What is Deemed Exports
“Deemed Exports” refers to supplies of goods manufactured in India (and not services) which are notified as deemed exports under Section 147 of the CGST/SGST Act, 2017.
The supplies do not leave India.
The payment for such supplies is received either in Indian rupees or in convertible foreign exchange.
Deemed exports are not zero-rated supplies by default, unlike regular exports. Hence all supplies notified as supply for deemed export will be subject to levy of taxes i.e. such supplies can be made on payment of tax and cannot be supplied under a Bond/LUT.
However, the refund of tax paid on the supply regarded as Deemed export is admissible to either the supplier or the recipient.
In simple terms, Mr. A person from Maharashtra supplies goods to Mr.B person in Gujarat Kandla SEZ, which is further exported outside india to Mr. C . Supply by A to B is Deemed Export
The Central Government published Notification No. 48/2017-Central Tax, which designated following supplies as Deemed Exports:
Supply of goods by a registered person against Advance Authorisation
Supply of capital goods by a registered person against Export Promotion Capital Goods Authorisation
Supply of goods by a registered person to Export Oriented Unit
Supply of gold by a bank or Public Sector Undertaking specified in the notification No. 50/2017-Customs, dated the 30th June, 2017 (as amended) against Advance Authorisation
An advance license is a permission granted by the Director General of Foreign Trade to import or purchase domestic inputs before import to facilitate physical exports.
On the other hand, a capital goods import license for physical exports is known as an export promotion capital goods authorization.
Export Oriented Units, Electronic Hardware Technology Park Units, Software Technology Park Units, and Bio-Technology Park Units are among the sanctioned units under the Foreign Trade Policy 2015–20 that fall under this category.
How Does the Exactly Deemed Export Work and How Refund Can be Claimed
It is to be noted that Deemed Export Supply cannot be cleared under the Bond / LUT option and thus supply of goods under deemed export needs to be with payment of IGST and then claiming the refund for the same. To understand the different refund procedures under GST read here.
The Supplier supplies the goods to any one of the above three mentioned recipients specified under Notification No. 48/2017 Central Tax
Tax Invoice is issued to the recipient i.e. Taxable Value Plus IGST thereon.
Refund of the tax paid can either be claimed by the Recipient or the Supplier. But recipient is not eligible to claim refund of input tax credit on goods supplied if supplier has claimed the refund
If refund is claimed by supplier than ,
Refund will be claimed by Filing Form GST RFD – 01 with supporting documents. Refund claim shall be filed along with Annexure 5B which contains details of the inward supplies of the person claiming refund along with details such as Invoice No., Date , GSTIN of Supplier, GST, etc.
ITC on inputs taken for the manufacture of deemed exports, shall be utilised for sale of taxable supply (other than nil-rated or fully exempted goods).
A CA certificate is submitted to the jurisdictional commissioner of GST or any other officer authorised by him within six months of such supply.
Refund should be accompanied with declaration that recipient has not claimed refund on IGST paid on supply of goods.
Practically when the refund is claimed by supplier , than the GST amount is not collected by the supplier from the recipient and only taxable value of goods is collected as consideration.
If refund is claimed by recipient than,
the recipient can file GST RFD – 01 with documents of ITC claimed with all details taxable invoice and a declaration that supplier has not claimed the refund of GST paid on the tax invoice.
In practical scenario when the refund is claimed by recipient , than the supplier collects full value as consideration for goods i.e Taxable Value Plus GST
Deemed Exports 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.
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