Import and Export under GST

Question 1

What is the definition of the term customs area as per section 2(11) of the customs act, 1962?

Answer 1

means the area of a customs station or a warehouse and includes any area in which imported goods or export goods are ordinarily kept before clearance by Customs Authorities [Section 2(11) of the Customs
Act, 1962]

Question 2

What is the meaning of Export of goods as per section 2(5)?

Answer 2

with its grammatical variations and cognate expressions,
means taking goods out of India to a place outside India [Section 2(5)].

Question 3

What is the meaning of export of services as per section 2(6)?

Answer 3

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 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 [Section 2(6)].

Answer 4

means a place other than the place of business which
is characterised by a sufficient degree of permanence and suitable structure
in terms of human and technical resources to supply services, or to receive
and use services for its own needs [Section 2(7)].

Answer 5

with its grammatical variations and cognate expressions,
means bringing goods into India from a place outside India [Section 2(10)].

Answer 6

(i) the supplier of service is located outside India;
(ii) the recipient of service is located in India; and
(iii) the place of supply of service is in India [Section 2(11)].

Answer 7

means any Government, local authority,
governmental authority, an individual or any other person not registered and
receiving online information and database access or retrieval services in
relation to any purpose other than commerce, industry or any other business
or profession, located in taxable territory.

Answer 8

For the purposes of this clause, the expression “governmental
authority” means an authority or a board or any other body,––
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by any Government

with ninety percent or more participation by way of equity or control, to carry out any function entrusted to a Panchayat under article 243G or to a municipality under article 243W of the Constitution [Section 2(16)].

Answer 9

(a) where a supply is received at a place of business for which registration has been obtained, the location of such place of business;
(b) where a supply is received at a place other than the place of business for which registration has been obtained, that is to say, a fixed establishment elsewhere, the location of such fixed establishment;
(c) where a supply is received at more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and
(d) in absence of such places, the location of the usual place of residence of the recipient [Section 2(14)]

Answer 10

means services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention and impossible to ensure in the absence of information technology and includes electronic services such

Answer 11

In case of goods, the importer of goods pays IGST and in case of services, the
importer of services pays IGST on reverse charge basis

Answer 12

However, in respect of import of online information and database access or retrieval (OIDAR) services by unregistered, non-taxable recipients, the supplier located outside India is
responsible for payment of IGST. Either the supplier of OIDAR services has to take registration or has to appoint a person in India for payment of taxes.

Answer 13

Import of goods means bringing goods in India [See definition under the heading ‘Relevant Definitions’] from a place outside India [Section 2(10)]. Supply of goods imported into the territory of India till they cross the customs frontiers of India is deemed to be an inter-State supply.

Answer 14

The place of supply of goods, imported into India is the location of the importer [Section 11].

Answer 15

IGST on imported goods is levied in addition to other customs duties levied on the imported goods but the same is not customs duty.

Answer 16

In addition, GST Compensation Cess, may also be leviable on import of certain luxury and de-merit goods under the Goods and Services Tax (Compensation to States) Cess Act, 2017.

Answer 17

Accordingly, goods imported into India are, in addition to the applicable customs duties, liable to IGST at such rate as is leviable under the IGST Act on a like article on its supply in India.

Answer 18

IGST on goods imported into India is levied and collected at the point when duties of customs are levied on the said goods under the Customs Act, 1962. Customs duty is leviable when importation of goods gets complete

Thus, the point of levy and collection of IGST is the point when the bill of entry for home consumption is filed.

Answer 19

Wherever the goods are also leviable to GST Compensation Cess, the same is
collected on the value taken for levying IGST. In other words, IGST paid shall
not be added to the value for the purpose of calculating GST Compensation
Cess.

Question 20

What is the business test and the consideration test that should be satisfied for the import of services to be taxable or not under GST?

