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GST: Frequently Asked Questions (FAQ)

  • 1) How to update GST number in IEC?  

    • There is no need to update or incorporate the GSTIN in the IEC. However, it is informed that all IECs issued with effect from 1.07.2017, would reflect PAN as IEC.
  • 2) Do we need to register for VAT?  

    • You need to register only with GSTN and obtain GSTIN.
  • 3) How are exports treated under the GST Law?  

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

      Inter-State supply and covered under the IGST Act.

      ‘zero rated supply’ 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.

  • 4) What will be the impact of GST on zero rating of export of goods?  

    • This will make Indian exports competitive in the international market.
  • 5) Will an exporter be required to pay GST in case of goods procured from unregistered persons?  

    • In case of supply by an unregistered person, the registered person i.e., exporter shall be liable to pay GST under reverse charge mechanism for purchases above five thousand rupees in a day. However the exporter can avail ITC of such GST paid and either utilize the ITC or claim refund of the same.
  • 6) What is Letter of undertaking (‘LUT’) for export of Goods?  

    • Letter of undertaking is an undertaking on letter head of company in prescribed form RFD-11 to be furnished with jurisdictional GST authority on the letter head of the registered person. LUT is binding:

      To export the goods out of India within three month from the date of issue of invoice for export.

      To pay applicable tax along with interest within a period of fifteen days after the expiry of three months from the date of issue of the invoice for export, if the goods are not exported out of India within the said period (i.e. 3 Month).

      To ensure export within three month from the date of issue of invoice for export. It also implies that date of invoice should be issued on or before the date of removal of goods. It also implies that the date of invoice in case of export of goods in all cases should be prior to the date of shipping bill.


      Relevant date of export in case of Goods

      if the goods are exported by sea or air, the date on which the ship or the aircraft leaves India; or

      if the goods are exported by land, the date on which such goods pass the frontier; or

      if the goods are exported by post, the date of dispatch of goods by the Post Office concerned to a place outside India;


      Conclusion: If the gap between date of export of goods and date of invoice for export of goods is more than three month then exporter is liable to pay IGST along with interest.
  • 7) Who is eligible for Letter of Undertaking?  

    • With effect from 4thOctober 2017 the facility of export of goods and/or services under LUT has now been extended to all registered persons except to those who have been prosecuted for any offence under the CGST/IGST Act /any of the existing laws and the amount of tax evaded in such cases exceeds two hundred and fifty lakh rupees. Therefore any person having valid GSTN is allowed to furnish the LUT if they have not been prosecuted for an offence involving evasion of tax exceeding Indian rupees 2.50 Cr(250 Lakhs).
  • 8) Validity of LUT  

    • The LUT shall be valid for the whole financial year in which it is tendered.
  • 9) What is Bond?  

    • Bond is like ledger with debit and credit facility and running in nature. Bond to be furnished with the GST officer judicial stamp on prescribed format RFD-11 but entry of debit and credit to be maintained by the exporter itself and to be shown to the officer whenever asked by the officer. Amount of bond is based on self-assessed tax liability by the exporter, bond amount should not be less than that of the outstanding IGST liability on account of export of goods and/or services. In all cases bond is to be supported by bank guarantee at the rate of 15%.
  • 10) How can IGST be paid?  

    • The IGST can be paid by utilizing ITC to the extent available and balance by cash. The use of ITC for payment of IGST will be done in the following order:

      ITC of IGST shall be used for payment of IGST first;

      Once ITC of IGST is exhausted, the ITC of CGST shall be used;

      If ITC of both IGST and CGST are exhausted, ITC of SGST shall be used.

      Remaining IGST liability shall be discharged in cash. GST System will ensure maintenance of this hierarchy for payment of IGST using the credit.

      However, IGST on imports has to be paid in cash only.

  • 11) How Exporter can claim refund for Zero rated supply?  

