Faculty of Law

B.A.LLB. (H.)
Tax Law II Assignment
Topic – Export and Import Under GST Act, 2017

Submitted by: Submitted to:

Mohd Hamza Hussain Ms. Kiran Bala
Sec. – B Assistant
Proffesor,
IV Year (7th Sem.) Faculty of Law,
Roll No. – 20 Jamia Millia
Islamia.
ACKNOWLEDGEMENT
Firstly, I would like to express my profound sense of gratitude towards the almighty
“ALLAH” for providing me with the authentic circumstances which were mandatory for
the completion of my project.
Secondly, I am highly indebted to Ms. Kiran Bala, Asst. Prof. at Faculty of Law,
Jamia Millia Islamia University, New Delhi for providing me with constant
encouragement and guidance throughout the preparation of this project.
Thirdly, I thank the Law library staff who liaised with us in searching material relating to
the project.
My cardinal thanks are also for my parents, friends and all teachers of law department in
our college who have always been the source of my inspiration and motivation without
which I would have never been able to unabridged my project.
Without the contribution of the above said people I could have never completed this
project.
CONTENTS

1. INTRODUCTION

2. MEANING OF EXPORT &IMPORT OF GOODS

3. MEANING OF EXPORT & IMPORT OF SERVICES

4. BROAD SCHEME OF TAXATION ON IMPORTS

5. TREATMENT OF EXPORT UNDER GST

6. EXPORT OF SERVICES AT ZERO RATED

7. GST ON SOFTWARE TRANSACTIONS INCLUDING CLOUD COMPUTING

8. CONTINUATION OF EXEMPTIONS FOR STP/SEZ UNITS

9. REFUND OF INPUT TAX CREDIT IN CASE OF EXPORT OF GOODS

10. DEEMED EXPORTS

11. SUPPLY OUTSIDE INDIA WHICH DO NOT CONSTITUTE EXPORT OF GOODS OR

SERVICES

12. EXPORT PROMOTION UNDER GST

13. TAX TREATMENT OF EXPORT OF GOODS AND SERVICES TO NEPAL AND BHUTAN
14. TAXES ON IMPORT TO CONTINUE AFTER GST

15. CONCLUSION

16. REFERENCE
INTRODUCTION

Foreign trade is one of the indices of a country’s economic growth. India is one of the
fastest growing economies in the world. Our country’s trade is booming. India exported
goods worth $274.6 billion in 2016-17, 4.7% higher than $262.2 billion in FY16. Trade
deficit in 2016-17 was $105.7 billion.

With the government’s decision to roll out Goods and Services tax (GST) in 2017, a
wave of apprehension ran through the business sector. Arguably GST’s implementation
will change the way of doing business in India, and impact the trade (import-export of
goods) as well. But will this impact be negative or positive? Prior to understanding
GST’s effect on trade, let’s quickly delve into the basics of GST.

GST is a single tax levied on the supply of goods and services, right from the
manufacturer to the consumer. It will replace a host of the current central taxes and
duties, and state cesses. Under the GST regime, credits of input taxes paid at each stage
will be available in the subsequent stage of value addition.

GST in India will have three components: Central Goods and Service Tax (CGST), State
Goods and Service Tax (SGST) and Integrated Goods and Service Tax (IGST). Centre
would levy and collect CGST, and States would levy and collect SGST on all
transactions within a State. The IGST would be equivalent to CGST plus SGST. IGST
will ensure flow of input tax credit from one State to another.

No tax will be payable on export of goods or services as per the GST law. Credit of input
tax credit will be available and same will be available as refund to the exporters.

However, the scenario is different in case of imports. Under the GST regime:

 Import of goods and services will be treated as inter-state supplies. IGST will be
levied on the import of goods and services into the country. Basic Customs Duty
(BCD) will be levied on the import of goods in addition to IGST.
 With regard to import of services, the service receiver will be liable to pay tax on
the service if such services are provided by a person residing outside India. This
practice is similar to the current provision of reverse charge, wherein service receiver
is required to pay tax and file return.
 GST will follow the Transaction Value based Valuation Principal from the current
customs law. IGST will be computed on the transaction value of the goods. 
 Tax paid during import will be available as a credit under “Import and Sale”
model. Also refund of Special Additional Duty (SAD) which is available now, after
doing specific compliance, no such restrictions will be part of GST. 
 The tax revenue in case of SGST will accrue to the State where the imported
goods and services are consumed, as GST is a destination-based tax.
 The current customs import tariff that are loaded with multiple exemption
notifications, will be reviewed and possibly withdrawn, or converted into a refund
mechanism. This exercise could change the structure of export-linked duty exemption
schemes under the FTP where the duty exemptions may be relieved from payment of
BCD. However, IGST may not be exempted.
MEANING OF EXPORT & IMPORT OF GOODS

Section 2 (5) of IGST Act, 2017 defines – “Export of Goods”, with its grammatical
variations and cognate expressions, means taking out of India to a place outside India.