Answer 20

The principle is adopted from schedule 1, where consideration is not a requirement but business test is a requirement and the vice versa provisions as per the general provisions of the act accordingly

Question 21

What is the meaning of the import of service as per section 2(11)? and when the place of supply is in the territorial waters, then how do we nail down that this is import of service or not?

Answer 21

Section 13 provides for determination of place of supply in cases wherein the location of the supplier of services or the recipient of services is outside India. If the place of supply of service is in the territorial waters, the place of supply is deemed to be in the coastal State/Union Territory where the nearest point of the appropriate baseline is located [Section 9]. Thus, the State tax component of the IGST accrues to such coastal State.

the service should be received at the recipient’s place of business or fixed establishment in India. In the absence of such a place, the usual place of residence of the recipient is taken to be his location1.

Question 22

who is the person liable to pay tax on importation of services under the GST act?

Answer 22

• Generally it has to be paid by the importer of service where the importer is a business entity registered under GST.
• The important criteria is to determine the place of supply and determine who has to pay the tax accordingly.
• In case of importation of OIDAR services by non taxable online recipient, the supplier of OIDAR services is liable to pay IGST and not the recipient.
  
  • Also ECO will be taxed on the similar lines as above.

Question 23

What is the taxability of OIDAR services, when the same is received by a business entity and not by a non taxable online recipient as per section 14?

Answer 23

OIDAR services can also be provided online even from a remote location outside the taxable territory. In such cases also - where the supplier of OIDAR service is located outside India and the recipient is located in India - the place of supply would be India and the transaction would be amenable to tax under reverse charge if the recipient is a business entity

Question 24

What is the taxability of OIDAR services, when the same is received by a Non taxable online recipient as per section 14?

Answer 24

IGST Act provides that on supply of OIDAR services by any person from a location outside India to an unregistered recipient in India for purposes unrelated to business or profession, or to a Government, Governmental authority or local authority [i.e. to a non-taxable online recipient (See definition)], the supplier who is outside India is liable to pay IGST on the supply.

If an intermediary is appointed by the non resident, then such intermediary will be deemed to be the supplier who will be required to pay the respective taxes by taking registration under GST - But there are exceptions to this provided that intermediary will not be taxed and the original supplier has only to be taxed

Question 25

How to determine whether a particular service is OIDAR service or not?

Answer 25

See the example of certain OIDAR services provided in page 14.27 for better clarity.

Question 26

What is the requirement for registration for importer of goods, since importer pays tax on the goods imported by him, but this is not considered as payment by reverse charge and hence not liable for compulsory registration?

Answer 26

Reverse charge provisions do not cover importers of goods. Importers are also not listed among the categories of persons in section 24 of the CGST Act for whom registration is compulsory.

It may be noted here that it is mandatory for the importers who are registered under GST to quote GSTIN in the bill of entry for the purpose of payment of IGST on import of goods as also for availing ITC of such IGST.

Question 27

What is the requirement of registration for in case of import of exempted goods generally and also in relation to availment of ITC?

Answer 27

persons engaged exclusively in the supply of goods (import and export) that is either not liable to tax or is wholly exempt from tax under the CGST or IGST Acts are not required to obtain registration.

In such cases, PAN (which is authorized as IEC by DGFT) of the importer and exporter would suffice.

Question 28

What is the requirement of registration for in case of importer of services generally and also in relation to availment of ITC?

Answer 28

Section 24(iii) of the CGST Act mandates compulsory registration for persons, without any benefit of the threshold limit for registration, who are required to pay tax under reverse charge.

Accordingly, importer of services who are required to pay IGST under reverse charge have to obtain compulsory registration under GST law so as to be able to pay tax on imported services under reverse charge.

Thus, recipient of imported services other than non-taxable online recipient must register compulsorily.

Question 29

What are the main differences between zero rating and exempted supplies under the GST law, since we know that for supplies for which output tax is not payable, ITC cannot be claimed - So how do we differentiate between the two and check which is available for which?

