Exports are critical in virtually every country. The volume of exports is often used as a metric for measuring economic growth. However, the export process is often extensive. Like other business players, exporters are required to pay specific taxes on the goods they sell. While these taxes can be numerous, none are as crucial to the Indian export business as the Goods and Services Tax (GST). 

The GST is significant for two reasons. First, it is a combination of numerous taxes. Second, while Indian exporters are generally mandated to pay the GST, the government has provided initiatives through which exporters can claim refunds on the GST. Hence, this article will discuss the GST and everything you should know about the tax refund. 

What is the GST?

The GST is an indirect tax imposed on goods and services. The GST acts as an umbrella tax system for other indirect taxes. Essentially, it represents a combination of indirect taxes like value added tax, excise duty, and service tax. Consumers pay the GST; however, the sellers are expected to remit the taxes to the government. Thus, Indian exporters are not directly responsible for the GST payment. They are merely expected to levy the GST on their goods and remit the funds to government quarters.

GST on Indian Exports

The GST is zero-rated on Indian exports. This term means that, unlike other goods and services, the GST is not imposed on export products. Instead, exports are zero-rated under the GST. Thus, exporters can claim drawbacks. Drawbacks are schemes that provide refunds on taxes. In this case, exporters can claim refunds after paying the required taxes. The process of claiming GST refunds can be extensive. To clarify, zero-rated exports mean that the GST is not imposed on their sale. However, in addition to this, exporters can also claim refunds on the GST they pay to purchase supplies. Thus, refunds are issued for GST paid on input supplies for export products.

How to Claim a GST Refund

An Indian exporter can claim a GST refund in specific scenarios. For example, they can be claimed when GST is paid on deemed exports, when goods are supplied to Special Economic Zones (SEZ), and when a refund on input tax credit is claimed. 

There are generally two ways to claim a GST refund. First, an exporter can claim a GST refund through the export route. Essentially, there are situations where exports are regarded as inter-state sales of goods, and the GST is imposed on the products. Here, the exporter can claim a refund on the GST by filing a refund application accompanied by an export report. On the other hand, exporters can claim refunds for GST paid on input supplies. The route for GST refunds on input supplies is also straightforward. The exporter must file a refund application for the input tax credit. 

Exporters must note that they must apply for a GST refund within two years from the tax payment date. Claims made after this window elapses will be rejected. You can apply for a GST refund by taking the following steps:

• Log onto the Indian Customs Electronic Commerce Gateway (ICEGATE): The ICEGATE is an electronic platform through which Indian taxpayers are allowed to make applications for tax refunds. In this case, exporters can use the gateway to make refund claims. Most importantly, the gateway highlights the documents required to make refund claims on export products. 

• Make a Refund Application: Exporters can lodge a GST refund application by filling out the GST RFD-01/1A form. The form is used to claim refunds on all forms of export scenarios. Notably, exporters can only claim refunds when the value of the GST exceeds 1000 rupees.

• Get an Acknowledgement Form: After filling and submitting the RFD 01/1A form, the tax authority processes an acknowledgement form to show that the refund application is being processed. The acknowledgement form is called the GST RFD-02. 

• Submit an Export Manifest: After filling and submitting the previously mentioned forms, the next step is to submit an export manifest. An export manifest is a legal document that contains details on the export product being shipped. It is usually filled before the goods are released for departure, and it is required by customs authorities to clear export products. In the refund process, it is used as proof of exports.

The process is slightly different for a refund on input tax paid on supplies. You are required to:

• Fill Form GST RFD-11: Like the GST RFD-01/1A, you can also fill out this form online. Exporters seeking a refund on taxes paid on supplies must fill out the form and submit it alongside documents listed on the portal. 

• Await Disbursement: The tax authority will pay about 90% of the refund sum after the refund application is acknowledged. This payment is often made within seven days of the application. The total balance is made within 60 days from the application date, and all payments are electronically sent to exporters' official bank accounts. 

Luckily, the Indian government has implemented measures to automate the refund process. The ICEGATE portal now provides features to auto-fill details on shipping bills and export manifests. The disbursement process would also be automatic after the application is approved. The Indian Central Board of Excise and Customs has also released a document to guide exporters on the requirements of the GST law, their benefits, and application conditions. You can access the document here. 

In today's global market, exports have become highly important. As a result, many governments have realized that taxes are the best way to optimize their country's export drive. Essentially, tax obligations form a significant part of the export process. Hence, exporters must continually educate themselves on the tax requirements for export products and available tax benefits. This knowledge will ensure that the export process is considerably seamless. To join Doocan, an export-import marketplace that allows you to connect with US-based buyers, you can sign-up here.