Section 2 (10) of IGST Act, 2017 defines – “import of goods” with its grammatical
variations and cognate expressions, means bringing goods into India from a place outside
India.

MEANING OF EXPORT & IMPORT OF SERVICES

“Import of Services” as defined under Section 2 (11) of IGST Act, 2017 means the
supply of any service, when –

1. The supplier of service is located outside India;

2. The recipient of service is located in India; and

3. The place of supply of service is in India

“Export of Services” as defined under Section 2 (6) of IGST Act, 2017 means the
supply of any service, when –

1. The supplier of service is located in India;

2. The recipient of service is located outside India;

3. The place of supply of service is outside India;

4. The payment for such service has been received by the supplier of service in
convertible foreign exchange; and

5. The supplier of service and the recipient of service are not merely establishments of a
distinct person in accordance with Explanation 1 in section 8;
 6. Explanation 1— For the purposes of this Act, where a person has,—

 An establishment in India and any other establishment outside India;

 An establishment in a State or Union territory and any other establishment outside

that State; or

 An establishment in a State or Union territory and any other establishment being a

business vertical registered within that State or Union territory then such
establishments shall be treated as establishments of distinct persons.

BROAD SCHEME OF TAXATION ON IMPORTS

As per provisions of the IGST law import of goods into India shall be deemed to be a
supply in the course of inter-State trade or commerce. It has also been provided that
Integrated Tax on goods imported into India shall be levied and collected in accordance
with the provisions of Section 3 of the Customs Tariff Act, 1975 at the point when duties
of Customs are levied on the said goods under the Customs Act, 1962, on a value as
determined under the Customs Tariff Act, 1975

The Taxation Laws (Amendment) Act, 2017 provides that IGST on imports will be levied
at value of imported article as determined under the Customs Act plus duty of customs
and any other sum chargeable in addition to customs duty (excluding GST and GST
Cess). This in effect makes levy of IGST at par with present levy of CVD which is on
basic value plus customs duty.

As per the definition of ‘supply’ under CGST law, import of services for a consideration
whether or not in the course or furtherance of business is deemed to be supply and as per
the IGST law, supply of services in the course of import into the territory of India, shall
be deemed as supply of services in the course of inter- State trade or commerce.
Accordingly, Integrated Tax would be levied on import of services. Although the
provisions are yet to be notified, the Integrated Tax on import of services would be
payable by the recipient under reverse charge.
 Further, there would be no change in applicability of countervailing duty levied under
section 9BB of the Customs Tariff Act, 1975 (and different from the additional duty of
Customs levied under section 3, ibid., also known as CVD), anti-dumping or safeguard
duties, where ever imposed by the Government.

TREATMENT OF EXPORTS UNDER GST

As per the provisions of IGST law, export of goods and/or services are to be treated as
“zero rated supplies” and a registered taxable person exporting goods or services shall be
eligible to claim refund under one of the following two options:

 Export under bond or letter of undertaking without payment of Integrated Tax and
claim refund of unutilized input tax credit.

 Export on payment of Integrated Tax and claim refund of the tax so paid on goods
and services exported. The aforesaid refunds will be subject to rules, safeguards and
procedures as may be prescribed.

EXPORT OF SERVICES AT ZERO RATED

Exports are being zero rated, and therefore input taxes paid would be allowed as refund. 
However, to determine whether the services qualify as export, it would be important to
analyse the conditions prescribed for “export of service”.

The definition of “export of service” is similar to the present law, and therefore no new
conditions are prescribed.  However, place of supply rules would need to be evaluated on
a case-to-case basis to determine the tax applicability on such services.

The default rule for place of supply for export of service shall be the location of the
service recipient, where the address on record of the recipient exists with the exporter. 
Hence, it will be critical for exporters to ensure that the address of service recipient on
record can be established before the authorities on request.
The typical IT/ ITES services that may fall under the default rule include software
development, BPO operations, software consultancy, etc.  Apart from these, certain
services like software support/ maintenance and intermediary services will also move to
the default rule, as there are no exceptions carved out for these, unlike under the present
law.

There are exceptions to the above default rule, wherein training services could be based
on the performance location of training, but at the same time, online training is not
specified, and therefore could fall under default rule.

Thus, a detailed analysis of the nature of services and its place of supply would need to
be carried out to determine whether the services would be treated as exports and zero
rated.

