against International Competitive Bidding
· Supplies to UN Agencies
· Supply of goods to nuclear projects through competitive bidding
· Supplies outside India which do not constitute export of goods or services
Tax treatment of export of goods and services to Nepal and Bhutan:
When these services are being provided to a place outside India from a place in India, a qualifying condition attached to in the definition of Export of Services is realization of payment in freely convertible foreign currency. If the payment is not received in freely convertible currency, then such services will not be treated as exports and in such situations the service provider has to discharge the tax liability.
The Govt. has released the Notification No. 12/2017- Central Tax (Rate), dated the 28th June, 2017 by exempting tax on Supply of services associated with transit cargo to Nepal and Bhutan (landlocked countries).
Exemption to Supply of services having place of supply in Nepal and Bhutan, against Payment in Indian Rupees
Further the Central Government vide Notification No. 42/2017- Integrated tax(Rate) dated 27th October, 2017 made the amendment in the Notification No. 9/2017- Integrated Tax (Rate), dated the 28th June, 2017 whereby a new entry have been inserted in the exemption notification, namely, Supply of services having place of supply in Nepal or Bhutan, against payment in Indian Rupees. Though this great relief was provided to the service providers to these two countries by way of exemption from GST, a missing point is related to availment of Input Tax Credit (ITC). If such services are exempted then ITC cannot be claimed.
In a nutshell Service to Nepal / Bhutan shall be treated as Export of Services irrespective of realization of payment in Indian Rupee. Such services are exempt from payment GST and allowed ITC.
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