We are now under 1 Nation, 1 Tax & 1 Market GST Regime. With the beginning of GST, there were many concerns about the procedures particularly relating to the documentation for Export & Import of goods. The Government has recently issued several notifications and guidance notes for Exporters and Importers detailing the procedures. I am here under summarizing the procedures to be followed for the Export & Imports of goods.
HOW TO MAKE ZERO RATED SUPPLY
Under GST Law Export of goods has been treated as “Zero Rated Supply” under Section 16 of the Integrated Goods & Services Tax Act, 2017 (‘IGST Act’). Hence, GST Law provides the following options as mentioned below to a registered tax-payer exporting the goods.
Option A: Export of goods without payment of duty under bond or letter of undertaking (LUT) and subsequently claim the refund of unutilized Input Tax Credits. Here no requirement of payment of IGST.
Option B: Export of goods on payment of IGST and claim the refund of such tax paid on Export of Goods. Here Exporter would be required to pay IGST first then claim the refund of such tax paid on Export of Goods.
FORMAT OF LETTER OF UNDERTAKING OR BOND
The exporter needs to file Bond or LUT prior to export in Form GST RFD – 11 on the common portal (www.gst.gov.in) but due to difficulties faced by trade and industry while filing online GST Policy Wing has issued a Circular No. 2/2/2017-GST Dated 04-Jul-2017 stating physical submission of Bond or LUT to the jurisdictional Deputy / Assistant Commissioner.
WHO CAN FILE LUT (LETTER OF UNDERTAKING) IN PLACE OF BOND
Vide Notification No. 16/2017 – Central Tax the CBEC has clarified that either a registered person having a status holder as specified in paragraph 5 of the Foreign Trade Policy 2015-2020 or who has received the due foreign inward remittances amounting to a minimum of 10% of the export turnover, which should not be less than one crore rupees, in the preceding financial year, and one has not been prosecuted for any offense under the Central Goods and Services Tax Act, 2017 (12 of 2017) or under any of the existing laws in the case where the amount of tax evaded exceeds two hundred and fifty lakh rupees can file LUT in place of Bond for export of Goods and Service or both in the annexure to FORM GST RFD – 11 referred to in sub-rule (1) of rule 96A of the Central Goods and Services Tax Rules, 2017.
LUT shall be valid for twelve months. If the exporter fails to comply with the conditions of the LUT he may be asked to furnish a bond.
Exports may be allowed under existing LUTs/Bonds till 31-July-2017. Exporters shall submit the LUTs/bond in the revised format latest by 31st July, 2017.
WHO CAN FILE BOND
All exporters, not covered by the said notification No. 16/2017 – Central Tax, would submit a bond. The procedure for submission and acceptance of the bond has already been prescribed by CBEC vide circular No. 2/2/2017-GST. The bond shall be furnished on non-judicial stamp paper of the value as applicable in the State in which bond is being furnished.
Due to consignment wise bond would be a significant compliance burden on the exporters. Hence CBEC has directed that the exporters shall furnish a running bond, in case he is required to furnish a bond, in FORM GST RFD -11. The bond would cover the amount of tax involved in the export based on estimated tax liability as assessed by the exporter himself. The exporter shall ensure that the outstanding tax liability on exports is within the bond amount. In case the bond amount is insufficient to cover the tax liability in yet to be completed exports, the exporter shall furnish a fresh bond to cover such liability.
Exporter has to furnish a Bank Guarantee with Form GST RFD – 11 Bond which should normally not exceed 15% of the bond amount.
It is further stated that the Bond/LUT shall be accepted by the jurisdictional Deputy/Assistant Commissioner having jurisdiction over the principal place of business of the exporter.
The exporter is at liberty to furnish the bond/LUT before Central Tax Authority or State Tax Authority till the administrative mechanism for assigning of taxpayers to respective authority is implemented.
