Benefits Of Deemed Exports
Q1. What is the meaning of Deemed Exports?
(1)‘Deemed Exports’ as defined in the Foreign Trade Policy-2015-20 means those transactions in which the goods supplied do not leave the country and the supplier in India receives the payment for the goods either in Indian rupees or in Free foreign exchange. It means the goods supplied need not go out of India to treat them as ‘Deemed Export’.
(2)“Deemed Exports” for the purpose of GST would include only the supplies notified under Section 147 of the CGST/SGST Act, on the recommendations of the GST Council. The benefits of GST and conditions applicable for such benefits would be as specified by the GST Council and as per relevant rules and notification.
Q2. What are the different categories of supplies regarded as ‘DEEMED EXPORTS’?
The following categories of supply of goods manufactured in India shall be regarded as “deemed Exports” under the Foreign Trade Policy-2015-20.
- Supply by manufacturer:
- Supply of goods against Advance Authorization / Advance Authorization for annual requirement / DFIA;
- Supply of goods to EOU / STP / EHTP / BTP;
- Supply of capital goods against EPCG Authorization;
- Supply by main / sub-contractor (s):
- (i) Supply of goods to projects financed by multilateral or bilateral Agencies / Funds as notified by Department of Economic Affairs (DEA), MoF, where legal agreements provide for tender evaluation without including customs duty.
- Supply and installation of goods and equipment (single responsibility of turnkey contracts) to projects financed by multilateral or bilateral Agencies/Funds as notified by Department of Economic Affairs (DEA), MoF, for which bids have been invited and evaluated on the basis of Delivered Duty Paid (DDP) prices for goods manufactured
- Supplies covered in this paragraph shall be under International Competitive Bidding (ICB) in accordance with procedures of those Agencies /
- A list of agencies, covered under this paragraph, for deemed export benefits, is given in Appendix
- (i)Supply of goods to any project or for any purpose in respect of which the Ministry of Finance, by erstwhile Notification No. 12/2012 –Customs dated 17.3.2012, as amended from time to time, had permitted import of such goods at zero customs duty (with exemption of both BCD and CVD) subject to conditions specified therein and which are continued under the Customs Notification No. 50/2017- Customs dated 30.6.2017 with exemption of zero basic customs duty and subject to conditions mentioned in the said new notification. Benefits of deemed exports shall be available only if the supply is made under procedure of
- Supply of goods required for setting up of any mega power project, as specified in the list 31 at Sl. No. 598 of Department of Revenue Notification No. 50/2017-Customs dated 30.6.2017, as amended from time to time and subject to conditions mentioned therein, shall be eligible for deemed export benefits provided such mega power project conforms to the threshold generation capacity specified in the above said
- For mega power projects, ICB condition would not be mandatory if the requisite quantum of power has been tied up through tariff based competitive bidding or if the project has been awarded through tariff based competitive
- Supply of goods to United Nations or International organization for their official use or supplied to the projects financed by the said United Nations or an International organization approved by Government of India in pursuance of section 3 of United Nations (Privileges and Immunities Act), 1947. List of such organization and conditions applicable to such supplies is given in the Customs notification no. 84/97-Customs dated 11.11.1997, as amended from time to time. A list of Agencies, covered under this paragraph, is given in Appendix-7B.
- Supply of goods to nuclear power projects provided:
- Such goods are required for setting up of any Nuclear Power Project as specified in the list 32 at Sl. No. 602, Customs notification no. 50/2017-Customs dated 30.6.2017, as amended from time to time and subject to conditions mentioned
- The project should have a capacity of 440 MW or
- A certificate to the effect is required to be issued by an officer not below the rank of Joint Secretary to Government of India, in Department of Atomic
- Tender is invited through National competitive bidding (NCB) or through
Q3. What are the benefits available under ‘Deemed Exports”
Deemed exports shall be eligible for any / all of following benefits in respect of manufacture and supply of goods, qualifying as deemed exports, subject to terms and conditions as given in HBP and ANF-7A:
- Advance Authorization / Advance Authorization for annual requirement / DFIA.
- Deemed Export Drawback for BCD.
- Refund of terminal excise duty for excisable goods mentioned in Schedule 4 of Central Excise Act 1944 provided the supply is eligible under that category of deemed exports and there is no
Q4. What are the “deemed exports treatment under the GST LAW;
- Meaning of Deemed Exports under GST
Export of goods, in common parlance, means taking goods outside India. Such supplies are treated as zero-rated supplies under GST. However, the Central Government may notify certain categories of supplies of goods, which would be treated as deemed exports.