GST ON SOFTWARE TRANSACTIONS INCLUDING CLOUD COMPUTING

Packaged software provided on media is likely to be covered under “goods”, and

therefore is likely to be taxed based on the rate of tax and place of supply for goods.
However, customized software may not qualify as “goods”, and therefore may be treated
as services.

However, with respect to software supplied electronically, the same may not be covered
under “goods” as the definition of goods does not include intangible property. Hence, it
would be covered under “service”. This is likely to put to rest the vexed issue of dual
taxation of software supplied electronically under the present laws.

In the context of cloud computing, the draft law provides that transfer of right in goods
without transfer of title, including leasing transaction, shall be treated as a service. Hence,
cloud services shall be treated as supply of “service” and therefore, the debate of dual
taxes of VAT and service tax will not arise under GST.
 CONTINUATION OF EXEMPTIONS FOR STP/ SEZ UNITS

No exemptions have been specified in the draft law for STP and SEZ units. Upfront
exemption from customs duty/ excise duty for STP units and SEZ units (including service
tax and CST exemption for SEZs) may not continue as GST will be payable on imports
or procurements as per the draft law.

The GST paid on such procurements will be eligible as refund and therefore, will impact
the working capital requirements of such units.

The efficacy of the STP scheme therefore seems doubtful upon transition to the GST
regime, as the benefit may be restricted only to BCD paid on import of non-IT products.

Upfront exemption of service tax for SEZ units (by way of Form A1/ A2) is also likely to
be converted to refund.

REFUND OF INPUT TAX CREDIT IN CASE OF EXPORT OF GOODS

 In case of zero rated supplies made without payment of tax, refund of input tax
credit will be available as per proviso (i) to section 54(2) of CGST Act.

 No refund of unitized input tax credit shall be allowed in cases other than exports
including zero rated supplies or in cases where the credit has accumulated on account
of rate tax on inputs being higher than the rate of tax on output supplies, other than nil
rated or fully exempt supplies – first proviso to section 54(3) of CGST Act.
 No refund of unutilized input tax credit shall be allowed in cases where the goods
exported out of India are subjected to export duty – second proviso to section 54(3) of
CGST Act.

 No refund of input tax credit shall be allowed if the supplier of goods or services
avails duty drawback of CGST / SGST / UTGST or claims refund of IGST paid on
such supplies – third proviso to section 54 (3) of CGST Act.

Drawback – “Drawback” in relation to any goods manufactured in India and exported,

means the rebate of duty, tax or cess chargeable on any imported inputs or on any
domestic inputs or input services used in the manufacture of such goods – section 2(42)
of CGST Act.

DEEMED EXPORTS

India gets foreign aid from World Bank, Asia Development bank etc. for various
prestigious projects in India for which global tenders are invited and India gets aid in
foreign currency.

Indian manufacturers and suppliers of services from India have to quote in competition
with foreign suppliers. Evaluation of bids is done without considering customes duty.
Since the supply of goods and services are for projects financed with free foreign
exchange, these supplies are treated as ‘deemed exports’.

Similarly, supplies to EOU units and services do not leave the country. Suppliers of
goods and services get payment in Indian rupees and not in foreign currency.

Deemed exports refer to those transactions in which goods supplied do not leave country,
and payment for such supplies is received in para 7.02 of Foreign Trade Policy 2015-
2020 shall be regarded as ‘deemed exports’, provided that goods are manufactured in
India.

As per Foreign Trade Policy 2015-2020, followings are treated as deemed exports:
 Supplies against Advance Authorisation/ DFIA

 Supplies to EOU / STP / EHTP / BTP

 Supplies against EPCG authorization

 Supply of marine freight containers

 Supplies to projects against international competitive bidding

 Supplies to projects with zero customs duty

 Supply of goods to mega power projects against International Competitive

Bidding

 Supplies to UN Agencies

 Supply of goods to nuclear projects through competitive bidding

SUPPLIES OUTSIDE INDIA WHICH DO NOT CONSTITUTE EXPORT OF

GOODS OR SERVICES

 Supply of service to a person located outside India where place of supply of

service is in India. For example – a property rented out in Mumbai to a person residing
in Dubai; agent located in India providing service to a New York based exporter for
selling goods to China.

 Supply of services where consideration is received in Indian currency or a

currency other than convertible currency. For example supply of consultancy service
by an Indian consulting firm to an overseas entity, payment for which is made in Indian
rupees by Indian branch of overseas entity.

 Services provided to overseas branch would not be eligible as export of services

due to specific exclusion for such transactions in the definition of “export of service”.
 This could entail reversal of input credits as such supply would be treated as non-
taxable and not as zero rated.

Definition of import of service also excludes services imported from overseas branch. 
However, the law has certain contradictions and therefore clarity to be obtained on this.

