Trade has been an important and sensitive issue all over the world even before World War II. After World War II world trade took a new shape like the adaptation of General Agreement on Tariffs’ and Trades or the formation of World Trade Organisation. International Trade involves both imports and exports and current account deficit is the main comparison and measurement between import and export which determines the economic condition of the country. Indian Government is striving real hard to reduce this deficit. Implementation of Good and Service Tax (GST) was one of the initiative towards that direction.

In principal for trade, export should not be burdened with domestic taxes. Export enjoyed a special treatment but implementation of GST demanded that the input-output chain should not be broken. The exemptions on export have a tendency to break the chain. Therefore a “zero-rated supply” method is introduced under the GST by which the Government is trying to address all the important considerations relating to export of goods and services.[1]

This article aims to give brief overview of GST on Export of Goods and Services and highlight few interesting aspect of GST on Export of Goods and Services.

Meaning of Export
Export of goods under GST:According to Section 2(5) of IGST,export of goods with its grammatical variations and cognate expressions, meanstaking goods out of India to a place outside India.Export essentially means trading or supplying of goods and services outside the domestic territory of a country.

Export of services under GST: According to Section 2(6) of IGST “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 paymentfor such service has been received by the supplier of service inconvertible foreign exchange;
(v) the supplier of service and the recipient of service are not merely establishments of a distinct person
Supply of services having place of supply in Nepal or Bhutan, against payment in Indian Rupees, is exempted even if the payment is received in Indian Currency looking at the business practices and trends.


Treatment of Export under GST
Under GST, export of goods or services are treated as follows:
# Inter-State supplyand covered under Section 7(5) of IGST Act. Export of goods or services are treated as Inter-state supply under GST and accordingly, IGST is charged on export.
# ‘Zero rated supply’ and covered under Section 16(1) of IGST i.e. the exported goods or services shall be relieved on GST and levied upon either at the input stage or maybe at the final product stage.

Zero Rated Supply
As stated above, under Section 16(1) of the IGST Act GST is not applicable on exports. Therefore, all export supplies of a registered taxpayer under GST would be classified under "zero-rated supply". According to Section 16(1) Zero-Rated Supply is an exempted supply but the Input Tax Credit (ITC) would be available on such supply. Effectively, this means a negative GST or, a GST refund.[2]
Zero-Rated Supply is also applicable to supply of goods and services to Special Economic Zone (SEZ) developer or a Special Economic Zone Unit.

Routes/Ways to claim the refund
According to Section 16(3) of the IGST Act, person making a Zero Rated Supply can opt for any of the following two options:

i. To supply goods or services under a bond or, a Letter of Undertaking (LUT) without paying IGST and then claim a refund of unutilised ITC; or
ii. To supply goods or services on payment of IGST and then claim the GST refunds of such tax paid.

The process for claiming a refund for supply of goods differ from process of refund in case of supply of services.

The process for manufacturers who supplying the goods are simpler. The shipping bill of the goods will itself be treated as an application for refund. The manufacturers will get refund directly into their bank account and no separate application is required in this process. Further, the GST authorities have declared that the refund will be credited directly to the bank account of the exporter registered with the customs even if it is different from the applicant’s bank account mentioned in his registration particulars. This method has been adapted by the GST authorities to ensure smooth processing and payment of refunds.

The process is difficult for the service exporters. The service exporters cannot get a direct GST refund into their bank accounts. For getting a refund, the service exporter has to file a set of documents with the jurisdictional GST officer where the company is situated. Services are usually intangible in nature therefore there is hardly any documentation trail for export of services, so this differentiation of process is necessary. When goods are exported, clear trials with the customs, shipping, transport and other bills are shared with Government as a usual practice. Thus it becomes easier for the manufacturers to get a GST refund.

Documents required by the Exporter of the Services to be filed for getting a GST refund:
i. A covering Letter
ii. Bank Realization Certificates or Foreign Inward Remittance Certificates
iii. Export Invoices
iv. Form GSTR 3B and GSTR 1
v. Application for Refund in the Form GST RFD 01
vi. cancelled cheque
vii. If GST refunds claims exceed ₹2 lakhs (₹200,000 or ~$3,000) per quarter a certificate from a Chartered Accountant/Cost Accountant.

All the above-mentioned documents are all mandatory, GST refund cannot be claimed without these documents.

