An Exporters Guide under GST Regime

Backdrop

The post GST scenario have caused undue hardships to exporters and the major amongst it being the blockage of working capital owing to unavailability of online facility to claim refunds of IGST or refund of unutilized input tax credit. Many of the exporters had been even postponing their shipments as they were grappling with low funds. These problems were addressed to the GST council by various exporters Association and export councils under the Ministry of Commerce.

The GST council has taken a vibrant approach for readdressing these grievances of all these exporters and in turn boosting up exports. The Council identified the major difficulties constraining the export sector on account of delays in refunds of IGST, unutilized input tax credit on exports and therefore resulting in huge working capital blockage. In relation to this the council has taken steps and bought out various notifications and circulars which have been made effective from the date prescribed therein. Further the GST council has also made various recommendations in its recently held 22nd Refund of IGST made Operative from 10.10.2017 meeting dated 06.10.2017. The key changes impacting all exporters have been summarized below for the sake of providing a quick guide to all the exporters.

Refund of IGST made Operative from 10.10.2017

Exports made on payment of IGST under Rule 96 of the CGST Rules was becoming a major concern amongst all exporters as it resulted in blockage of a major portion of their working capital. Further in order to ensure that the exports of the country, is not affected due to these procedural lapses the GST council has taken steps in order to ensure that refunds start smoothly. The following guidelines have been issued¹

Exporters should ensure with their carriers that correct & timely EGM is filed.
Details of zero rated supply as filled up in Table-6A of Form GSTR-1 should be matched up with details of shipping bill/ bill of export. For the sake of convenience the details in the customs system shall be made available for verification in ice gate login.
As facility of GSTR-1 has not been made available for the month of August and subsequent months, accordingly to facilitate processing of refunds, GSTN is making available a separate utility for filing up Table-6A of GSTR-1 on the GSTN portal.
Valid Return in GSTR-3/3B is another pre-condition for considering Shipping Bill as claim for Refund.
The Bank Account registered for Drawback purpose will be credited with the Refund amount of IGST even if it differs from that of the Bank Account given at the time of GST registration. However, to bring parity with the GST particulars the Bank A/c could be changed in customs or the bank account shown in customs should be an additional account in GST registration details.
The bank account details needs to be verified by Public Financial Management System (PFMS) and exporters are also advised not to change their bank details frequently.
Proper officer from each jurisdiction shall generate payment scrolls
In case Refund is withheld as per Rule 96(4a), the proper officer of integrated tax at customs station has to intimate the same to the applicant and the jurisdictional commissioner of CGST, SGST and UTGST. Further a copy of such intimation to be transferred to the common portal.
If goods are exported under violation of Customs Act, 1962 IGST refund has to be withheld.
For non-EDI shipping bills the guidelines and procedures shall be communicated separately.

It may also be noted that due to the delay in operation of PFMS and on the request of the chief controller of account the existing tax refund payment system will be used for making payment of IGST from 10thOctober, 2017 to 14th October, 2017. The payment through PFMS portal will be made effective from 16th October, 2017²

Procedural steps for obtaining IGST Refund in brief³

Refund of IGST on exports shall be given by generating scrolls of Shipping Bills.
Transmission of scrolls from ICEGATE to PFMS.
Further the scrolls to be validated by a DDO for authentication and further processing of refund.
On obtaining due confirmation by the Central DDO, amount shall be credited to the exporter’s account through PFMS.
A GSTIN wise Shipping Bill enquiry module is also made available in ICEGATE login for the registered users (exporters/CHAs) to again check the relevant declarations (SB No., Invoice details, IGST Amount, EGM details etc.) they filed with Customs and verify whether they match with the GSTR-1 and GSTR-3B returns.

Facility of LUT now extended to all exporters

All exporters making exports on non-payment of IGST can now avail the facility of exporting under LUT without any pre-requisite criteria as enshrined earlier. Previously, the facility of LUT was limited to status holders and exporters having a prescribed minimum foreign inward remittance. However, now any registered person is eligible to export goods and services under LUT, without payment of integrated tax except those who have been prosecuted for any offence under the CGST Act/ IGST Act or under any of the existing laws and the amount of tax evaded exceed Rs. 250 lakhs.

Validity of LUT and Time for acceptance of LUT/Bond

LUT shall be valid for the whole financial year in which it is tendered unlike 12 months as had been stated earlier. Further, such LUT/ Bond should be accepted within a period of 3 working days of its receipts along with self declaration and if the same is not accepted within a period of 3 working days from the date of its submission it shall be deemed to be accepted.

Clarification regarding running bond

The exporters shall furnish a running bond where the bond amount would cover the amount of self assessed estimated tax liability on the export. A fresh bond must be furnished if the existing bond amount is insufficient to cover the tax liability. Exporter will have to maintain the debit/credit entries of integrated tax. The record shall be furnished to the Central Tax officer when required.

Mandatory furnishing of Bank Guarantee along with Bond

In all cases a bond shall be accompanied by a bank guarantee of 15% of the bond amount. Unlike previously, the commissioner if satisfied with the track record of an exporter could dispense off with the requirement of bank guarantee with bond. However, it may be noted that Bond will be required to be furnished by those persons who have been prosecuted for any offence under the CGST Act/ IGST Act or under any of the existing laws and the amount of tax evaded exceeds Rs. 250 lakhs.

