Deemed Exports and its benefits

The Foreign Trade Policy defines ‘Deemed Exports' as goods (not services) made in India that are moved locally and do not leave the country. Deemed export simply indicates that the provider can be paid in either Indian Rupees or convertible foreign currency for this transaction.

“Deemed exports" for the purpose of GST would include only the supplies notified under section 147 of the CGST/SGST Act, on the recommendations of the GST council. the benefits of GST and conditions applicable for such benefits would be as specified by the GST council and as per relevant rules and notification.

Eligibility requirements for Deemed Exports

The following are the FTP conditions that must be met for any transaction to be considered a "deemed export."

• Only commodities are eligible for Deemed Export. Services are not eligible.
• The manufacturing of items must be done in India.
• It is not recommended that the goods be transported outside of India.
• The payment can be made in Indian currency or convertible foreign currency.

• A Letter of Undertaking (LUT) or a bond cannot be used to process items submitted as Deemed Export
• The GST on the items should be paid at the time of purchase.
• The GST on the items should be paid at the point of sale. This tax can be claimed for a full refund.
• In case supplier files claim for TED refund, it shall obtain a certificate for non-availment of CENVAT credit from the recipient of goods as per Annexure - I to ANF-7A and submit the same. In case recipient of goods is an applicant, then the applicant itself shall submit such certificate.

GST-registered supplies that are deemed to be exports

The Central Government has issued Notification No. 48/2017-Central Tax dated 18.10.2017 in exercise of powers provided under Section 147 of the CGST Act, declaring the following categories of commodities supply as Deemed Exports: –

01. Goods supplied by a registered person under the terms of an Advance Authorization i.e., the supplier must be GST-registered, and the recipient must have an Advance Authorization.

02. Capital goods supplied by a registered person in accordance with an Export Promotion Capital Goods Authorisation.

03. Goods supplied to an Export Oriented Unit (EOU) / STP / EHTP /BTP by a registered person (BTP)

04. Supply of gold by a bank or a public sector undertaking pursuant to an Advance Authorization as defined in Notification No. 50/2017-Customs dated June 30, 2017 (as amended)

GST taxability of presumed exports

Supplies that are deemed export supplies are not zero-rated. At the point of sale, all presumed export supplies will be liable to GST. Tax cannot be paid on supplies made under Bond / LUT. Tax should be paid on such a supply, and then a refund obtained.

Refund of tax paid can be sought by either of the following individuals, subject to specific conditions:

1. Goods provider OR

2. A person who receives goods.

Note that if the supplier is claiming a refund of tax paid, the recipient is not able to claim the input tax credit (ITC).

Extra requirements for presumed exports to EOU/STP/EHTP/BTP

1. The EOU/ EHTP/ STP/ BTP unit must notify the supplier and the jurisdictional GST officer of the supplier and the recipient as a recipient by filing Form A (attached hereto).

2. Form A must have a running serial number and contain details of the goods to be procured, which the Development Commissioner has pre-approved.

3. The supplier must then deliver goods accompanied by a tax invoice.

4. The recipient must sign the tax invoice. The supplier, as well as the jurisdictional GST officer of the supplier and the recipient as a recipient, shall receive an endorsed copy of the same.

5. Form B must be used to keep track of the goods received by the EOU/ EHTP/ STP/ BTP unit (Appended herewith).

Procedure for receiving a refund of GST paid on considered exports

To get a refund, you'll need the following documentation:

The following information/documents must be provided if the supplier is demanding a refund of tax paid on considered exports:

• A statement detailing invoice-level data of the supplier's presumed export supplies.
• In the case of EOU/ EHTP/ STP/ BTP/ Copy of tax invoice signed by the recipient, acknowledgment by jurisdiction tax officer of AA or EPCG holder that the said deemed export supplies have been received OR in the case of EOU/ EHTP/ STP/ BTP/ Copy of tax invoice signed by the recipient that the said deemed export supplies have been received.
• The recipient swears that no ITC has been claimed.
• The recipient agrees not to seek a refund for such supplies.

The Advantages of the Deemed Exports Scheme

The following benefits are available to commodities that are eligible to be considered deemed exports:

• Advance License / Advance licence for annual requirement / DFIA.
• Deemed Export Drawback.
• Refund of terminal excise duty for excisable goods mentioned in Schedule 4 of Central Excise Act 1944 provided the supply is eligible under that category of deemed exports and there is no exemption.

Conditions for refund of deemed export drawback

Supplies will be eligible for deemed export drawback as per para 7.03(b) of FTP as under:

Refund of drawback on the inputs used in manufacture and supply under the said category can be claimed on ‘All Industry Rate’ of Duty Drawback Schedule notified by Department of Revenue from time to time provided no CENVAT credit has been availed by supplier of goods on excisable inputs or on ‘Brand Rate Basis’ upon submission of documents evidencing actual payment of basic custom duties.

At Enrich Services What We Do

At Enrich Professional Services, we give you a detailed explanation of the terms and conditions of the benefits of Deemed exports and will help you in applying the benefits of Deemed exports from DGFT.