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Detailed Analysis of Zero Rated Export of Goods and Services under GST

Editorial Team
Updated
September 1, 2023

Since the introduction of the Goods and Services Tax (GST) in India, businesses have been trying to understand its various provisions. One such provision is the zero-rated export of goods and services. It is an important concept that businesses need to be aware of to ensure that they are following the correct procedures while doing their exports. In this blog, we will take a detailed look at the zero-rated export of goods and services under GST and also discuss the relevant provisions that need to be kept in mind.

First, let's understand the concept of export under GST.

In the realm of GST, exports play a crucial role in promoting international trade and boosting the economy. However, it’s essential to understand the qualifying conditions and the meaning of export under GST. In this blog post, we will delve into the intricacies of exports and shed light on the conditions that must be fulfilled for a supply of goods or services to qualify as an export and in the second part of the article we will deal with Zero Rated Supply (Export of Goods or Services)

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Defining Export under GST

Under the Goods and Services Tax (GST) Act, export refers to the supply of goods or services from India to a destination outside its territory. It encompasses transactions that contribute to foreign exchange earnings and support the growth of the nation’s economy. To ensure that a supply can be classified as an export under GST, certain conditions need to be fulfilled. Let’s explore these qualifying conditions:

Place of Supply: The place of supply for goods and services must be outside India. It means that the recipient of the supply should be located in a foreign country.
Proof of Export: To establish that a supply qualifies as an export, the supplier needs to obtain certain documents, such as:
1. Shipping Bill: This document is generated by the Customs authorities and serves as proof that the goods have been shipped out of India.Bill of Lading/Airway Bill: These documents provide evidence of the transportation of goods via sea or air.
Receipt of Foreign Exchange: Another important condition is the receipt of payment in foreign currency for the export transaction. It ensures that the supply contributes to foreign exchange earnings for the country.
Time Limit for Realisation of Export Proceeds: The exporter must receive payment against the export within a prescribed time frame. The current time limit is nine months from the date of export, extendable up to fifteen months for specific sectors.

Zero Rate Export of Goods & Services

The zero-rated export of goods and services refers to the export of goods or services where no tax is levied on them. In other words, it means that such goods or services are taxed at 0% under GST. This is done to ensure that the exports are not burdened with taxes and can compete in the international market. However, it is important to note that this zero rating only applies to the final export of goods or services and not the goods or services that are used in the production of those exports. To claim zero rating for exports, businesses must comply with the following conditions:

The exporter must be registered under GST.
The goods or services must be exported from India.
The recipient of the goods or services must be located outside India.
The payment for the goods or services must be received in foreign currency.
The goods or services must be eligible for zero-rated GST.
The exporter must file an export declaration (LUT) with the GST authorities.

Under GST, the procedure for zero-rated exports is simplified with the introduction of the Export LUT/Bond process. To avail of this process, the exporter needs to file an LUT or a bond to the proper officer. The LUT or bond needs to be furnished online on the GST Portal, which is a straightforward process. Once the proper officer verifies the LUT or bond, the exporter can undertake export transactions without having to pay any tax.

In addition to the conditions mentioned above, it is important to note that certain services are also eligible for zero rating under GST. These services include transportation of goods from India to a place outside India, the supply of goods or services to a Special Economic Zone (SEZ), and the supply of goods or services to an exporter who holds the benefit of a refund of the duty paid on goods supplied.

In conclusion, the zero-rated export of goods and services is an important concept that helps businesses to compete in the international market. The government has simplified the process for zero-rated exports under GST with the introduction of the Export LUT/Bond process. Businesses need to comply with the conditions mentioned above and furnish an LUT or bond to avail of this process. By ensuring that they follow the correct procedures, businesses can benefit from zero rating and do exports without incurring any tax liability.

Conclusion

Note: The information provided above is based on current understanding and may be subject to change. For detailed and up-to-date information, please refer to official GST guidelines and consult professional advisors.

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