GST on Third-Party Exports

The Goods and Services Tax (“GST”) regime subsumed the various indirect taxes. There are many transactions that attracted such multiple statutes of taxation one of which is export. Export is the trading / selling of goods beyond the geographical boundary of the country.

Export is usually done by the manufacturer or the trader who is the direct link between the seller and the buyer. Whereas the exports can be made with the help of the third person or the intermediary.

What is the third –party exports?

Any export of goods or services is done by the exporter  or a manufacturer on behalf of any other exporter or a manufacturer is termed as third party export transaction.  In this process,  the overseas order is received by a third party exporter who receives the remittance against the delivery of the order.

The third-party exports are popular due to the following reasons:

  • Such intermediary has all the valid license and the approvals for doing such exports and reimbursement approval.
  • This involves the less cost i.e., the commission only.
  • Better focus on production or core business than filing and reporting requirements to the customs.
  • This facilitates ease of process by less error and resubmission of documents due to error in filing.

Defining Exports:

  1. Export of goods under GST means taking in view the grammatical variations and cognate expressions meaning taking out of India to a place outside India.
  2. Export of Services under Section 11  of the Integrated GST Act, 2017 means the supply of any service, when –
  • The place of supply of service is in India
  • The supplier of service is located outside India;
  • The recipient of service is located in India
  • Deemed Exports under GST means the transactions which involve:
    1. The supply of goods that do not leave the country, and
    2. The payment for such supplies is received in Indian Rupees.

Exceptions:

The following supplies do not form part of the export of goods or services are as follows:

  • Where the place of supply of service is within India but to a person located outside India.
  • Where the consideration for the supply of services is received in Indian currency or in currency other than freely convertible currency.
  • The supply of services to the foreign branch would not be covered as export of services due to specific exclusion as “export of service”.

Documentation

In the process of making such export, the documents like export bill, shipping bill which need be filed shall disclose the names and other relevant details of manufacturer exporter and the third party exporter. Following are the documents which need by filed for making the exports:-

  • Invoices
  • Shipping bill
  • Bank Realization Certificate
  • Guaranteed Remittance Declaration
  • Export order
  • Self Declaration and other documents

Taxability of Third Party Exports

Referring to the Notification No. 41/2017 – IT(R) and Notification No. 40/2017-CT(R), the tax rates have been specified as follows:

  • In the case of a supply in the same state the tax rate @ 0.05 percent.
  • In case of supply from one state to another the tax rate @ 0.1 percent.

Please note, Deemed exports are not allowed under the third party exports.

Conditions:            

  • GST Registration – The manufacturer and the third party exporter shall have GST Number known as GSTIN (A PAN-based 15 digit number).
  • Valid GST invoice – The supply of goods from the manufacturer exporter to the third party exporter shall be followed a validly made invoice. Such
  • Export of goods – The concessional rates of GST as mentioned above can be availed only by the exporter of goods. Such invoice shall contain all the relevant details regarding the exporter and manufacturer exporter.
  • No subsisting Default – The third-party exporter and the manufacturer exporter shall have not made default in filing returns for the preceding six months.
  • Export obligation – The export of goods made within ninety days from the date of the issue of the GST invoice.
  • License & Approvals – The third-party exporter should be registered with an Export Promotion Council (EPC).
  • Place of supply  – The third-party exporter should move the goods from the premises of the manufacturer exporter to any of the following places:
    • The port, airport, land customs station or inland container depot from which the export is scheduled to take place
    • A registered warehouse as a temporary transit point before the goods are moved to a port, land customs station, inland container depot or airport from which the export is scheduled to take place
  • Proof of Export – The proof that the export was made and completed should be provided to the manufacturer exporter and the jurisdictional assessing officer. A duly signed copy of the shipping bill or bill of export will be allowed as proof.

Need any assistance in Registrations & return?

Reach us at info@cs-india.com

Also Read: NCLT (Amendment) Rules, 2020

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