How GST Impact Export of Goods and Services Explained

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    Blog posted on : 17-11-2020

    How GST Impact Export of Goods and Services Explained

    The tax on goods and services has a significant influence on India's exports as many of the revenue problems are economically important. Following the introduction of the goods and services levy, it was observed that the sector continued to raise revenue and capital problems within the first month of compliance. And now almost 3 months after the spread of GST, the export sector is reportedly facing difficult times due to the unavailability of refunds on time.


    It was agreed, at the 22nd GST Council meeting at the latest, that six-month tax exemptions would be eligible for exporters. It is also agreed that refunds would be reimbursed by cheques on 10 and 18 October for the months of July and August respectively. Exporters are still removed from heavy taxes and 0.1% of the exempt tier tariff has been created.


    The Government of India's aim is to increase the production and efficiency of India's exports and the numerous tax advantages provided to exporters. GST was introduced on 1 July and yet there could still be some ambiguity among the exporters as to the feasible effects of the new regime on this business. Traders may like to know how the exported goods and the amount of tax charged on the raw material/input used will be affected by GST. In order to clarify this confusion, the Government of India has also exchanged notifications and suggestions with the public regarding the applicability of CGST, SGST, UTGST, Cess, and GST rates. In this article, we will learn How GST Impact Export of Goods and Services – Explained


    How to apply GST on shipments of goods and services


    According to the previous regulations, in lieu of the duty charged on goods for the selling of the exempted products, a tariff drawback was provided. Claiming the downside of duty turned into a major activity. In the GST, only customs duties imposed on imported inputs or on central excise duty charged on petroleum or tobacco products used as inputs or as fuel for captive power generation will be subject to the drawback of customs duties. There was however, confusion regarding the refund of the input tax paid by the exporters.


    Therefore in relation to the above-mentioned problem, the Government of India released a notice which helped to address concerns concerning the assertion of an input tax credit (ITC) on zero-rated exports. An exporter trading in GST zero-rated goods can under the following options, request a refund for zero-rated supplies, as follows:

    1 This involves the provision of goods or services, or both, under a bond or under a Letter of Undertaking (LUT), according to the terms, precautions, and procedures that may be required, without the charge of the incorporated tax and, consequently, the repayment of the unused input tax credit. The exporter is expected to submit an application for a refund on the common GST site, either directly or via the GST Commissioner's facilitation center. Until filing an application for a refund, an export manifest or documentation must be issued under the Customs Act.

    2 Any exporter or any United Nations or Embassy or other entity or entity referred to in Section 55 which supplies products or services, or both in compliance with such conditions, safeguards and procedures as may be prescribed and payable by the IGST may request that the tax paid on the goods or services supplied, or both, be refunded. The claimant is expected to apply for a refund in compliance with the detailed requirements set out in Section 54 of the CGST Act.


    Documents Needed to Demand Export Refunds

    • Below is a list of important documentation required to seek a refund:
    • A return copy which provides evidence of the payment of the obligation.
    • And a copy of the bill.
    • Any documents showing that the duty to pay tax has not been passed on, such as CA registration or self-certification.
    • Any other document that is required by the Government of India.


    Labor-Intensive Industries Effect of GST


    It noted that the labor-intensive industry after GST introduction was deteriorating, including ready-made clothes, gems and jewelry, carpets, and pharmaceuticals. Although arriving at the exact figures, a 40 percent direct decrease in the production of handmade carpets was seen in the month of July as a comparison of the data shipments from the previous year. Both this resulted due to the complicated documentation introduced for the first time in the industry and the rigid compliance-based text framework. Mr. Mahavir Sharma, Chairman of the Promotion Council for Carpet Export, said We are getting price resistance from U.S. importers as they are worried about the price increase that will be passed on to them In the history of exports, India managed a total of INR 10000 crores of handmade carpet exports last year.