Taxation of Deemed Exports Under GST

Deemed Exports is not a new term under the indirect tax system. Foreign trade policy entails a detailed discussion and schemes governing the same. Under GST, the term deemed exports are defined under the IGST Act.

Recent Updates on Deemed exports

1st February 2021
Union Budget 2021:
IGST Act was also amended for section 16 that defines a zero-rated supply. Three amendments are made
1. To state that supply to SEZ units /developers will be zero-rated only if it is authorised operations.
2. Only notified persons or supplies of goods/services can avail the status of zero-rated when IGST is paid.
3. foreign exchange remittance will be linked in case of export of goods with the refund.

Meaning of Deemed Exports under GST

Export of goods, in common parlance, means taking goods outside India. Such supplies are treated as zero-rated supplies under GST.  However, the Central Government may notify certain categories of supplies of goods, which would be treated as deemed exports. This means that such supplies shall be treated as exports even if such goods are not taken outside India.

Essential conditions to qualify as Deemed Exports

• Applicable only for the supply of goods (not applicable to services).
• Goods are not required to be taken outside India.
• Such supply of goods must be notified by the Central Government as Deemed exports under Section 147 of the Central Goods and Services Tax Act, 2017 (CGST Act).
• Goods must be manufactured or produced in India.
• Payment can be received in Indian Rupees or in convertible foreign exchange.
• Such supplies cannot be made under Bond / LUT.
• The tax must be paid at the time of supply. Refund of tax paid on such supplies can be claimed.

Supplies notified as Deemed Exports under GST

CGST notification no. 48/2017 – Central Tax dated 18th October 2017 has notified the following supply of goods as deemed exports:

• Supply of goods by the registered person against Advance Authorisation (AA) i.e. Supplier must be registered under GST and recipient must be an Advance Authorisation holder
• Supply of capital goods by the registered person against Export Promotion Capital Goods Authorisation (EPCG)
• Supply of goods by the registered person to Export Oriented Unit (EOU)/ Electronic Hardware Technology Park Unit (EHTP) / Software Technology Park Unit (STP) / Bio-Technology Park Unit (BTP)
• Supply of gold by Bank or Public Sector Undertaking against AA

Note: Deemed exports have also been defined under the Foreign Trade Policy 2015 – 2020 (FTP). However, the definition of deemed exports under FTP is different from the definition under GST law and should not be considered while applying GST provisions. A particular supply of goods can be deemed exports under FTP but may not qualify as deemed exports under GST. The purpose of the two legislations is different.

Difference between Exports and Deemed Exports

For example, Dealer ‘A’ (located in Rajasthan) sells goods to Dealer ‘B’ which is an EOU. B, in turn, sells the goods to a customer ‘C’ in Germany. Supply by A to B is treated as deemed exports. Supply by B to C is treated as exports.  

Taxability of deemed exports under GST

Unlike exports, deemed export supplies are not zero-rated supplies by default. All deemed export supplies will be subject to GST at the point of supply. Supplies cannot be made under Bond or LUT without payment of tax. Tax should be paid on such supply and then be claimed as refund. 

Subject to certain conditions, refund of tax paid can be claimed by either of the following persons:

1. Supplier of goods or
2. Recipient of goods.

Note: The recipient is not eligible to claim the input tax credit (ITC) in case refund of tax paid is being claimed by the supplier.

Additional conditions for deemed exports to EOU/STP/HTP

1. The EOU/ EHTP/ STP/ BTP unit must give prior intimation by filing Form A to the supplier and the jurisdictional GST officer of supplier and recipient.
2. Form A must bear a running serial number and contain details of goods to be procured, which is pre-approved by the Development Commissioner.
3. The supplier must then supply goods under the cover of a tax invoice.
4. The tax invoice must be endorsed by the recipient. Endorsed copy of the same must be sent to the supplier and jurisdictional GST officer of supplier and recipient.
5. Record of such goods received by EOU/ EHTP/ STP/ BTP unit must be maintained in Form B.