Answer 29

Question 30

Does sending Sending/ taking goods out of India for exhibition or on consignment basis for export promotion be covered as a zero rated supply and be eligible for the benefits of refunds?

Answer 30

activity of sending/ taking goods out of India for exhibition or on consignment basis for export promotion, except when such activity satisfy the tests laid down in Schedule I of the CGST Act, does not constitute supply as the said activity does not fall within the scope of section 7 of the CGST Act as there is no consideration at that point in time.

Since such activity is not a ‘supply’, the same cannot be considered as “zero rated supply” as per the provisions contained in section 16 of the IGST Act.

Thus, activity of sending/ taking specified goods out of India is not a zero-rated supply. That being the case, execution of a bond or LUT, as required under section 16 of the IGST Act, is not required.

Question 31

What are the following category of goods(Not services) which are covered as deemed exports as per section 147?

Answer 31

Question 32

What is the taxability of deemed exports under section 147?

Answer 32

Hence, all supplies notified as supply for deemed export are subject to levy of taxes, i.e. such supplies can be made on payment of tax and cannot be supplied under a Bond/LUT

However, the refund of tax paid on the supply regarded as deemed export is admissible to either the supplier or the recipient.

Thus, the application for refund has to be filed by the supplier or the recipient (subject to certain conditions) of deemed export supplies, as the case may be.

Question 33

What is the broad concept of merchant exports and how does it work in relation to the procedure to be followed for the execution of the same?

Answer 33

Merchant exports are basically exports through third party by the manufacturer supplier at a concessional rate of 0.1% which gives rise to an inverted duty structure where Input tax is less than the output tax payable.

Refund of ITC to the supplier will be available based on the refund provisions for inverted duty structures and can be executed only under a bond /LUT and cannot export on payment of IGST

See procedural requirement is 14.40

Question 34

What are the conditions to be fulfilled for export of services under section 2(6)? and when two entities are establishments of distinct persons and services are being supplied between them. then what will be the treatment?

Answer 34

Conditions to be fulfilled for export of services are:

(a) the service is supplied from India to a recipient located outside India,
(b) the place of supply of the service is outside India,
(c) the consideration for the service is received in freely convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India, and
(d) the transaction is between separate entities, i.e. not merely between two establishments of an entity

But the last condition will not be applicable where the transaction is between subsidiary and holding company and they are not merely establishment of distinct persons

Question 35

What are the provisions of Sub-contracting of services by an exporter of services to another person located outside India - Circular No. 78/52/2018 GST dated 31.12.2018?

Answer 35

The provisions are explained through the example which is lucid and easily understandable.

Question 36

What is the taxability of transactions with EOU?

Answer 36

Transaction with EOU - That is supplies to EOU will be treated as deemed exports and is not a zero rated supply and hence it will be treated like any other supply on which tax has to be paid accordingly.(No Bond/LUT is allowed)

However, supplies to EOUs are treated as deemed exports and refund of tax paid on deemed exports is admissible either to the supplier or the recipient.

Question 37

What is the requirement in relation to realization of Exports proceeds? Both in terms of FEMA and in terms money terms in which such export proceeds are received?

Answer 37

“there is no restriction on invoicing of export contracts in Indian Rupees in terms of the Rules, Regulations, Notifications and Directions framed under the Foreign Exchange Management Act, 1999.

all export contracts and invoices shall be denominated either in freely convertible currency or Indian rupees but export proceeds shall be realized in freely convertible currency.

However, export proceeds against specific exports may also be realized in rupees, provided it is through a freely convertible Vostro account of a non-resident bank situated in any country other than a member
country of Asian Clearing Union (ACU) or Nepal or Bhutan” - Means to say export proceeds from these countries can be in Indian rupees also.

Further, section 2(6) of the IGST Act, 2017 allows realization of export proceeds of services in INR, wherever allowed by the RBI.