GST for Exporters

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Every government looks to boost exports, because of the economic growth it offers. The current government has taken several initiatives. GST is one of the biggest transitions for India. There have been many debates on it. Our intention is to help exporters understand ‘How to make GST work better for exporters’.

Importer Exporter Code (IEC):

PAN acts as IEC in the GST era commenced on 1st July 2017. GSTIN is the identifier at the transaction level for every import and export. GSTIN would be used for credit flow of IGST paid on import of goods.

refund

Export procedure:

The supply of goods or services or both can be made under bond or Letter of Undertaking (LUT), with or without payment of integrated tax. The exporters can claim the refund of unutilized input tax credit. The exporter must file an application for claiming input tax credit directly through the common electronic portal or through a facilitation center notified by the GST commissioner.

The registered person need not file any application for refund of IGST, paid for the supply of goods. The shipping bill with GST invoice details shall be deemed as the application for refund of IGST. The details of the relevant export invoices contained in FORM GSTR-1 get transmitted through the common portal to customs system and a confirmation of the export get transmitted back to the system, electronically.

The customs system processes the claim for refund, upon receiving the details of export manifest furnished in the return FORM GSTR 3. The amount equal to IGST paid in respect of each shipping bill gets credited to the bank account of the applicant mentioned in the registration.

The existing shipping bill formats are modified to comply with the IGST law. ARE-1 procedure is followed only for the commodities of applied central excise act.

Sealing of containers:

Central Board of Excise and Customs (CBEC), revised the procedure of sealing of the containers to be effective from 01.09.2017. Containers arrive at the port under three categories: containers stuffed at factory/warehouse under self-sealing, stuffed under the supervision of central excise officer, stuffed and sealed at the Inland Container Depot. For ease of doing business and uniformity, the board has decided to do away with the sealing by the CBEC officers. The procedure of self- sealing is simplified as follows:

The exporter should inform the jurisdictional customs officer about the details of the premises (factory or warehouse or any other place) where container stuffing is to be carried out.

Status holders recognized by Directorate General of Foreign Trade (DGFT) can use self-sealing procedure even if they are not registered under GST law. Other exporters are required to register under GST law and will be filing GSTR1 and GSTR2 to use self-sealing procedures. Otherwise, the exports goods are to be stuffed and sealed at ICD.

The exporter, desirous of using this procedure should inform the superintendent ranked customs officer or appraiser of customs at least 15 days before the first consignment from the premise. The officer will inspect the premise regarding the viability of stuffing the container. The officer will submit a report to the Deputy or Assistant Commissioner of Customs within 48 hours, who in turn shall forward the report to the Principal Commissioner of customs. The Commissioner grants permission for self-sealing at the premises.

Every time the self-sealing is carried out at the approved premises, the exporter should furnish details of address, description of export goods and incentives to be claimed at the customs.

In the case of a non-favourable report by the customs officer, the exporter should bring the goods to the ICD for sealing purpose.

Self-sealing permission obtained is valid for exports at all customs station. The Customs Bureau will circulate the permission along with the exporter’s GSTIN to all customs house.

The exporter uses a tamper-proof electronic seal of standard specification, fed with details of the exporter, exports goods, invoice number, authorized signatory name (for affixing the e-seal) and shipping bill, to seal the container before shipment.

The exporter planning to clear export goods without a customs broker can do so, by filing the shipping bill under digital signature.

In transit between approved premises and port of export, arises a possibility of replacing electronic seals with new details. At the port of export, customs officer might verify the integrity of electronic seals and inspect the consignments in self-sealed containers for risk standards using random or intelligent sampling methods.

Export order

Impact on Exports:

Drawback scheme will continue with the options of All Industry Rate (AIR) and Brand Rate. On goods imported for re-export purpose, drawback will continue to compensate customs duties as well as integrated tax and compensation cess. On the other hand, for imported goods and services used as inputs, the drawback is limited to customs duties on imported inputs and central excise duty on items specified in the Fourth Schedule to Central Excise Act 1944, instead of central excise duty, customs duty and service taxes combined.

Since there are limitations in Drawback scheme under GST, the existing duty drawback scheme will continue for a period of 90 days to allow a smooth transition. Exporters planning to claim a higher rate of duty drawback (composite AIR) during this period, should submit a declaration that no input tax credit or refund of IGST paid is claimed and CENVAT credit is not carried forward, along with a certificate from jurisdictional GST officer. This will prevent neutralization of input taxes twice. The exporter can claim brand rate for customs, central excise duties, and service tax during this period.

Exporters also have the option of claiming only the customs portion of AIR and claim refund under GST laws.

MEIS and SEIS are being continued, providing the exporters with duty scrips for the exemption of duties paid for the import of raw materials. The amount of exemption is expressed as a percentage of the total turnover of the exporter.

Concerns of exporters:

During initial days of GST implementation, the non-availing of credit certificate from GST officer may not be available for higher rate duty drawback claims. This prevents shipping bill moving to LEO stage and requires revision of bill to claim lower rate, to avoid delay in exports. Once the certificate is available, an additional claim needs to be filed for balance refund.

Another major concern for exporters is the imposition of five per cent GST on ocean freight which was exempted earlier. This will lock up working capital. Therefore, Refund will be processed within a week for 90% of the duties. Remaining 10 % will be refunded after the verification of accounts by tax authorities.

FIEO organized an Open house session on June 2017 to answer the concerns of exporters and to discuss on measures for FTP. Exporters from various sectors expressed their dissent on the announcement that deemed exports benefits may get discontinued under GST. They insisted on the continuation of all schemes for Indian products to remain competitive in global market and outcry over the method of paying tax and claiming the refund, demanding direct exemptions. Also, exporters were concerned about the regular break down in the icegate server of customs.

Conclusion:

The current GST structure has certain negative effects on the exports. It will be reviewed and the council will ensure the smooth transition to the GST regime.

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