This means that such supplies shall be treated as exports even if such goods are not taken outside India.
- Essential conditions to qualify as Deemed Exports
- Applicable only for the supply of goods (not applicable to services).
- Goods are not required to be taken outside India.
- Such supply of goods must be notified by the Central Government as Deemed exports under Section 147 of the Central Goods and Services Tax Act, 2017 (CGST Act).
- Goods must be manufactured or produced in India.
- Payment can be received in Indian Rupees or in convertible foreign exchange.
- Such supplies cannot be made under Bond / LUT.
- The tax must be paid at the time of supply. Refund of tax paid on such supplies can be claimed.
- Supplies notified as Deemed Exports under GST
Notification No. 48/2017 – Central Tax dated 18 October 2017 has notified the following supply of goods as deemed exports:
- Supply of goods by the registered person against Advance Authorisation (AA) i.e. Supplier must be registered under GST and recipient must be an Advance Authorisation holder
- Supply of capital goods by the registered person against Export Promotion Capital Goods Authorisation (EPCG)
- Supply of goods by the registered person to Export Oriented Unit (EOU)/ Electronic Hardware Technology Park Unit (EHTP) / Software Technology Park Unit (STP) / Bio-Technology Park Unit (BTP)
- Supply of gold by Bank or Public Sector Undertaking against AA
Note: Deemed exports have also been defined under the Foreign Trade Policy 2015 – 2020 (FTP). However, the definition of deemed exports under FTP is different from the definition under GST law and should not be considered while applying GST provisions. A particular supply of goods can be deemed exports under FTP but may not qualify as deemed exports under GST. The purpose of the two legislations is different.
Difference between Exports and Deemed Exports
For example, Dealer ‘A’ (located in Rajasthan) sells goods to Dealer ‘B’ which is an EOU. B, in turn, sells the goods to a customer ‘C’ in Germany.
Supply by A to B is treated as deemed exports. Supply by B to C is treated as exports.
- Taxability of deemed exports under GST
Unlike exports, Deemed export supplies are not zero-rated supplies by default. All deemed export supplies will be subject to GST at the point of supply. Supplies cannot be made under Bond / LUT without payment of tax. Tax should be paid on such supply and then be claimed as refund.
Subject to certain conditions, Refund of tax paid can be claimed by either of the following persons:
- Supplier of goods OR
- Recipient of goods.
Note: The recipient is not eligible to claim the input tax credit (ITC) in case refund of tax paid is being claimed by the supplier.
- Additional conditions for deemed exports to EOU/STP/HTP
- The EOU/ EHTP/ STP/ BTP unit must give prior intimation by filing Form A to the supplier and the jurisdictional GST officer of supplier and recipient.
- Form A must bear a running serial number and contain details of goods to be procured, which is pre-approved by the Development Commissioner.
- The supplier must then supply goods under the cover of a tax invoice.
- The tax invoice must be endorsed by the recipient. Endorsed copy of the same must be sent to the supplier and jurisdictional GST officer of supplier and recipient.
- Record of such goods received by EOU/ EHTP/ STP/ BTP unit must be maintained in Form B.
- Refund of GST paid on deemed exports: Procedure
Documentary Evidence required to claim a refund:
In case the supplier is claiming a refund of tax paid on deemed exports, the following details/ documents must be produced:
- A statement containing Invoice-wise details of deemed export supplies made by the supplier.
- Acknowledgement by jurisdiction tax officer of AA or EPCG holder that the said deemed export supplies have been received OR in case of EOU/ EHTP/ STP/ BTP/ Copy of tax invoice signed by the recipient that said deemed export supplies have been received.
- Undertaking by the recipient that no ITC has been claimed.
- Undertaking by the recipient that it shall not claim a refund in respect of such supplies.
For obtaining a refund of tax paid on deemed exports, the supplier or recipient is required to file an application in Form GST RFD – 01 with supporting documents. Manual filing and processing of refund claims in case of deemed export supplies are permitted till the refund module is fully operational. The refund claim can be filed within two years from the date on which return relating to such deemed export supplies is furnished electronically.
Reporting requirements in GSTR – 1 and GSTR – 3B:
Deemed export supplies are required to be disclosed in Table 6C of Form GSTR – 1. The registered dealer has to give invoice details and tax paid on such supplies.
In Form GSTR – 3B, deemed exports are disclosed in Table 3.1 (b) with other zero-rated supplies.
Amendment in B2B deemed export invoices is required to be disclosed in Table 9A (B2B amendments). Amendment in debit/ credit notes would be reported in Table 9C.