Goods and Services Tax (GST) is a consumption-based tax system that has transformed the Indian indirect tax landscape. It has replaced multiple indirect taxes like Service Tax, VAT, and Central Excise. The introduction of GST has resulted in a uniform tax structure, which has helped in the ease of doing business. In this blog, we will discuss the GST on the export of services.
GST on Export of Services
The export of services is treated as an inter-state supply under the GST regime. Therefore, it is subjected to Integrated Goods and Services Tax (IGST) and not to Central GST (CGST) and State GST (SGST). The rate of IGST on the export of services is 18%. The export of services can be divided into two categories- zero-rated supplies and exempt supplies.
Zero-rated Supplies
Zero-rated supplies mean supplies that are exempt from tax. In other words, there is no tax liability on the exporter for the supply of such services. However, the exporter can claim the Input Tax Credit (ITC) on the inputs, input services, and capital goods used in the course of supplying these services.
The exporter can opt for any of the following two options while exporting zero-rated supplies:
Export under bond/LUT:
The exporter can export services without payment of IGST by furnishing a bond or Letter of Undertaking (LUT) to the jurisdictional Commissioner. The bond or LUT is furnished on a non-judicial stamp paper and is valid for a2 months.
Export on payment of IGST:
The exporter can export services by paying the IGST at the time of supply. The IGST paid can be claimed as a refund by the exporter after the export of services.
Exempt Supplies:
Exempt supplies refer to those supplies that are not subject to GST. The exporter cannot claim ITC on the inputs, input services, and capital goods used in the course of supplying these services.
Registration for Export of Services
Exporters of services need to obtain GST registration. They can register under the GST regime as a regular taxpayer or under the GST composition scheme. The GST composition scheme applies to small taxpayers who have a turnover of up to Rs. 1.5 crores. However, exporters of services are not eligible to opt for the composition scheme.
Filing of Returns:
Exporters of services need to file GST returns periodically. The due dates for filing GST returns are as follows:
GSTR-1: 10th of every month
GSTR-3B: 20th of every month
GSTR-9: 31st December of the following financial year
Exporters who opt for export under bond/LUT need to file GSTR-3B and GSTR-1 for each tax period. They also need to file FORM RFD-01A for claiming a refund of the unutilized input tax credit. Exporters who export on payment of IGST can claim a refund of the IGST paid on export of services by filing FORM GST RFD-01.
Other GSTR List You Should Know:
Reverse Charge Mechanism
Under the reverse charge mechanism, the recipient of the services is liable to pay the GST on the services received. The reverse charge mechanism applies to certain services, including legal services, manpower supply services, and security services. The recipient of the services needs to pay the GST on a reverse charge basis and can claim the input tax credit.
In conclusion
the GST on the export of services is an important aspect that exporters need to understand. Exporters need to comply with the regulations governing the export of services and file the necessary returns. The GST regime has simplified the export of services by providing a uniform tax structure, which has facilitated the ease of doing business in India.
Frequently Ask Question
Q1. What is GST on the export of services?
Answer: GST on the export of services refers to the tax levied on the export of services from India. The tax is levied under the Integrated Goods and Services Tax (IGST) and not under Central GST (CGST) or State GST (SGST).
Q2. What is the rate of GST on the export of services?
Answer: The rate of GST on the export of services is 18%. This rate applies to all exports of services from India.
Q3. What is zero-rated supply in the context of the export of services?
Answer: Zero-rated supplies refer to supplies that are exempt from tax. In the context of the export of services, it means that there is no tax liability on the exporter for the supply of such services.
Q4. Can I claim the input tax credit on exports of services?
Answer: Yes, you can claim an input tax credit (ITC) on the inputs, input services, and capital goods used in the course of supplying zero-rated services. However, you cannot claim ITC on the inputs, input services, and capital goods used in the course of supplying exempt services.
Q5. Can I export services without paying IGST?
Answer: Yes, you can export services without paying IGST by furnishing a bond or Letter of Undertaking (LUT) to the jurisdictional Commissioner. The bond or LUT is furnished on a non-judicial stamp paper and is valid for 12 months.
Q6. How can I claim a refund of IGST paid on the export of services?
Answer: You can claim a refund of IGST paid on the export of services by filing FORM GST RFD-01. The refund application needs to be filed within two years from the relevant date.
Q7. What is the due date for filing GST returns for the export of services?
Answer: The due date for filing GST returns for the export of services is as follows:
GSTR-1: 10th of every month
GSTR-3B: 20th of every month
GSTR-9: 31st December of the following financial year
Q8. Is the reverse charge mechanism applicable to the export of services?
Answer: The reverse charge mechanism applies to certain services, including legal services, manpower supply services, and security services. The recipient of the services needs to pay the GST on a reverse charge basis and can claim the input tax credit. However, the reverse charge mechanism does not apply to the export of services.