FILING OF SHIPPING BILL
The format of the shipping bill has been changed and aligned with IGST Law. An exporter is required to file details of exports in the revised format of the shipping bill. In the shipping bill, the exporter needs to declare the choice of exports whether exports are made without payment of IGST or on payment of IGST with an option between (a) or (b)
FILING OF ARE-1
The requirement of filing ARE-1 has been dispensed for the goods to be exported under the GST Regime.
SEALING OF CONTAINERS
CBEC has prescribed a simplified procedure for self-sealing of containers. Going-forward, an exporter can undertake self-sealing of goods under the supervision of the customs officials (instead of excise officials as done currently). CBEC has decided that the revised procedure of sealing of containers would come into effect from 01-Sep-2017. In the interim, sealing of containers under the supervision of excise officials will continue.
The duty drawback scheme for the export of goods manufactured in India will continue under the GST regime as well. For the initial 03 months, the existing drawback scheme will continue. Hence, exporters will be entitled to claim a higher rate of duty drawback subject to the condition that no credit or refund of CGST / IGST is claimed and no CENVAT credit related to export goods is carried forward (a declaration needs to be filed towards the same). In the post-transition period of three months, the drawback will be limited to customs duties paid on imported goods (as known as “lower rate” presently). For GST paid on the procurement of goods and services, the exporter needs to go for credit or refund.
CONDITION FOR EXPORT OF GOODS/ SERVICES
In the case of goods, Exporter have to export the goods within 3 months from the date of issue of invoice
In case of service, Exporter must be received the convertible foreign currency within one year from the issue of invoice for export
Exporter has to pay tax along with interest within 15 days from the default in the above conditions.
GSTIN – IEC & PAN
Import Export Code (‘IEC’) would be PAN post-01-Jul-2017. GSTIN would be used as an identifier at the transaction level for every import and export transaction.
Basic Customs Duty and Customs Cess, IGST, and Compensation Cess under Section 3(7) and 3(9) of the Customs Tariff Act, 1975 (‘CTA’) will apply on import consignments.
Customs valuation rules will apply for the computation of IGST and Compensation Cess to be paid on imported goods. The following points as mentioned below are relevant in this regard:
IGST is payable on assessable value (as per Section 14 of the Customs Act, 1962) plus (a) basic customs duty; (b) customs cess; (c) anti-dumping duty; (d) safeguard duty; and (b) any other duty of customs
Compensation Cess shall payable on the value taken for levying IGST.
FORMATS FOR BILLS OF ENTRY
Formats of bills of entry have been revised to capture IGST and Compensation Cess details.
Applicability of IGST clarified as follows for the below transitional scenarios:
Cargo imported before 01-Jul-2017 and bill of entry filed after 01-Jul-2017: IGST and Compensation Cess, as applicable, to be paid
Bill of entry filed before 01-Jul-2017 and cargo imported after 01-Jul-2017: Proper officer may recall bill of entry and reassess the same for levy of IGST and Compensation Cess.
N J Singh Comment: Importers can apply for re-assessment or revision of bill of entry
Filing of an ex-bond bill of entry post-July 1, 2017: IGST and compensation cess, as applicable, to be paid.
USE OF EXIM SCRIPS
Scrips (MEIS, SEIS etc.) can be utilized only for payment of basic customs duty (‘BCD’) and additional duties of customs. These scrips cannot be utilized for payment of IGST and Compensation Cess (on imports) and CGST and SGST / IGST (on domestic procurements).
N J Singh Comment: This could pose a challenge in utilizing the scrips as these generally have time validity.
TREATMENT OF SAD PAID ON GOODS IMPORTED BEFORE 01-JUL- 2017
The credit of SAD can be availed on the goods imported before 01-Jul-2017 and can be set off against the GST liability on the supply of such goods in the domestic market post 01-Jul-2017.
ELIGIBLE DOCUMENT FOR AVAILMENT OF CREDIT
Bill of entry to be considered as an eligible document for availing of credit and following needs to adhere:
GSTIN to be mandatorily disclosed on the bill of entry. Provisional IDs can be used during the transition period. Ensuring the details GST paid matches in auto-populated Form GSTR-2 (return for inward supplies)
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