In the existing Indirect tax system and upcoming GST regime there has been a lot of changes in the different aspects of goods and services but in all these the one which is least affected is the ‘Export’ of India. Under current regulations, most goods can be organized for export by simply paying its export duty, where applicable, and without obtaining a license. It is only if items are listed in Schedule 2 of the Indian Trade Classification (ITC) Harmonized System (HS) that a company will either need to obtain the relevant license, or be unable to export the product at all.
Products listed in Schedule 2 of the ITC (HS) will either be restricted or prohibited. Restricted goods become available for export once a company has obtained the appropriate license.
After the GST implementation, exporters will be able to capitalize on the refunds and rebates from the taxes which will come under the ambit of state taxes (SGST). The refund and rebate on the export of services is likely to be increased substantially after the GST rates are applied. To make the refunds easier, government has ensured that all the relevant data on GST rates will be available online which tends to do away with the verification of documents. A large number of organizations are actively looking for ERP systems that are GST compliant and will provide them competitive benefits.
Present refund mechanism involves filing of bulk sets of export documents; thereby involving a sheer wastage of time, money and energy. The division offices are burdened with tons of papers which are to be preserved for no use in future. Also, it is said that it is feasible for exporters to keep a dedicated person for doing photocopies of export documents. So, now this saying will say good bye in the GST era as under GST, there will be least filing of documents for the purpose of export as most of the filing will be online. Following are the key features of newly proposed refund mechanism applicable to exporters under GST era:-
- In IGST Model, there is proposal of online filing details of invoice wise sale/purchase along with the monthly returns to GST network (GSTN). These details will be linked to customs network (ICEGATE). Thus, the details of basic export documents like invoice no., packing list, etc. as submitted to GSTN can be verified with those available at ICEGATE. Thus, there would be no need of submitting the same manually.
- The refund application will be submitted online within the time prescribed under GST law which is proposed as one year from relevant date. Definition of relevant date is to be prescribed by GST law.
- The receipt and bill of lading are the crucial documents evidencing the factum of export. Thus, the scanned copies of mate’s receipt and bill of lading will be submitted along with the refund application.
- Bank realization certificate (BRC) may not be available at the time of filing the refund application; thus, the same shall be submitted subsequently to GSTN.
- There will be inbuilt feature in the GSTN to track those export invoices in respect of which BRC has not been submitted within due time. This feature will send alert to respective officer for taking the appropriate action.
- The time limit for granting refund has been fixed as three months from the date of filing of application.
- There shall be inbuilt feature in GSTN to link the refund sanctioned with blocking of carry forward of input tax credit in the return/cash ledger. Thus, double benefit could not be taken by the exporters.
- In case of export of service, only two documents are available - invoice and BRC. Further, no data is available on the ICEGATE also. Therefore, the refund in case of export of service shall be filed manually after the realization of export proceeds.
In GST regime exports are proposed to be zero rated, i.e. the export goods will not suffer any actual tax liability although the inputs for them would be tax paid which would subsequently be neutralized. Exports will be treated as inter-state supply of goods, thus, IGST will be paid by the tax payer in case the tax is paid at the time of export. This IGST can be claimed as refund by following the procedure detailed as above.
The government is re-designing the export benefit scheme MEIS to make it GST-compliant .
Under the Merchandise Exports from India Scheme (MEIS), the commerce ministry gives duty benefits to several products. It provides duty benefits at 2 %, 3 % and 5 % depending upon the product and country.
After the GST is put into effect , there will be zero rating of export leading to an inverted tax sructure which will prove beneficial. As a result input credit will be accumilated and then can be claimed for regular refund . Thus manufactures will be placed at par with importers.
Although, evaluation of the impact of GST on exporters and indigenous traders is yet to be conclusively made, unarguably, the new tax structure will enhance the competitiveness of Indian export. On the whole, the GST will ensure that the process of getting tax incentives is streamlined and made easier for the stakeholders. In addition, the GST is also likely to expedite the process of getting various refunds for exporters, thereby boosting the overall economy of the nation.