Imports in GST: Under the GST regime, imported goods and services are subject to Integrated GST (IGST) in addition to customs duties. The total value for tax purposes includes both the customs duties and IGST. Importers are eligible for Input Tax Credit (ITC) on the IGST paid, which can be used to offset future tax liabilities.
Exports in GST: Exports are considered zero-rated supplies under the IGST Act. This means that export goods and services are exempt from GST, but exporters can claim a refund on the taxes paid on inputs and other related expenses. New provisions enable faster refund processing, including a 90% provisional refund within 7 days for exporters.
Special Economic Zones (SEZs): Supplies to SEZs are treated as zero-rated, allowing businesses to claim refunds on the input taxes paid. SEZ developers and units can avail of this benefit, further promoting international trade.
Key Updates:
- E-Invoicing for Exporters: As per the latest updates, exporters with a turnover above Rs. 10 crores must comply with e-invoicing requirements.
- Refunds: The GST council has made provisions for faster refunds, helping exporters with liquidity issues.
GST on Export of Services for Zero-Rated Supplies and Refunds
- GST on Import of Services: Under the GST regime, when services are imported into India, the recipient is liable to pay tax under the reverse charge mechanism (RCM). This means that instead of the service provider charging GST, the recipient must pay the applicable tax directly to the government. Businesses need to be aware of the RCM provisions to ensure compliance when engaging with foreign service providers.
- GST on Export of Services: Exports of services are treated as zero-rated supplies under GST, meaning they are exempt from the tax. However, exporters are entitled to a refund of the input taxes paid on goods or services used in providing the export services. To qualify as an export, the service must meet specific criteria set under the IGST Act, including the service being supplied to a foreign recipient.
- Customs Duty vs GST: While both customs duty and GST are levied on imported goods, they differ in their application. Customs duty is imposed at the time of import, while GST (in the form of IGST) is charged on the value of the goods after adding customs duties. Importers can claim Input Tax Credit (ITC) for the IGST paid, but customs duty is generally non-refundable unless specified under specific provisions.
- Impact of GST on Free Trade Agreements (FTAs): GST impacts imports from countries with which India has Free Trade Agreements (FTAs) by reducing or eliminating the customs duties typically imposed on those goods. However, despite these duty reductions, GST (IGST) is still applicable on the imported goods, and businesses must comply with both the FTA provisions and the GST requirements to ensure smooth trade.
- Role of Customs Authorities in GST Implementation: Customs authorities play a critical role in the implementation of GST for imports and exports. They are responsible for ensuring that goods entering or leaving India are correctly taxed, including verifying the IGST paid on imports. Customs officers also assist in managing the bond and refund processes for exporters and ensure compliance with both GST and customs laws during cross-border trade.
Import of services under GST
According to IGST section 2(11) supply of any service shall be treated as “ Import of services under GST ” when:
- The supplier of service is located outside India
- The recipient of service is located in India
- The place of supply of service is in India
Further establishments of a person in India and outside India shall be treat-ed as establishment of separate persons. Also any person carrying business through branch or agency office in any territory shall be treat-ed
as having an establishment in that territory.
Supply of services in the course of import into the territory of India shall be treat-ed as supply of services. Therefore such import of service under reverse charge system would subject to IGST on reverse charge base system. At the same time the term supply also includes importation of service, whether or not brought for furtherance of business.
Import of services from related person
As per CGST Section 7 schedule I, below activities will be treated as supply from related person even if made without any consideration.
- Supply of services between related persons as specified in section 25, when made in the course or furtherance of business.
- Import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.
By ensuring compliance with these guidelines, businesses can leverage GST provisions to their advantage when engaging in international trade.