    • An exporter dealing in zero-rated goods under GST can claim a refund for zero-rated supplies as per the following options:

  • 12) Procedure for refund of IGST  

    • In case of refund of IGST, the shipping bill filed with the Customs is treated as an application for refund if the exporter has filed a valid return in Form GSTR-3/3B and the person in-charge of the conveyance carrying the goods to be exported has furnished an export manifest/report. There are some conditions laid down for successful claiming of refund of IGST paid on exports:

      GSTR-3B for the month is filed

      Table 6A of GSTR-1 has been filed

      Details of Shipping Bill and Invoice provided in Table 6A of GSTR-1 should match

      The IGST amount mentioned in GSTR-3B is equal or more than the IGST mentioned in Table 6A of GSTR-


      As per Act, 90% of refund is processed on a provisional basis within 7 days of application for refund.Refund of the balance 10% will be granted after verification of documents furnished by the applicant.
  • 13) How much a merchant exporter needs to pay for procuring goods from a domestic supplier for export?  

    • A merchant exporter can pay a nominal GST of 0.1 percent for procuring goods from a domestic supplier for export.
  • 14) Has DGFT/ Department of revenue issued any clarification to explain implication of GST on FTP schemes/ exports/ imports?  

  • 15) What type of duties can be paid using MEIS or SEIS scrips now? Can we use these scrips to pay GST?  

    • For items covered under the GST, scrips can be used for payment of Basic Custom Duty, Safeguard Duty, Transitional Product Specific Safeguard Duty, and Antidumping Duty.

      For items not covered under the GST (specified in Fourth Schedule to Central Excise Act 1944 covering specified petroleum products, tobacco etc.), in addition to the Basic Custom Duty, Safeguard Duty, Transitional Product Specific Safeguard Duty, and Antidumping Duty, scrips can also be used for payment of duties like central excise, CVD/ SAD.

      The scrips cannot be used for payment of any type of GST.
  • 16) Where can I find HS code, GST rates for my product?  

  • 17) Can the EOUs continue to get duty free supplies from domestic market?  

    • An EOU will have to pay the applicable GST on the import or domestic sourcing of inputs (goods or services).
  • 18) Will the exemptions, available to 100% EOUs & SEZs in the pre GST regime would continue?  

    • -SEZs
      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.

      EOUs

      Imports by EOUs
      The EOUs will continue to get exemption from payment of the basic Customs Duty, however they will have to pay IGST on imports.

      • On the IGST paid on import of inputs, ITC would be available which can be utilized for payment of GST payable on the goods cleared in the DTA. Refund of the unutilized ITC can also be claimed under Section 54(3) of CGST Act.

      • The facility of duty free import of capital goods under the Procurement Certificate procedure will not be available. To import capital goods at zero duty, EOUs will have to follow procedure under of the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017.


      Supplies to EOUs
      Suppliers to EOU will pay normal GST as they would pay while supplying to a domestic unit. An EOU can take Input Tax Credit (ITC) of the GST paid while taking domestic supplies and same canbe used for payment of GST on finished goods cleared in DTA.


      DTA sale
      DTA sale shall be subject to fulfillment of the following conditions:

      a) fulfillment of positive NFE

      b) payment of applicable GST on product under DTA sale

      c) Reversal of the BCD exemption availed on the inputs used in the manufacture of products under DTA sale. The reversal of BCD would be as per Standard Input Output norms published by the DGFT or norms fixed by Norms Committee of DGFT (where no SION is fixed).

      d) Refund of any benefits taken on procurement of inputs from DTA under Chapter 7 of FTP and used in the manufacture of products under DTA sale.


      Inter Unit Transfers
      Supply of goods from one EOU to another EOU (inter-unit transfer) will require payment of applicable GST. The BCD exemption availed on inputs by the supplier EOU, utilized in such transferred goods would have to be reversed by the recipient EOU at the time clearance of such goods in DTA. Same provisions apply on sending of Goods for Job work.


      Exempt products
      For GST exempt Goods like Petroleum products, the existing provisions provided under notification no. 52/2003-Cus, notification no. 22/2003-CE and Notification no. 23/2003-CE will continue to apply for import, domestic procurement and domestic clearance respectively.

