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Deemed Exports : Concept and Refund Procedure under GST

What is the concept of Deemed Exports?

To boost export sector and to reduce financial burden on exporters, government has notified some supplies as Deemed Exports. These supplies are made by any GST registered person to some specified (notified) entities who fulfill criteria in this regard.
After successful supply, these suppliers are allowed to claim refund of Tax paid on such supplies. This is the main thrust of concept of Deemed Exports.
Deemed supplies are different from Regular Exports (i.e. ZERO Rated Supplies). Deemed exports are not allowed to supply under Bond or LUT.
Hence, all supplies notified as supply for deemed export are subject to levy of taxes in first instance, i.e. such supplies can be made on payment of tax only at normal rate of GST as for others.
And, then, one of them, (recipient or supplier, on mutual understanding), can claim a refund under Section 54 of CGST Act 2017 in respect of taxes paid on such supplies.

Notified Supplies as Deemed Exports

Till date, following supplies are notified as Deemed Exports (i.e. any supply of goods to these persons are considered as Deemed Exports):-
S.No.       Description of supply
1.            Supply of goods by a registered person against Advance Authorisation
               *{Provided that goods so supplied, when exports have already been made after availing input tax credit on inputs used in manufacture of such exports, shall be used in manufacture and supply of taxable goods (other than nil rated or fully exempted goods) and a certificate to this effect from a chartered accountant is submitted to the jurisdictional commissioner of GST or any other officer authorised by him within 6 months of such supply.
Provided further that no such certificate shall be required if input tax credit has not been availed on inputs used in manufacture of export goods.}
*inserted w.e.f. 15/01/2019
2.            Supply of capital goods by a registered person against Export Promotion Capital Goods Authorisation
3.            Supply of goods by a registered person to Export Oriented Unit
4.            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.

Explanations:

 
1. “Advance Authorisation” means an authorisation issued by the Director General of Foreign Trade under Chapter 4 of the Foreign Trade Policy 2015-20 for import or domestic procurement of inputs on ^{pre-import basis} for physical exports.
2. Export Promotion Capital Goods Authorisation means an authorisation issued by the Director General of Foreign Trade under Chapter 5 of the Foreign Trade Policy 2015-20 for import of capital goods for physical exports.
3. “Export Oriented Unit” means an Export Oriented Unit or Electronic Hardware Technology Park Unit or Software Technology Park Unit or Bio- Technology Park Unit approved in accordance with the provisions of Chapter 6 of the Foreign Trade Policy 2015-20.
^inserted w.e.f. 15/01/2019

Operational Regulations in case of Deemed Exports to EOU:

In order to be eligible for refund of tax involved in ‘Deemed Exports’, following operational regulations to be followed by such supplier and recipient:-
(i) The recipient EOU / EHTP / STP / BTP unit shall give prior intimation (to following persons) in a prescribed proforma in “Form–A” bearing a running serial number containing the goods to be procured, as pre-approved by the Development Commissioner of concerned SEZ and the details of the supplier before such deemed export supplies are made.
The said intimation shall be given to – 

  • the registered supplier;
  • the jurisdictional GST officer in charge of such registered supplier; and
  • its own jurisdictional GST officer.

(ii) The registered supplier there after will supply goods under tax invoice to the recipient EOU / EHTP / STP / BTP unit.
(iii) On receipt of such supplies, the EOU / EHTP / STP / BTP unit shall endorse the tax invoice and send a copy of the endorsed tax invoice to –

  • the registered supplier;
  • the jurisdictional GST officer in charge of such registered supplier; and
  • its own jurisdictional GST officer.
(iv)The endorsed tax invoice will be considered as proof of deemed export supplies by the registered person to EOU / EHTP / STP / BTP unit.
(v) The recipient EOU / EHTP / STP / BTP unit shall maintain records of such deemed export supplies in digital form, based upon data elements contained in “Form-B” (appended herewith).
The software for maintenance of digital records shall incorporate the feature of audit trail.
While the data elements contained in the Form-B are mandatory, the recipient units will be free to add or continue with any additional data fields, as per their commercial requirements.
All recipient units are required to enter data accurately and immediately upon the goods being received in, utilized by or removed from the said unit.
The digital records should be kept updated, accurate, complete and available at the said unit at all times for verification by the proper officer, whenever required.
A digital copy of Form – B containing transactions for the month, shall be provided to the jurisdictional GST officer, each month (by the 10th of next month) in a CD or Pen drive, as convenient to the said unit.
The above procedure and safeguards are in addition to the terms and conditions to be adhered to by a EOU / EHTP / STP / BTP unit in terms of the Foreign Trade Policy, 2015- 20 and the duty exemption notification being availed by such unit.

Application for Refund

Application for refund in respect of supplies regarded as deemed exports, may be filed only after completion of operational regulations as provided above.
Such application can be filed either:-
(a) by the recipient of deemed export supplies; or
(b) by the supplier of deemed export supplies in cases where the recipient does not avail of input tax credit on such supplies and furnishes an undertaking to the effect that the supplier may claim the refund”:-
In case, supplier of deemed export is filing application for refund, he must have following documents evidencing such deemed supplies:
1. Acknowledgment by the jurisdictional Tax officer of the Advance Authorisation holder or Export Promotion Capital Goods Authorisation holder, as the case may be, that the said deemed export supplies have been received by the said Advance Authorisation or Export Promotion Capital Goods Authorisation holder, or
2. A copy of the tax invoice under which such supplies have been made by the supplier, duly signed by the recipient Export Oriented Unit that said deemed export supplies have been received by it.
3. An undertaking by the recipient of deemed export supplies that no input tax credit on such supplies has been availed of by him
4. An undertaking by the recipient of deemed export supplies that he shall not claim the refund in respect of such supplies and the supplier may claim the
refund.

Timing to claim refund

An application for refund can be moved within two years from the date on which the return relating to such ‘deemed exports’ is furnished.

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