I.
Key Definitions
• Customs frontiers of India: The limits of a customs area as defined in the Customs Act of 1962.
• Intermediary: A broker or agent who facilitates the supply of goods or services between two or more
people but does not include a person who supplies those goods or services on their own account.
• Non-taxable online recipient: An unregistered person receiving online information and database access
or retrieval services in a taxable territory.
• Place of business: Includes a place where business is ordinarily carried on, a place where goods are
stored, a place where books of account are kept, or a place where business is conducted through an agent.
• Recipient of supply: A person who pays consideration for the supply of goods or services.
• Zero-rated supply: Supply of goods or services that are for export or to a Special Economic Zone (SEZ).
• Tourist: A person not normally residing in India, who enters India for a stay of not more than six months
for legitimate non-immigrant purposes.
II. Import Taxation Under GST
• Levy of Customs Duty: Customs duties are levied on goods imported into India, as specified under the
Customs Tariff Act of 1975.
• Integrated Goods and Services Tax (IGST): IGST is levied on the import of goods and services.
o IGST is levied at the time of filing the bill of entry for imported goods.
• Valuation for Customs Duty: The value for charging customs duty on imported goods is the value at the
time of importation.
• Input Tax Credit (ITC): The importer can avail of the IGST and GST Compensation Cess paid on
imports, subject to conditions under sections 16 and 17 of the CGST Act.
o This ITC can be used to pay taxes on outward supplies.
o The ITC of GST Compensation Cess can only be used for payment of GST Compensation Cess.
• Import of Services: Import of services is treated as a supply, and IGST is payable on it.
o Services imported from a related person or establishment outside India, in the course or
furtherance of business, are treated as supply even without consideration.
o However, free services from entities like Google or Facebook are not considered supply.
• Online Information and Database Access or Retrieval (OIDAR) Services:
o These include services like e-books, movies, software, digital content, data storage, and online
gaming provided through the internet.
o If the supplier of OIDAR services is located outside India, and if the invoice identifies the service
and its supplier, the supplier is responsible for registration.
o The responsibility for payment of IGST lies with the supplier of OIDAR services located outside
India.
o If the supplier fails to comply with GST provisions, any information related to the supply can be
blocked.
o A non-taxable online recipient is not responsible for paying GST on OIDAR services.
III. Export Taxation Under GST
• Zero-Rated Supply: Exports of goods or services and supplies to SEZ developers/units are considered
zero-rated.
• Types of Exports
o Physical Exports: Require taking goods out of India to a place outside India. India is defined as
extending to the limits of its maritime zone, which is 200 nautical miles from the coastal baseline.
o Deemed Exports: Certain supplies are notified as deemed exports but are not zero-rated by
default. These supplies do not leave India.
▪ Examples include supply of goods to Advance Authorisation (AA) holders, Export Promotion
Capital Goods (EPCG) Authorisation holders, and Export Oriented Units (EOU).
▪ Deemed exports are subject to GST and can be made on payment of tax.
• Export of Goods:
o The supply of goods from a non-taxable territory to another non-taxable territory is not considered
a supply.
o High sea sales, where goods are sold after dispatch from the port of origin but before clearance for
home consumption, are not treated as supply of goods or services.
o The value of high sea sales is also not included in the value of exempt supply for the purpose of
reversal of ITC.
• Export of Services:
o Supply of service qualifies to be an ‘export of service’ if the supplier is located in India, the
recipient is located outside India, the place of supply is outside India, payment is received in
convertible foreign exchange or Indian rupees as permitted by RBI, and the supplier and recipient
are not merely establishments of distinct persons.
o If a part of the service is outsourced, the entire value is considered as export of services if the
invoice is raised by the Indian entity, and payment for the entire amount is received in convertible
foreign exchange.
o The services provided by a foreign entity to a client based in a third country, where the contract is
with an Indian entity, is considered import of services by the Indian entity, which would be liable
to pay IGST on it under reverse charge.
o Services provided by an Indian establishment to its foreign establishment are exempt from IGST if
the place of supply is outside India.
