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GST and its impact on Export of Services

GST and its impact on Export of Services

With the introduction of GST,the export of Services aremade at par with the export of Goods. The export procedure for both goods and services have been changed and there is no such distinction for export of goods or services.
Under old law, in case of export of services, there was no procedure defined under Service Tax and hence no tax was applicable on export of services, but under GST the export of services has been made at par with export of goods and thus IGST is applicable in the GST regime.

How to export Services under GST

As per the provisions of IGST Act 2017, the export of services can happen only through two ways:
1. Export of services on Bond/LUT – Goods or services can be supplied under bond or letter of undertaking (LTU) without payment of IGST and claim the refund on all the input taxes paid.

Export under Bond– A Bank Guarantee will have to be furnished to the Commissioner as a security under the Bond. The Bond must be equivalent to the GST liability on the export turnover supported by bank guarantee which should normally not exceed 15% of the bond amount.

Export under LUT-The Assesse is eligible for LUT, if he has received the due foreign inward remittances amounting to a minimum of 10% of the export turnover, which should not be less than Rs 1 Crore, in the preceding financial year, and has not been prosecuted for any offence under the CGST Act, 2017 or under any of the existing laws in case where the amount of tax evaded exceeds Rs 2.5 lakhs.

Practical challenges in getting bond and LUT from the department

– There is no standard list of documents for getting the Bond/LUT from the department. Different range and division officers are asking for different documents to grant the Bond/LUT.
– Additional cash gets blocked under option of bond for getting bank guarantee.

2. Export on Payment of IGST-Service provider may supply services on payment of IGST and claim the refund of such taxes along with taxes on inputs by filing FORM GST RFD – 1.


Refund under GST and procedure for refund

1. File GST RFD – 1 before expiry of two years from the date of export of goods or services.
2. After submitting the FORM GST RFD – 1, the proper officer shall within 15 days scrutinize the application and submit an acknowledgment in form GST RFD – 2.
3. In the case of any claim for refund on account of export of goods or services made by registered taxable persons, the proper officer may refund 90% of the total amount so claimed on provisional basis subject to some conditions and restriction.
4. Once the application is accepted, the proper officer shall issue the refund order within sixty days.

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