Other Procedural Aspects regarding LUT/ Bond

The form for execution of Bond/ LUT i.e. FORM GST RFD-11 must be submitted manually till the time it is available in the common portal. The form shall be furnished to the jurisdictional Deputy/ Assistant Commissioner having jurisdiction over the principal place of business.
The LUT shall be furnished on the letter head of the registered person in duplicate and it should be executed by the working partner, the Managing Director/the Company Secretary/ the proprietor/by a person duly authorized by such working partner/Board of Directors of such company or proprietor.
If goods are not exported as per time prescribed in Rule 96A(1) and the registered person fails to pay the amount as prescribed therein then the facility of LUT shall be withdrawn and till the same is restored the exports in the intervening period shall be either on payment of IGST or under Bond with Bank Guarantee.
Self declaration that the conditions of LUT have been fulfilled shall be accepted unless there is specific information otherwise

Self-Sealing

Till the implementation of mandatory self sealing, the containers are to be sealed under the supervision of the central excise officer having jurisdiction over the place of business. A copy of the sealing would be forwarded to the Deputy/Assistant Commissioner having jurisdiction over the principal place of business. Further, considering the difficulties expressed by trade associations the date of mandatory self sealing procedure is deferred to 1^st of November, 2017⁵

Exporters purchasing from manufacturers^{4 & 6}

The transaction between a manufacturer and a merchant exporter is in the nature of supply and the same would be subject to GST. Under GST regime, there is no provision for issuance of CT-1 that previously enabled merchant exporters to purchase goods from a manufacturer without payment of tax. However, the 22^nd Realization of exports in Indian Rupee GST Council meeting dated 06.11.2017 approved that relaxation will be given to Merchant exporters and they will now have to pay nominal GST of 0.1% for procuring goods from domestic suppliers for export. The details would be released soon. (We shall share an additional Alert explaining process involved for such transaction.)

Realization of exports in Indian Rupee⁴

LUT shall be accepted for supplies to Nepal, Bhutan, SEZ unit or SEZ developer irrespective of whether payments are in made in Indian rupee or convertible foreign exchange if the same is as per RBI guidelines. However, supply of services to Nepal or Bhutan would be deemed to be exports only if the consideration for the same is received in convertible foreign exchange.

New Drawback Schedule⁷

The new drawback schedule has been made effective from 1^stof October,2017, and the composite rates of Drawback available for a transition period of 3 months has been done away with. Further the declaration as required for a transition period of 3 months is no longer required.

Changes in Valuation Rules⁸

Place of importation which was not defined earlier is now defined as“the customs station where the goods are brought for being cleared for home consumption or being removed for deposit in a warehouse.”

Henceforth loading, unloading and handling charges incurred for delivery of goods to the place of importation shall now be included in transaction value.
More clarity in computation of transport & insurance charges when actuals of each cannot be determined separately.

Export Relief Package as approved in the 22^ndGST Council Meeting and not yet bought out by notification/ circulars

For August and subsequent months refunds would get cleared from 18.10.2017.
Other refund of IGST paid on supplies to SEZs and refund of unutilized inputs taxes on exports under Bond/LUT, shall also be processed from 18.10.2017.
Further Holders of AA / EPCG and EOUs would not have to pay IGST, Cess etc. on imports.
E wallet account facility has been approved by the Council so that the exporters get refund in advance. The effective date of E-wallet is expected to be rolled out by1^stApril ,2018
To reduce GST rate on sale of MEIS scrip from 5% to 0%.
GST on bunker fuel is being reduced to 5% for both coastal vessels and foreign going vessels.

Conclusion

The decisions taken by the GST council have given a slew of relief to Exporters, those who have been facing working capital squeeze due to delayed tax refund. Moreover, the E-wallet facility which will be made operational from April, 2018 will further help in getting a notional advance amount of refund thus solving the sluggishness of obtaining Refund under the GST regime.

¹Instruction No.15/2017-Customs dated 9^thber, 2017

²Instruction No.16/2017-customs dated 09.10.2017

³As per Advisory on the IGST Refund Module in ICES

⁴Notification No.37/2017-Central Tax dated 04.10.2017, Circular No.8/8/2017-GST dated 04.10.2017

⁵Circular No. 37/2017-cus dated 20.09.2017

⁶Export Package as approved in the 22^nd GST Council meeting dated 06.10.2017

⁷Notification No.88/2017-cus(N.T.) dated 21.09.2017, Notification No. 89/2017-cus (N.T.) dated 21.09.2017 Circular No. 38/2017-cus dated 22.09.2017

⁸Notification No. 91/2017-cus (N.T.) dated 26.09.2017, circular no. 39/2017-cus dated 26.09.2017

An Exporters Guide under GST Regime _final

BT Associates is a premier indirect tax consultant in kolkata, delivering high quality services to client in the area of indirect taxation.GST idea is a unit of BT Associates formed to share knowledge on stakeholders. We cover entire gamut from technical papers to recent development including IT under GST

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Bhaskar Thakkar

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BT Associates, India

thakkar@btassociate.com

Twenty years of experience in tax practice. Specialist in structuring & planning and tax optimization under indirect tax. Lead eastern India indirect tax practice of Ernst & Young in past.