Process for claiming a GST refund
Step 1:
The application for GST refund has to be forwarded to the proper officer with all the documents above mentioned. It must include
i. A statement containing the date and number of invoices and the Bank Realization Certificates or, Foreign Inward Remittance Certificates. The officer shall within 3 days of filing, issue an acknowledgment, in Form GST RFD-02.

Step 2:
The officer shall make an order, in Form GST RFD-04, sanctioning the amount of refund on a provisional basis, within a period of 7 days from filing of the application.

Step 3:
The officer, will issue payment advice, in Form GST RFD-05 which will be electronically credited to the bank account of the applicant as mentioned in the application. Ninety percent of the amountis credited at this stage.

Step 4:
Remaining ten percent of the amount is payable after a scrutiny of the documents (verification of all physical documents with the available online data in the GST portal). Then form GST RFD-06 will be issued sanctioning the balance ten percent amount if all the documents are found in order with the online data available in the GST portal.

In case of supply of goods, a claim must be filed within, expiry of 2 years from the date of exports.
For exporters of service the relevant date is either:
i. The date of completion of services, or
ii. The date of receipt of the advance, in cases where, the advance has been received prior to the date of issue of invoice.
Typically therefore, if a service exporter receives an advances, it is beneficial for him to apply, at that stage itself.

In case of delays of the refund due,
i. Cases beyond sixty days will get an interest at the notified rate not exceeding 6% till the date of refund if the refund has been sanctioned.
ii. Cases which may be adjudicated by Appellate or Adjudicating authority interest shall be paid at the notified rates not exceeding 9% till the date of refund.

Analysis and Features
i. Practically, zero-rated supply does mean that goods and the services under the tariff rate of ‘0%’ rather it means the manufacturer or the service exporter is liable to a refund on the GST paid for the goods or the services or is entitled to pay ‘0%’ GST by virtue of the LUT and claim a refund on the unutilised ITC.

ii. It is also discussed under section 17(2) of the CGST Act, that the ITC will not be available to the supplies where the rate tax is ‘0%’.

iii. Essentially the concept of zero-rated supplies is introduced under GST on the basis of the prevalent laws of the Central Excise and Service Taxes. GST is based on the input-output chain of taxes, and direct exemption of GST on the export of supplies would have broken the chain thus the method of zero-rated supplies are introduced under GST. It is believed that the introduction of this method of zero-rated supplies will ease the difficulty of the suppliers and promote international trade.

iv. There are a few instances where the zero-rated supply is not applicable, such instances are mentioned below:
a. When the place of service is in India but it is been provided to a person located outside India. For example, a property is located in Mumbai given on lease to a person residing in London; or where an agent is residing in India, providing service to a person residing in London exporting goods to UAE.
b. In cases where the consideration for a service is received in Indian Currency or maybe in such currency other than convertible currency. For example- A Consultancy Firm supplies service to an entity outside Indian but the payment is made by the Indian Branch of the overseas entity in Indian Rupees.
c. Where the supply of services was to a foreign branch which would not be covered as export of services due to the specific exclusion from “export of service”. This will involve reversing the input tax credits as such supply of service, would be considered as non-taxable.

v.Under the reverse mechanism of GST, when an unregistered person supplies goods or services to a registered person the registered person becomes liable to GST on such supply. This mechanism actually discourages the exporters from making any purchase from unregistered vendors such as small enterprises. This mechanism increases operational and compliance difficulties for the exporters, as they first need to pay the reverse charge and then claim a refund.[3]

Conclusion
GST had a direct impact on exports of goods and services in India because a huge amount of revenue is associated with this industry and the economy of the country is also directly related to the foreign exchange earned from this industry. Initially when the GST was implemented, several exporters faced major difficulties in understanding the procedure and claiming refunds. This resulted in large blocks of working capital being held up, until refunds are correctly applied for and then received.

The government is trying to alleviate the difficulties faced by the exporter by releasing clarification notes on this. Several changes have also been suggested by the Parliamentary Standing Committee on Commerce to remove the drawbacks in the statute.

End-Notes
[1] Ramandeep Singh Bhatia, GST on Export of Goods and Services (10 February 2018),
https://taxguru.in/goods-and-service-tax/gst-export-goods-services.html
[2] Dakshita Mehta,India: GST Refunds For Service Exporters - A Guide (23 January, 2018),https://www.asitmehtaassociates.com/indian-indirect-tax-gst/gst-refunds-service-exporters-guide/
[3] One Hundred and Thirty-Ninth Report on Impact of Goods and Service Tax on Exports (19 December 2017), Department –Related Parliamentary Standing Committee on Commerce,