• Zero Rated Supplies (ZRS)
o Registered persons making ZRS are eligible to claim refund of unutilized ITC.
o ZRS can be made under bond or Letter of Undertaking (LUT) without payment of IGST and claim a
refund of unutilized ITC.
o Alternatively, certain notified classes of persons can make ZRS, or certain classes of goods or
services can be exported, on payment of IGST and claim a refund.
o In case of non-realization of sale proceeds, the supplier of ZRS is liable to deposit the refund
received.
• Letter of Undertaking (LUT) / Bond:
o Registered persons can furnish an LUT in place of a bond, except those who have been prosecuted
for cases involving an amount exceeding ₹250 lakh.
o LUT is valid for the entire financial year and no separate LUT is needed for each export supply.
o The LUT is accepted by the jurisdictional Deputy/Assistant Commissioner having jurisdiction over
the principal place of business.
o If goods are not exported within the specified time, the facility of export under LUT will be
withdrawn.
• Payment in Indian Rupees (INR)
o Export contracts and invoices can be denominated in freely convertible currency or INR.
o Export proceeds should be realized in freely convertible currency.
o However, export proceeds may also be realized in rupees through a freely convertible Vostro
account of a non-resident bank situated in any country other than a member country of Asian
Clearing Union (ACU) or Nepal or Bhutan.
o Acceptance of LUT for supplies of goods or services to countries outside India or SEZ is permissible
regardless of whether payments are made in INR or convertible foreign exchange.
• GSTIN in Export Documents:
o The GSTIN should be quoted in the bill of entry for payment of IGST on import of goods.
o The GSTIN of the supplier and the tax invoice number should be mentioned in the shipping bill/bill
of export.
o Merchant exporters may exclude commercially sensitive information while providing copies of
shipping bills to registered suppliers.
• Refunds in Export:
o The government may specify classes of persons who can make zero-rated supply on payment of
integrated tax and claim a refund.
o A registered person making zero-rated supply can claim a refund of unutilized ITC.
o In case of non-realization of sale proceeds, the supplier of ZRS is liable to deposit the refund so
received.
• If a person fails to export goods, they will have to pay the tax due with interest.
• The details of export invoices should be submitted in GSTR-1.
• Special Economic Zones (SEZ):
• Supplies to a SEZ unit/developer are considered zero-rated, but only if they are for authorized operations.
o An endorsement to this effect shall have to be issued by the specified officer of the Zone.
• Services provided to a SEZ unit/developer such as short-term accommodation, conferencing, and
banqueting are treated as inter-state supplies.
• Manufacturer Exporters vs. Merchant Exporters:
o A manufacturer exporter is someone who exports goods manufactured by them.
o A merchant exporter is someone engaged in trading activity and exports or intends to export
goods.
o The transaction between a manufacturer and a merchant exporter is a supply and is subject to
GST.
IV. Refund of Taxes
• General Provisions:
o The GST law provides for a streamlined and standardized online refund process.
o Any person can claim a refund of tax, interest, penalty, fees, or any other amount paid.
• Time Limit for Claiming Refund:
o Refund applications must be filed within 2 years from the relevant date.
o The time limit does not apply to refund of excess balance in the electronic cash ledger.
• Relevant Date
o For goods exported by sea or air, the date on which the ship or aircraft leaves India.
• For goods exported by land, the date on which the goods pass the frontier.
• Application for Refund
o Refund claims must be filed electronically in Form GST RFD-01.
• Refund of additional IGST paid on account of upward revision in price of the goods subsequent to exports
can be claimed using Form GST RFD-01.
• Refund of excess balance in the electronic cash ledger can be claimed in Form GST RFD-01.
• Documentary Evidence:
o The main document is a statement of relevant invoices/shipping bills.
o Documentary evidence should establish that a refund is due and that there is no unjust
enrichment.
o If the refund amount is less than ₹2 lakh, a declaration stating there is no unjust enrichment is
sufficient.
o If the refund amount exceeds ₹2 lakh, a certificate from a Chartered Accountant or Cost
Accountant is required.
o Neither a declaration nor a certificate is required for refund of excess balance in the electronic cash
ledger.
o Documentary evidence may not be needed for certain types of refunds.
▪ For instance, a Bank Realisation Certificate (BRC) or Foreign Inward Remittance Certificate
(FIRC) are not pre-conditions for refunds related to export of electricity.
o Specific documents may be required for refunds related to export of goods, deemed exports, or
services to SEZ units/developers.
