Everything You Need to Know About GST Refund on Export of Services Without Tax
When dealing with exports, understanding the process of GST refund becomes crucial, especially for businesses providing export services. The GST law provides provisions for claiming refunds on zero-rated supplies to ease the burden on exporters. To claim a GST refund, it is essential to understand key terms such as export, place of supply, Letter of Undertaking (LUT), and other crucial elements like foreign exchange regulations. In this guide, we will cover the eligibility criteria, procedure, and documents required for claiming a GST refund for the export of services without payment of GST.
Export of Services: When services are said to be export of services.
To qualify the services as export of services under GST, the below condition needs to be met as specified in the definition of export of services under section 2(6) of the IGST Act, 2017.
export of services” means the supply of any service when-
(i) The supplier of services is situated in India;
(ii) the service recipient is situated outside of India;
(iii) the location of providing services is outside of India;
(iv) the supplier of such service has received payment in convertible foreign exchange 1[or in Indian rupees wherever approved by the Reserve Bank of India]; and
(v) Explanation 1 in Section 8 states that the supplier of service and the recipient of service are not easily establishments of a distinct person;
Explanation of Section 8 of IGST Act 2017: Explanation 1 of Section 8 of IGST Act–
For this Act, where a person has,-
(i) an establishment in India and every other establishment outside of India;
(ii) an establishment in a state or union territory, as well as any other establishment outside that state or union territory; or
(iii) in a State or Union territory and any other registered establishment in that State or Union territory, those establishments will be treated as separate persons.
Section 13 of IGST Act, 2017: Place of supply of goods imported into, or exported from India. –
The place of supply of services shall be the location of the recipient of services except for some specified services as defined in section 13 of the IGST Act, 2017.
Export is treated as zero-rated supply.
Zero rate Supply means as per section 16(1) of IGST Act,2017 any of the supply pertaining to the export of services or goods or both, supply of goods or services both to SEZ.
Payment of GST on Export if certain conditions are not fulfilled
Under the provisions of rule 96A of CGST Rule 2017,
Rule 96A of CGST Rule 2017
(1) Any registered person availing the option to supply goods or services for export without payment of integrated tax shall furnish, before export, a bond or a Letter of Undertaking in FORM GST RFD-11 to the jurisdictional Commissioner, binding himself to pay the tax payable along with the interest stipulated in sub-section (1) of section 50 within a term –
(a) fifteen days after the expiry of three months [or such longer period as may be granted by the Commissioner] from the date of issue of the invoice for export, if the commodities are not exported from India; or
(b) if the payment of such services is not received by the exporter in convertible foreign exchange or Indian rupees, wherever permitted, fifteen days after the expiry of one year, or the period allowed by the Foreign Exchange Management Act, 1999 (42 of 1999), including any extension of such period as granted by the Reserve Bank of India, whichever is later, from the date of issue of the invoice for export, or such additional period as may be allowed by the Commissioner.
In a nutshell, if export proceeds are not realized within a period of one year or time allowed under FEMA ( 9 months) whichever is later from the date of invoice, the exporter has to pay the GST on export with 18% interest.
Eligibility of GST refund in case of Export of Services
Considering the provision of section 16(2) of the IGST Act, 2017, Credit of Input Tax credit can be availed for making the Zero-rated supply such even if the supply is the exempt supply.
Pursuance to the provision of section 16(3) of the IGST Act, the registered person making the supply of zero-rated supply eligible for a GST refund of the unutilized GST amount
Frequency for filing the GST refund
Considering the provision of section 54(1) of CGST Act, 2017, Any person claiming GST refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may apply before the expiry of two years from the relevant date.
Considering the provision of Circular No. 37/11/2018-GST dated March 15, 2018, it is hereby clarified that the exporter may make a refund claim for one calendar month/quarter or by combining consecutive calendar months/quarters. The calendar month(s) / quarter(s) for which the refund claim was filed, however, cannot be extended across multiple financial years.
In conclusion, we can say a refund of GST can be filed within 2 years from the date of receipt of payment or invoice whichever is later.
Documents required for filing the GST refund
Considering rule 89 of CGST Rule 2017 read with Circular No. 37/11/2018-GST, the following documents are required along with the application for GST refund:
- Bank Realization certificate (BRC)/Foreign inward remittance certificate (FIRC) for payment received either in INR or foreign currency.
- BRC/FIRC would be required even if payment is received either through wire transfer, PayPal payonner, or any other mode.
- Certificate from CA if the amount of refund exceeds 2 Lakhs INR.
- All copies of procurement Invoices either from domestic supplier or foreign supplier of which GST refund is claimed.
- All copies of export invoices.
- Refunds will be calculated proportionate to the realization of export proceeds for services or domestic taxable sales.
- Any other documents including agreement copy as may required by the officer
Conclusion
In summary, claiming a GST refund for export of services involves meeting specific conditions and adhering to timelines laid out by GST law. Exporters need to ensure compliance with provisions of Section 16 of IGST Act, Rule 96A of CGST Rules, and the guidelines under FEMA to avoid penalties. By submitting necessary documents like the Bank Realization Certificate (BRC) and CA Certificate, exporters can efficiently claim their refunds within the stipulated period. Make sure to file your GST refund application within the two-year limit to secure your refund without any hassles.
We at Sterling Tax Partners, assist the client for filing and getting the GST refund as per the process prescribed under various provision of GST Act. We also streamline and automate the process of compliance considering various applicable statutory provisions.
For more details, contact at below details.
Sterling Tax Partners LLP
Unit No. 729, JMD Megapolis, Sector-48, Gurugram-122012
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