Export import GST rules

GST on Imports: The IGST Factor

The importation of goods and services into India is legally treated as an inter-State supply. This means that imports are subject to the levy of Integrated Goods and Services Tax (IGST).

1. Import of Goods

• Levy and Collection: IGST is levied and collected along with the Basic Customs Duty (BCD) and other applicable duties (like Social Welfare Surcharge) at the time of importation. The tax is collected by the Customs Authority.

• Payment: The importer must pay the IGST while filing the Bill of Entry for customs clearance.

• Input Tax Credit (ITC): Crucially, the IGST paid on imported goods can be claimed as Input Tax Credit (ITC) by the importer, provided the goods are used for business purposes. This prevents a cascading tax effect.

  • Note: ITC is available for IGST, but not for the Basic Customs Duty (BCD) or Social Welfare Surcharge paid.

2. Import of Services

• Reverse Charge Mechanism (RCM): When services are imported from a supplier located outside India to a recipient in India, the recipient (Globax Solutions) is generally liable to pay the IGST under the Reverse Charge Mechanism (RCM).

• Tax Payment & ITC: The Indian recipient (Globax) pays the IGST directly to the government and can subsequently claim this tax as ITC, provided the service is used in the course or furtherance of business.

• Exception: For certain services, like Online Information and Database Access or Retrieval (OIDAR) services supplied to an unregistered non-taxable recipient, the foreign supplier may be liable to pay the tax.

🌍 GST on Exports: Zero-Rated Supply

Exports of goods and services are treated as ‘Zero-Rated Supplies’ under GST. This means the GST rate on the final export product or service is zero, and exporters are allowed to claim a refund of the GST paid on the inputs/input services used for making these exports.

Two Key Options for Exporters

As an exporter, Globax Solutions has two options for making zero-rated supplies:

Export of Services: Essential Conditions

To qualify as an export of service and receive the zero-rated benefit, all five conditions under the IGST Act must be satisfied:

1. The supplier of service (Globax Solutions) 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 is received by the supplier in convertible foreign exchange (or in Indian rupees where permitted by the RBI).

5. The supplier of service and the recipient of service are not merely establishments of a distinct person.

📜 Documentation and Compliance

Proper documentation is vital to ensure smooth customs clearance and timely refund processing.

The Role of LUT

Filing a Letter of Undertaking (LUT) on the GST portal is a critical step for exporters who wish to export without paying IGST upfront, helping to prevent the blockage of working capital.

✅ Action Plan for Globax Solutions

• Audit Imports: Ensure all IGST paid on imports is correctly claimed as ITC in your GST returns (GSTR-3B).

• Optimize Exports: Leverage the LUT option to save working capital by avoiding the upfront payment of IGST.

• Timely Refunds: Establish a robust system for filing for GST refunds (Form RFD-01 for ITC refund/or Shipping Bill as deemed application for IGST refund) within the stipulated deadlines to maximize cash flow.