EXPORT PROMOTION UNDER GST

Exports are priority of any country, Goods and services are to be exported, taxes are not
to be exported. WTO stipulates free and fair global trade. Giving export incentives will
be against principle of fair trade and hence export incentives are not allowed under WTO.
However, goods and services can be free of domestic  taxes.

Supplies to SEZ unit and SEZ Developer are treated at par with physical exports.
Provisions in CGST Act have been designed by make exports tax free.  Export benefits
under GST – In relation to GST, following are the concessions / incentives for exports:

(1) Exemption from GST on final products or 

(2) Refund of GST paid on inputs. Exporting units need raw materials without payment
of taxes and duties, to enable them to compete with world market. Government has
devised following schemes for this purpose:

(a)Special Economic Zones at various places where inputs are allowed to be imported
without payment of duty and finished goods are exported, and 

(b) Export Oriented Undertakings (EOU), and,  (c) Duty Drawback Scheme, and (d)
Schemes of Advance Authorization, DEPB and DFIA.

Elaborate procedures have been prescribed for the above, to ensure that the benefits are
not misused.

TAX TREATMENT OF EXPORT OF GOODS AND SERVICES TO NEPAL

AND BHUTAN
 In terms of para 2.52 of the Indian Foreign Trade Policy (2015-2020) exports proceeds
from Nepal and Bhutan can be realized in Indian rupees. Despite receipt of export
proceeds in India, rupee exports of goods to Nepal and Bhutan will be treated at par with
export to any other country as definition of ‘export of goods’ under IGST Law attaches
no condition other than ‘taking goods out of India to a place outside India’. However in
case of export of services, in case export proceeds are received in Indian rupees, it will
not qualify as ‘export’ as the definition of ‘export of services’ mandates receipt of
payment in ‘convertible foreign exchange’.

TAXES ON IMPORT TO CONTINUE AFTER GST

Even after introduction of GST following duties may not be subsumed under GST regime
and they may continue to be levied as usual. These duties are:

 Basic Customs Duty

 Anti-Dumping Duty

 Safeguard Duties

After  the  introduction  of  full  and  complete  GST  major  import  gaining  sectors
include leather and leather products; furniture and fixtures; agricultural sectors; coal and
lignite; agricultural  machinery; industrial machinery; other machinery;  iron and
steel; railway transport equipment; printing and publishing; and  tobacco  products. The
moderate gainers include metal products; non-ferrous metals; and transport equipment
 other than railways. Imports are expected to decline in textiles and readymade garments;
minerals other than coal, crude petroleum, gas and iron ore; and beverages.

CONCLUSION
With GST in place, the export industry in India would be able to have internationally
competitive prices due to the smooth process of claiming input tax credit and the
availability of input tax credit on services.

 In relation to GST, following are the concessions / incentives for exports : (1)
Exemption from GST on final products or (2) Refund of GST paid on inputs.

 Export of goods or services or both and supplies of goods or services or both to

SEZ unit or SEZ developer will be zero rated supply – section 16 (1) of IGST Act.

 Credit of input tax may be availed for making zero-rated supplies, even if such
supply is exempted supply – section 16(2) of IGST Act.
 Refund of unutilized input tax credit shall not be allowed in cases where the goods
exported out of India are subjected to export duty.

 Refund of input tax credit shall not be allowed if the supplier of goods or services
avails duty drawback of CGST / SGST / UTGST or claims refund of IGST paid on
such supplies [Thus, duty drawback of customs portion can be availed].

 Benefits will be available to ‘ deemed exports’ also. Mostly, the benefit will be
through refund route and not direct exemption.

 If goods are imported, IGST and GST Compensation Cess will be payable.

 If goods are taken to warehouse and then cleared from warehouse, IGST and GST
Compensation Cess will payable at the time of removal of warehouse.

 IGST Act or CGST Act make no provision in respect of high seas sale i.e. sale in
course of imports. In absence of such specific provision, it seems IGST will be payable
if sale takes place within Exclusive Economic Zone i.e. within 200 nautical miles
inside sea.

REFERENCE

BOOKS
 GST Manual with GST Law Guide & GST Practice Referencer (Set of 2
Volumes) (9th Edition, September 2018), Taxmann
 GST Laws Manual: Acts, Rules and Forms Paperback – May 2017, Rakesh
Garg  (Author), Sandeep Garg (Author)
 Bare Act on Goods and Services Tax Acts and Rules (GST), Universal Law
Publishing Co.

WEBSITES
 https://indiankanoon.org/search/?formInput=gst&pagenum=5
 http://gstcouncil.gov.in/sites/default/files/import-and-export.pdf
 https://www.scribd.com/doc/34573677/import-export