For companies of all sizes, exporting has several benefits. Access to a large worldwide market of potential customers is one of the main advantages of exporting. Going global and exporting your goods allows you to reach a much larger market, whereas not doing so limits the number of customers you can reach.

Specifically, if you’re a small and medium enterprise (SME) looking to grow beyond your home country, export of goods and services brings you a slew of other benefits that would help to unlock your future growth:

• Exporters who have passed the test of adhering to international standards are thought to be more trustworthy than their domestic counterparts;
• The exchange of ideas and cultural information creates a wealth of economic and trade prospects;
• Access to newer customers, cutting-edge equipment and vendors in foreign countries.

In recent decades, India has emerged as a significant exporter, which has helped the Indian economy soar to new heights. Overall India's exports in November 2023 were estimated at USD 62.58 billion - a 1.23% increase from the previous year. 

Petroleum goods, sugar and basmati rice are some of the major product categories that have shown an increase in value and volume terms. The USA, United Arab Emirates, Netherlands, China, and Saudi Arabia round up the top five export destinations. Make sure you're ready for e-invoicing as it is made mandatory for GST registered businesses with an annual turnover of Rs 10 crore and above in India.

Export of Goods and Services

You should be aware of the business tax structure, including Goods and Services Tax (GST). 

Introduced in 2017, the Indian GST is a unified national tax system intended to create a one-market environment. The GST replaces several indirect taxes (apart from customs duties), and there is just one tax that is applied to the supply of goods and services.

The Indian government aims to increase its quantity and quality of exports, which is outlined in the “Make in India” programme and the numerous tax breaks offered to exporters.

Under the GST, exports are recognised as a zero-rated supply. This means GST will not be levied on the outbound supply of any service of goods – and exporters can claim an input tax credit for the product shipped.

The following steps are included in the process for exporting goods or services under GST for distinct persons:

• Obtain a valid GST registration via the GST portal.
• File an application for a shipping bill for export.
• Indicate exports on GST returns: Exports in the GST returns must be declared by filing the GSTR-1 form.
• Pay the IGST and request a reimbursement: The IGST on the shipments must be paid by the exporter before requesting a refund of the tax. This can be done by submitting either the RFD-01A or GSTR-3B form.
• Generate an E-way bill for goods being exported: This document lists the quantity, value and destination of the goods being exported.

Treatment of exports under GST: how will it be levied?

Export of goods or services are considered zero-rated supplies, meaning they are exempt from taxation at either the input or final product stage. Under the Indian GST law, the supply of goods or services from one state to another is classified as interstate supply – on which the Integrated Goods and Services Tax (IGST) is applied.

Features of export under GST scheme

The goods and services can be supplied to outside India either on payment of IGST (Integrated Goods and Services Tax), claimable as refund after the goods have been exported, or under Bond or Letter of Undertaking (LUT) without payment of IGST.

For goods and services that are shipped outside India under LUT businesses can claim refund of accumulated ITC on account of export.

The shipping bill filed with Customs is considered an application to be refunded for payment of IGST and shall be deemed to have been filed after submission of the export general manifest and provision of a valid return in Form GSTR-3 by the applicant.

Place of supply of goods in case of export of goods

The place of supply of goods is the place where the commodities are exported (a country outside India).

The place of supply of services must match the place where the services are provided. If the location of the recipient isn’t readily available, then the location of supply can be the location of the provider of goods or services.

Deemed exports

Deemed exports are transactions whereby goods supplied don’t exit the country, and payment for such service is either received in convertible foreign exchange or Indian Rupees.

The following types of supply of goods or services would be regarded as exports under GST:

• Goods supplied by a registered person against Advance Authorisation;
• Supply is given to an export-oriented undertaking (EOU) or Hardware Technology Park unit, Software Technology Park unit, Biotechnology Park unit;
• Provision of capital goods by a registered person against Export Promotion Capital Goods Authorisation;
• Sale of gold by a bank or Public Sector Undertaking against Advance Authorisation in accordance with Customs legislation;
• The general processes outlined for export under GST must be followed when filing returns for the deemed export.

Claiming refunds on exports

In addition to paying customs duties, you might also have to pay GST. The good news is that you may be able to recover part of your tax payments.

Previously the tax paid on inputs for the export of exempt items was eligible for a duty drawback, however with a complicated refund application process. 

To clear any ambiguity regarding the reimbursement of tax paid on exports, the Indian government provided a guidance note to clarify claiming input tax credits on zero-rated supplies. 