Refund of GST paid on deemed exports: Procedure

Documentary evidence required to claim a refund

In case the supplier is claiming a refund of tax paid on deemed exports, the following details/ documents must be produced:

1. A statement containing Invoice-wise details of deemed export supplies made by the supplier.
2. Acknowledgement by jurisdiction tax officer of AA or EPCG holder that the said deemed export supplies have been received OR in case of EOU/ EHTP/ STP/ BTP/ Copy of tax invoice signed by the recipient that said deemed export supplies have been received.
3. Undertaking by the recipient that no ITC has been claimed.
4. Undertaking by the recipient that it shall not claim a refund in respect of such supplies.

Refund form

For obtaining a refund of tax paid on deemed exports, the supplier or recipient is required to file an application in Form GST RFD – 01 with supporting documents. Online filing and processing of refund claims in case of deemed export supplies are allowed. The refund claim can be filed within two years from the date on which return relating to such deemed export supplies is furnished electronically. 

It should be noted that CGST notification no. 49/2017 dated 18th October 2017 also sets out the list of evidence that the supplier of considered export supplies must produce in order to demand a refund.

Declaration in Statement 5B must be filled in and form part of Annexure I of RFD-01 refund application.

Sl. no	Details of invoices/credit notes/debit notes of outward supplies in case refund is claimed by supplier/Details of invoices of inward supplies in case refund is claimed by recipient					Tax paid
	GSTIN of the supplier	No.	Date	Taxable value	Type (Invoice/credit note/debit note)	Integrated tax	Central tax	State or Union territory tax	Cess
1	2	3	4	5	6	7	8	9	10

ITC on inputs taken for manufacture of deemed exports, shall be utilised for sale of taxable supply (other than nil rated or fully exempted goods). A CA certificate is submitted to the jurisdictional commissioner of GST or any other officer authorised by him within six months of such supply.

Reporting requirements in GSTR – 1 and GSTR – 3B

Deemed export supplies are required to be disclosed in Table 6C of Form GSTR – 1. The registered dealer has to give invoice details and tax paid on such supplies.  

GSTIN of recipient	Invoice wise details			Shipping bill / Bill of export		Integrated tax			Cess
	No	Date	Value	No.	Date	Rate	Taxable value	Amt.
6C. Deemed exports

In Form GSTR – 3B, deemed exports are disclosed in Table 3.1 (b) with other zero-rated supplies.

3.1 Details of Outward supplies and inward supplies liable to reverse charge
Nature of supplies	Total taxable value	Integrated tax	Central tax	State / UT tax	Cess
(b) Outward taxable supplies (zero-rated)

Amendment in B2B deemed export invoices is required to be disclosed in Table 9A (B2B amendments).  Amendment in debit/ credit notes would be reported in Table 9C.

Frequently Asked Questions

Supplier should pay tax on a forward charge basis by collecting from the recipient, then why should the recipient allow the supplier to claim refund? 

The supplier can claim refund only in cases where the recipient does not avail of input tax credit on such supplies and furnishes an undertaking to the effect that the supplier may claim the refund.

What are the documents that I need to submit with my refund application for a deemed export supplier?

You must upload any documents that are needed to be filed with Form RFD-01, as well as any other documents that the refund sanctioning authority can request, as notified under CGST Rules or Circulars issued in the matter. Statement 5B must be uploaded with the details of the documents for which a refund is being sought. 

Is it possible to submit a refund claim for multiple tax periods from two separate fiscal years?

Yes, you can file a refund claim for several tax periods from two separate fiscal years.

When and how will the RFD-01 refund be processed?

When a refund application is filed in Form RFD-01 and an ARN is created, the refund application, along with any documents attached at the time of filing, is assigned to a Refund Processing Officer for processing. The monitor status feature allows the taxpayer to keep track of the status of their refund application. After reviewing the submission, the Jurisdictional Authority may process it and issue a refund.