In this blog, we look at a query on requirement of registration in case of exporters and eligibility of refunds on exports.
We are in a startup phase. We build products. All our sales are outside India only. Currently, we have no service tax number nor do we take any export benefits anywhere.
- Do we need to register for GST?
- Do we need to charge GST to our customers?
- Do we get tax reimbursement anywhere?
A. Registration under GST:
Yes, any person making a supply of taxable goods or services or both is required to obtain registration in the State from where he is making taxable supplies, if his aggregate turnover in a financial year exceeds twenty lakh rupees (or ten lakhs, in case of Special Category States).
The term “aggregate turnover” means the aggregate of the turnovers of all registrations having the same PAN (computed on all-India basis), comprising the following:
- Taxable supplies (intra-State and inter-State supplies);
- Exempt supplies;
- Exports of goods or services or both.
Further, every person making inter-State supplies is also liable to registration, regardless of the threshold limit for turnover. Exports would also be covered within the meaning of the term “inter-State supply” – which means, even if you are just an exporter of goods (assuming that there are no local supplies), you are required to obtain registration under the GST law.
B. Collecting tax (GST) on supplies made:
Tax should not be collected where the supply amounts to an export. A supply would qualify as an export only under the following conditions:
- Goods: Taking of goods out of India to a place outside India
Note: Tax will be recovered where goods are not exported within three months and fifteen days from date of issue of the invoice for export.
- Services: For a service to qualify as an export, five conditions to be satisfied, which are:
- supplier of services should be located in India;
- recipient of services should be located outside India;
- place of supply of services said to be exported, shall be outside India;
- Payment for the said service is received in convertible foreign exchange;
- supplier and recipient of services are not mere establishments of the same person (viz., the recipient is not a branch or any other form of office of the exporter in India).
Note: Tax will be recovered if payment of such services is not received by the exporter in convertible foreign exchange within one year and 15 days from the date of issue of invoice for export;
Where any transaction does not qualify as an export, as provided above – the supply would be a taxable supply, attracting GST, which can be collected from the recipient.
C. Eligibility of refund on exports:
As exports are zero-rated supplies, the relevant input tax credits are allowed to be utilised against any other output taxes of the exporter. Alternatively, the exporter may claim refund of such taxes, as prescribed.
- Refund of taxes paid on inputs, input services and capital goods which are used in export of goods or services or both, remaining after utilisation towards other output tax liability – where the export is made without payment of taxes; or
- Refund of the IGST paid on export of goods or services or both.
Legislative reference: Section 22 read with Section 24 and 2(6) of the CGST Act, 2017; Section 7 & 8 read with Section 2(5), 2(6) and 16 of the IGST Act, 2017
Authors: Kushal Choudhary and NR Badrinath
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