GST on Export and Import: A Quick Guide for Global Traders!

In this rapidly growing global marketplace, businesses no longer remain restricted by borders. But taxes apply to every product that leaves or enters our country. Whether you are a flourishing exporter tapping into the international market or an importer getting products displayed globally to India’s doorstep, understanding GST on export and import is a must! 

Global trades don’t just cater to moving goods, but are more about moving them smartly! This blog will help you decode IGST, refunds, and more. 

Scroll down to read the article and confidently navigate the tax maze. 

What is GST on Export and Import? 

1. GST on Imported Goods and Services- A Quick Snapshot! 

• An individual importing goods/ services in India has to pay integrated goods and services tax (IGST) + Basic Customs Duty (BCD), since they are recognized as interstate supply per model law. 
• IGST acts as a global checkpoint to ensure imported goods are taxed on par with domestically produced ones.
• For imported services, GST is applied through the Reverse Charge Mechanism (RCM), meaning the responsibility of paying tax shifts from the service provider to the recipient.

Formula to Compute GST on Import of Goods! 

IGST = (AV + BCD + SWS) X IGST Rate

Where;

IGST: Integrated GST 

AV: Accessible Value, which is also CIF (Cost + Insurance + Freight) + Landing charges 

BCD: Basic Customs Duty 

SWS: Social Welfare Surcharge (if applicable) 

Total Tax applicable = BCD + SWS + IGST + compensation cess 

Import of Goods Under GST Example! 

Suppose an item is imported into India with an assessable value of ₹100. Basic Customs Duty is 10% according to the Value. Education duty is 3%; IGST levied is 18%, and Compensation surcharge is 15%. 

Formula to Compute GST on Import of Services! 

IGST = Value of Imported Service X IGST Rate

Let’s consider the service value to be ₹5,00,000, and the IGST rate applied is 18% 

IGST = 5,00,000 x 18% = ₹90,000

2. GST on Export of Goods and Services- A Short Summary!  

• Shipping both goods and services internationally are zero-rated under GST. 
• This means GST is not applicable on exports, but exporters can claim ITCs used to purchase or manufacture the products from the exported supplies. 
• Implications of state and central taxes, will boost exports from India due to high quality and rising competitiveness in the international market. 

While, GST doesn’t apply on international shipments; they benefit from this by claiming ITCs. To fully leverage these benefits, exporters need to accurately compute GST refunds. Here’s how to do it: 

Computing GST Refunds on Export of Services!

Refund = (Zero-rate Supply Turnover X Net ITC) / Adjusted Total Turnover 

Where; 

Net ITC: Input tax credit accumulated on goods and services used for business purposes.

Adjusted Total Turnover: Total Turnover that excludes exempted supplies 

Also, know our step-by-step process on How to Claim GST Refund.

Forms to Claim Refunds under GST on Exports

1. RFD-01: Taxpayers use this form to claim a refund of ITC under Exports 
2. RFD-02: Form that acknowledges the refund application. 
3. RFD-03: A deficiency memorandum will be allotted if there are any errors in the form. 

Required Documents for Claiming GST Refund on Exported Goods

How GST on Export and Import Affects? 

GST has simplified the compliance process and brought India’s trade practices in line with global standards. Let’s quickly take a look. 

Impact of GST on Import	Impact of GST on Export
Uniform taxation with same rates applicable as domestic supplies	No GST applicable, but ITC refund encourages competitiveness in global markets
Import of Goods under GST helps avoid tax cascading and reduce costs to business.	Speedy refund mechanism eliminates liquidity crunch and improves cashflow
It encourages “Make in India” by allowing domestic industries to benefit from reduced customs and GST incentives	GST on export boosts International Trade and promotes its position in global supply chain.

Place of Supply of Goods! 

The place of supply determines the location where goods or services are considered delivered, which helps establish the applicable GST for exports and imports.

GST on export and import. 

Section 11 of IGST ACT, 2017 determines the place of supply, export or import of goods under GST. Here’s how it goes: 

Supply Type	Place of Supply	GST
Goods Imported to India	Location of the Importer	GST is always levied on imports
Goods Exported from India	Location out of the India	GST on exports are eligible for refund

Benefits of GST on Export and Import! 

• Simplified tax system 
• Enhanced cash flow via ITC refunds 
• Boost India’s global trade 
• Encourage simplicity of doing business with digital process

Conclusion

Implementing GST on export and import has simplified India’s tax ecosystem, integrated transparency, and improved cross-border trade. Identifying imports as inter-state supplies and exports as zero-rated, import and export of goods under GST turn out to be a game changer for businesses. 

If you have any query, connect with our experts and get it resolved. Munim becomes the pillar to file GST returns seamlessly minimizing errors and maximizing returns. Want to know more about Munim! Explore Today! 

GST on Export and Import FAQs!

1. Is GST applicable on import of Goods? 

Yes, GST is applicable to the import of goods in India, where these imports are treated as inter-state supplies. 

2. What is the turnover limit for GST on export of services in India? 

₹20 lakh for normal category states and ₹10 Lakh for special category states is the turnover limit for GST on export of services. 

3. What are deemed exports? 

Deemed exports are deals catering to goods developed in India but are not exported internationally. These products are identified as exports for benefits like tax refunds. 

4. Why is a Letter of Undertaking requested under GST on Export and Import? 

LUT (Letter of Undertaking) facilitates exporters to ship goods and services globally without integrated GST. This ensures enhanced cashflow and eliminates the need to pay taxes.