Export of Service under GST – all questions answered
Category : GST
There is a lot of confusion in the minds of service exporters about registration and refund under GST.
What is “export of service” under GST?
- “Export of Services” as defined under Section 2 (6) of IGST Act, 2017means the supply of any service, when –
- the supplier of service is located in India;
- the recipient of service is located outside India;
- the place of supply of service is outside India;
- the payment for such service has been received by the supplier of service in convertible foreign exchange; and
- the supplier of service and the recipient of service are not merely establishments of a distinct person
2. I am 100% export oriented IT company. Do I need to register under GST?
- Exports are considered as inter-state supply as per section 7 of IGST Act.
In case of inter-state supply, registration is mandatory from Re. 1 turnover.
I am a small service provider. My total turnover consists domestic as well as export services. But my turnover does not exceed Rs. 20 Lakh. Do I still need to apply for GST registration?
- Yes, export of service being an inter-state supply, turnover limit of Rs. 20 Lakh is not applicable in this case.
However, for 100% domestic service providers, registration is not mandatory until Rs. 20 Lakh turnover.
Do I need to pay any GST before or after export of service?
- Export of service is ‘zero rated supply’ i.e. the goods or services exported shall not be levied GST.
However, there are two ways to export:
- The goods and services can be exported either on payment of Integrated Goods and Service Tax (IGST) @ 18%, which can be claimed as refund after the goods have been exported, OR
- Export under bond or Letter of Undertaking (LUT) without payment of IGST.
What is the purpose of taking Bond / LUT from service providers?
- As per the rule 96A of the CGST rules, Bond / LUT is for binding the exporter to pay tax due alongwith the interest, within 15 days if the payment against export of service is not received in convertible foreign exchange by exporter within one year from the date of issue of the invoice for such export.
- In such case, the liability of the export shall arise to pay tax (IGST) @ 18% on the value of export.
What if I do not submit any Bond / LUT?
- It is mandatory to file LUT or Bond for export of services, if you want to export without charging GST on the same. In case you do not file the LUT or bond, then you need to pay IGST @ 18% on the service export invoice amount and then claim the refund.
How to submit bond? What should be the amount of Bond?
- As per the government circular, the bond amount shall be equal to the tax amount on the previous year turnover or the expected export turnover.
- e.g. if total expected turnover is Rs.1 crore and the tax rate on my item is 18%, then the bond amount shall be Rs.18 lakh.
- Also a bank guarantee is also required to be furnished alongwith the Bond. Bank guarantee amount shall be calculated at 15% of the bond amount.
- Taking the above example, of turnover of Rs. 1 Cr. the bank guarantee amount shall be 15% of 18 Lakh i.e. Rs. Rs. 2.70 Lakh in such case.
Who can submit Letter of Undertaking (LUT)?
- if the following conditions are satisfied, then only a letter of undertaking can be filed instead of a bond with bank guarantee
- Exporter should have received the due foreign inward remittances amounting to a minimum of 10% of the export turnover, which should not be less than one crore rupees, in the preceding financial year.
- Exporter not been prosecuted for any offence under the Central Goods and Services Tax Act, 2017 (12 of 2017) or under any of the existing laws in case where the amount of tax evaded exceeds two hundred and fifty lakh rupees.
What is the process of claiming refund of the IGST paid at the time of export (not submitting Bond / LUT)?
- Exporter needs to furnish details of export invoices in GSTR-1.
- Also Form GSTR-3 or GSTR 3B (as the case may be ) required to be submitted by the exporter to the common portal of GST.
- On submitting GSTR-3 / 3B the system designated by the Customs shall process the claim of refund and an amount equal to the IGST paid on the shipping bill or bill of export shall be electronically credited to the bank account of the exporter.
How soon will refund in respect of export of goods or services be granted under the GST regime?
- In case of refund of tax on inputs used in exports:
- Refund of 90% will be granted provisionally within seven days of acknowledgement of refund application.
- Remaining 10% will be paid within a maximum period of 60 days from the date of receipt of application complete in all respects.
- Interest @ 6% is payable if full refund is not granted within 60 days.