The below are the points you should take into account when considering a refund application for zero-rated supplies:

• Export of goods and services without payment of IGST: A business may claim refund for the input tax credit that was not used. Refunds are normally provided within a fortnight if they are requested for duties already paid. For products exported outside of India, the exporter submits the shipping bill. The export report or manifest with the date and number of the shipping bills must be filed by the exporter, the Custom House Agent, or whoever oversees the shipment before the presumed application will be regarded as having been submitted.
• Export of goods and services with payment of IGST: The tax paid on such exports may be claimed back by the exporter. The exporter submits a separate online application in the form of RFD-01A for refund claims made for input credits and refund claims made without the payment of IGST. To manually submit the application to GST officials, a paper copy must be accompanied by the necessary supporting documentation. In this instance, the refund is granted after reviewing the submitted paperwork.

Documents required for refund application

Here are the documents required for claiming a refund in the refund application: 

1. Copy of return showing that taxes have been paid
2. Copy of invoice
3. Documentation demonstrating that the cost of paying taxes has not been passed on (CA certification or self-certification)
4. Any additional documentation that the government may request for

Process for claiming a GST refund

Step 1: To start the GST return process,  forward your GST refund application to the proper officer with all the above mentioned documents. It’s important to include a statement specifying the date and number of invoices and the Bank Realization Certificates or, Foreign Inward Remittance Certificates. Within three days of filing your GST refund, the officer shall issue an acknowledgment, in Form GST RFD-02.

Step 2: Within seven days of receiving the application, the officer must issue an order in Form GST RFD-04, approving the GST refund amount on a provisional basis.

Step 3: Under Form GST RFD-05, the officer will issue payment advice that will be electronically credited to your bank account specified in the application. At this point, 90% of the money has been credited.

Step 4: Following a review of the documents, the final 10% of the sum is due (all physical documents will be verified with the available online data in the GST portal). If all the documents are deemed to be in order using the online information accessible in the GST site, Form GST RFD-06 will be issued authorising the payment of the remaining 10%.

Mandatory GST e-invoicing in India

The government of India is giving its citizens more access to technology and the digital world. The Indian government hopes to empower the nation by making crucial online infrastructure accessible to all stakeholders through its flagship initiative, "Digital India."

The Indian government introduced an electronic invoicing (e-invoice) system under GST for business or B2B transactions. 

FAQs on exports under GST

Is GST applicable for export of services?

Under the GST regime, exports of both goods and services are not taxed. You may request a refund of input tax credits (ITC) for inputs/input services used in exporting goods or services, subject to satisfying the requirements.

What is the GST exemption limit for export of services?

GST treats exports of commodities or services as interstate supplies. Therefore, Section 24 of the CGST Act of 2017 mandates that all exporters of products register for GST. However, if a service exporter's annual turnover is less than the Rs 20 lakh exemption limit, the company isn’t needed to register for GST.

What are the conditions of export of services?

In accordance with Section 2(6) of the IGST Act of 2017, "export of services" refers to the provision of any service in the following circumstances:

i) the service provider is based in India;

ii) the service recipient is based outside of India;

iii) the location of the service's provision is outside of India;

iv) the payment for the service was received by the service provider in convertible foreign currency or in Indian rupees, as permitted by the Reserve Bank of India;

v) The service provider and recipient are not just separate enterprises of the same person, according to Section 8's Explanation 1. Explanation 1 in Section 8 of the Act states that when a person has establishments in both taxable and non-taxable territories or in one or more taxable territories throughout India, they are to be treated as the establishments of a distinct person.

What is an example of export of services under GST?

Export of services is when the supplier of service is in India while the place of supply of service is outside India.

One example is services offered directly in relation to real estate, including lodging through hotels or inns. In this case, the location of the hotel and/or inn (outside India) would be considered the place of supply. Under the GST, hospitality industry players can profit from standard and uniform tax rates as well as from the simple and effective use of input tax credits. As a result of the lower overall cost to the end customer, you as an exporter can expect to attract more foreign tourists than before.

Since the GST is more effective, efficient, transparent, and business-friendly, this tax system spurs economic growth and raise international competitiveness – the latter should be your main consideration if exporting is on the table. 

Under the GST regime, starting a new business and then growing it will be relatively simpler. Overall, the GST streamlines the tax filing and payment process. To mitigate the potential challenges of GST on your exporting business, it is crucial that you remain proactive and closely observe your GST compliance steps in advance.