• Unjust Enrichment:
o The principle of unjust enrichment states that a refund will not be granted if the tax burden has
been passed on to the consumer.
o However, this principle does not apply in certain cases like refund of tax paid on exports, refund of
unutilized ITC in case of zero-rated supplies, or refund of tax in case of inverted duty structure.
o Refunds are paid to the applicant in the cases of export of goods/services, inverted duty structure,
and deemed exports if the recipient does not avail of ITC on such supplies.
• Refund of ITC on Export
o Refund of ITC is allowed if the goods are exported out of India, but a refund of unutilized ITC shall
not be allowed if the exported goods are subject to export duty.
o Refund of unutilized ITC is restricted to the extent that invoice details are reflected in Form GSTR-
2B.
o The formula for calculating the refund of ITC on zero-rated supply is: (Turnover of zero-rated
supply of goods + Turnover of zero-rated supply of services) x Net ITC / Adjusted Total Turnover.
o Net ITC includes ITC on inputs and input services. It does not include capital goods.
o Adjusted total turnover includes everything other than exempt supply and supplies where the
supplier is claiming benefit of deemed export or goods procured at point zero, 5% CGST, point
zero, 5% is GST. That is merchant export.
o Turnover of zero-rated supply of goods is the value at which the zero-rated supply was made or
1.5 times the domestic value, whichever is lower. The value of exported goods is the FOB value
declared in shipping bill or tax invoice, whichever is lower.
o The formula for calculating the refund on account of inverted duty structure is: (Turnover of
inverted rated supply of goods x Net ITC / Adjusted Total Turnover) – Tax payable on inverted
rated supply of goods.
• Refund Process
o On a complete application, an acknowledgment is issued.
o The proper officer scrutinizes the application within 15 days, and if found complete, an
acknowledgment is issued.
o If there are deficiencies, the officer issues a deficiency memo, requiring the applicant to file a fresh
refund application. The time period between the filing of the original refund claim and the
communication of the deficiencies is excluded from the 2-year time limit.
o The applicant can withdraw the refund claim before the issuance of the refund sanction order.
o Provisional refund of 90% of the claimed amount is granted within 7 days from the date of
acknowledgement for certain categories of zero-rated supplies.
o The proper officer will issue a payment order, which is electronically credited to the applicant's
bank account.
o If the refund is not sanctioned within 60 days of a complete application, interest at 6% per annum
is payable to the applicant.
o If the refund is rejected, a notice is issued to the applicant, who has 15 days to respond.
o Refunds can be withheld if there are pending tax amounts or if the goods are exported in violation
of the Customs Act.
• Refunds to UN Bodies, Embassies etc.:
o Supplies to UN bodies and embassies may be exempt.
o The Government may specify certain agencies, institutions, and embassies that are eligible for a
refund.
o Eligible entities can claim a refund quarterly.
• Consumer Welfare Fund (CWF):
o Amounts of refund that are not payable to the applicant are credited to the CWF.
o The CWF is used to promote and protect consumer welfare.
o An amount equal to 50% of the IGST determined under section 54(5) shall be credited to the CWF.
• Interest on delayed refunds
o Interest is payable on delayed refunds at the rate of 6% per annum. However, any time period
beyond 15 days which the applicant takes to submit the documents, and any period which the
applicant takes for validating the bank account are excluded from calculation of the period for
delayed refund.
▪ Interest on refund arising from a court order is 9% per annum.
V. Additional Points
• Simplified Registration Scheme: This scheme applies to suppliers of online money gaming services.
• Merchant Exporters:
o Suppliers of goods to merchant exporters at a concessional rate are eligible for refunds on account
of inverted tax structure.
o The recipient must export the goods within 90 days of the date of the invoice.
o The recipient shall indicate the GSTIN of the supplier and invoice number issued by supplier in the
shipping bill/bill of export.
o The merchant exporter should be registered with the export promotion council.
• Goods sent for sales promotion: If goods are sent on a sales promotion basis, refund will be granted
only if the goods are accepted within 6 months, and if not accepted tax will be payable.
• Electronic Cash Ledger: Any balance in the electronic cash ledger can be refunded without any time
limit.