  • 19) Under GST regime, can we get duty free benefit (all duties exempted) if we import using Advance authorization or EPCG?  

    • Under GST regime, both the Advance Authorization and EPCG holders would continue to get the exemption from payment of the Basic Customs Duty, Safeguard Duty, Transitional Product Specific Safeguard Duty, and Antidumping Duty. And for items specified in Fourth Schedule to Central Excise Act 1944 (specified petroleum products, tobacco etc.) exemption from Additional Duty leviable under Sections 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975 will also be available.

      However there is one major change. Now an Advance Authorization holder will have to pay IGST at the time of imports. He can take input Tax Credit (ITC), and after export, claim refund of any unutilized input tax credit at the end of tax period.

      The EPCG holder also will have to pay IGST at the time of imports and take input Tax Credit (ITC) on the duty paid. He cannot claim refund of any unutilized input tax credit after the exports.
  • 20) Whether balance import quantities under Advance Authorizations issued before 01.07.2017 can be utilized after 01.07.2017? And, will there be any implications on export obligation?  

    • The balance import quantities under Advance Authorizations can be utilized for duty free import but only Basic Customs Duty will be exempted on import after 01.07.2017. The applicable IGST will be required to be paid. There will be no implication on export obligation of Advance Authorizations.
  • 21) Whether balance import quantities under EPCG issued before 01.07.2017 can be utilized after 01.07.2017? And, will there be any implications on export obligation?  

    • The balance import quantities under EPCG can be utilized for duty free import but only Customs Duties will be exempted on import after 01.07.2017. The applicable IGST will be required to be paid. Since the export obligation is based on actual duty saved amount, the EO will be accordingly adjusted.
  • 22) Will Invalidation and ARO be available under Advance Authorization or EPCG scheme post GST implementation?  

    • ARO
      For items covered under the GST, No Advance Release Order (ARO) facility will be available in Advance Authorization and EPCG scheme.

      For items not covered under the GST (Listed in the Schedule 4 of Central Excise Act, 1944 read with The Taxation Laws (Amendment) Act 2017 No 18 of 2017, with effect from July 1, 2017) ARO would be available.

      Invalidation
      Invalidation facility will be available for both Advance Authorization and EPCG schemes, but applicable GST would need to be paid while making local procurement, using an invalidation letter.

      Input Tax Credit (ITC) of the GST paid on such local procurement can be availed as per CGSTRules 2017. Please also refer to DGFT Trade Notice No.11/2018 dated 30.06.2017.
  • 23) Is cess on customs duty to be paid on imports under GST regime?  

    • Education cess and Compensation cess would be applicable on imports
  • 24) What duties will be levied on import of goods?  

    • Customs duty and cess as applicable + IGST+ GST compensation cess. IGST and GST compensation cess shall be paid after adding all customs duty and customs cess to the value of imports.
  • 25) Will IGST be refunded for Capital Goods imported under EPCG scheme?  

    • The EPCG holder also will have to pay IGST at the time of imports and take input Tax Credit (ITC) on the duty paid. He cannot claim refund of any unutilized input tax credit after the exports.
  • 26) Will Deemed export drawback and TED refund be available under GST regime for deemed exports?  

    • The following provisions would apply under the GST regime for the deemed exports in relation to the refund of the Terminal Excise Duty (TED) and Drawback (DBK).

      No TED refund would be available as the central excise duty is subsumed under the GST. However, for the items covered under Schedule four of Central Excise Act, 1944, the TED refund would be available, provided the items are eligible for supply under the said category of the deemed exports under chapter 7 of the FTP, and there is no exemption from payment of excise duty.

      II. The drawback as provided under Chapter 7 would be limited to the refund of basic custom duty only.

  • 27) Present Procedures have Service Tax on Nepal, But no Goods Tax on Nepal. But, With GST, what tax will apply?  

    • The export procedure for Nepal would be same as that to other Countries.
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