IMPORTS AND EXPORT OF GOODS AND SERVICES UNDER GST

Imports under GST

Import of goods is bringing commodities from overseas into India. As such, all imports are considered as inter-state supplies. IGST will be applicable to all imported goods along with custom duties as applicable.

Import of services means supply of a service by a supplier who is based outside the company, but the recipient of the services is based in India and the place at which the service is supplied is also within the geographical boundaries of the country.

Import of Goods

After the implementation of Goods and Services Tax (GST) Act, the import will not be impacted by charges such as safeguard duty, education cess, basic customs duty, anti-dumping duty, etc.

Article 269A of the Goods and Services Tax (GST) Act regime states that the supply of goods or services or both, if imported into India, will be considered as supply under inter-state supply will attract integrated tax.

Import of Services

The provisions present in Section 7(1)(b) of the Central Goods and Services Tax Act, 2017, mentions that when services are imported with consideration, it will be deemed as a supply, regardless of whether it is utilised in the continuance or course of business. When services are imported without consideration, they will not be deemed as supply. Businesses, however, are not mandated to undertake any tests for service imports to be deemed as a supply.

Moreover, the provisions present in Schedule I of the Central Goods and Services Tax Act, 2017, services imported by registered taxable individuals from relatives or distinct individuals as stated in Section 25 of the Central Goods and Services Tax Act, 2017, in the continuance or course of a business will be considered as supply regardless of whether or not it has been made without consideration.

Introduction

Exports continue to enjoy this special treatment because exports should not be burdened with domestic taxes. On the other hand, GST demands that the input-output chain not be broken and exemptions have a tendency to break this chain. Zero-rated supply is the method by which the Government has approached to address all these important considerations.

What is Export of Goods under GST?

Export of goods with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India. Export means trading or supplying goods and services outside the domestic territory of a country.

What is Export of Services under GST?

As per IGST Act Section 2(6) “Export of services” means 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.
  • The supplier of service and the recipient of service are not merely establishments of a distinct person.

How are Exports treated under GST Law?

Under the GST Law, export of goods or services has been treated as: 

  • Inter-State supply (7(5) IGST act) and covered under the IGST Act. Export is treated as Inter-state supply under GST and IGST is charged on export. 
  • ‘Zero-rated supply’ (Sec.16 (1) IGST act) i.e. the goods or services exported shall be relieved of GST levied upon them either at the input stage or at the final product stage.

GST will not be levied in any Kind of Exports of Goods or Services.

What is Zero rated Supply?

“Zero-rated supply” means any of the following supplies of goods or services or both, namely: – 

  • Export of goods or services or both; or 
  • Supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.

Zero-rated supply does not mean that the goods and services have a tariff rate of ‘0%’ but the recipient to whom the supply is made is entitled to pay ‘0%’ GST to the supplier.

Special Economic Zones (SEZ)

Special Economic Zones are specially delineated areas that are treated as foreign territories in the context of trade and tariff laws.

A Special Economic Zone (SEZ) is a specified duty-free zone deemed to be a foreign territory within the country for the purpose of tariff and trade. The objectives of SEZ include the promotion of goods and services leading to enhanced economic activities, investment promotion, development of infrastructure, creation of employment opportunities, etc.

SEZs could be multiple products SEZs, sector-specific, IT sector, free trade and warehousing, gem and jewelry sector, biotechnology, etc. SEZs enjoy a host of fiscal and tax benefits. Indirect tax exemptions include customs duty, central excise duty, service tax, central sales tax, stamp duty, and other miscellaneous taxes and duties. Direct tax exemptions include income tax, dividend distribution tax, securities transaction tax, minimum alternate tax, etc.

No change in the operation of the SEZ scheme. SEZs can continue to import raw materials without payment of any duty. Supplies to SEZs would also be treated as Zero-rated supplies.

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