Understanding the concept of Export of Services and refund of unutilised amount of GST pertaining to export of Services

Before understating the procedure for GST refund of GST for Export without payment, we should know the meaning of certain thing like export, place of supply, LUT etc.

Export of Services: When services is said to be export of services.

To qualify the services as export of services under GST, below condition needs to be meet as specified in definition of export of services under section 2(6) of IGST Act, 2017. 

export of services" means the supply of any service when,-

(i) the supplier of service is located in India;

(ii) the recipient of service is located outside India;

(iii) the place of supply of service is outside India;

(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange ¹[or in Indian rupees wherever permitted by the Reserve Bank of India]; and

(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;

Exlplianation1 of Section 8 of IGST Act 2017: Explanation 1of Section 8 of IGST Act.-

For the purposes of this Act, where a person has,-

(i) an establishment in India and any other establishment outside India;

(ii) an establishment in a State or Union territory and any other establishment outside that State or Union territory; or

(iii) an establishment in a State or Union territory and any other establishment registered within that State or Union territory, then such establishments shall be treated as establishments of distinct 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 some specified services as defined in section 13 of IGST Act, 2017.

Export is treated as Zero rated supply

Zero rate Supply means as per section 16(1) of IGST Act,2017 means any of the supply pertaining to export of services or goods or both, supply of goods or services both to SEZ.

Payment of GST on Export is certain conditions are not fulfilled

Pursuant to 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, prior to export, a bond or a Letter of Undertaking in FORM GST RFD-11 to the jurisdictional Commissioner, binding himself to pay the tax due along with the interest specified under sub-section (1) of section 50 within a period of -

(a) fifteen days after the expiry of three months 3[or such further period as may be allowed by the Commissioner,] from the date of issue of the invoice for export, if the goods are not exported out of India; or

(b) fifteen days after the expiry of one year, or the period as allowed under the Foreign Exchange Management Act, 1999 (42 of 1999) including any extension of such period as permitted by the Reserve Bank of India, whichever is later, from the date of issue of the invoice for export, or such further period as may be allowed by the Commissioner, if the payment of such services is not received by the exporter in convertible foreign exchange or in Indian rupees, wherever permitted by the Reserve Bank of India.

In nutshell, we can say If export proceeds is not realized within period of one year or time allowed under FEMA ( 9 month) 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 IGST Act, 2017, Credit of Input Tax credit can be availed for making the Zero-rated supply although such even if  supply are the exempt supply.

Pursuance to the provision of section 16(3) of IGST Act, registered person making supply of zero rated supply eligible for GST refund of unutilized GST amount

Frequency for filing the GST refund

Considering the provision of section 54(1) of CGST Act, 2017, Any person making the claim of GST refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before expiry of two years from the relevant date.

Considering the provision of Circular No. 37/11/2018-GST  dated 15th March 2018, it is hereby clarified that the exporter, at his option, may file refund claim for one calendar month / quarter or by clubbing successive calendar months / quarters. The calendar month(s) / quarter(s) for which refund claim has been filed, however, cannot spread across different financial years

In conclusion, we can say refund of GST can be filed within 2 years from the date of receipts 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, following documents are required along with application of 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 or payonner or any other mode.
• Certificate from CA if amount of refund exceeds 2 Lakhs INR.
• All copy of procurement Invoices either from domestic supplier or foreign supplier of which GST refund is claimed.
• All copy of export invoices.
• Refund will be calculated proportionate to realization of export proceeds for services or domestic taxable sale
• Any other documents including agreement copy as may required by officer