In this article, you will learn:
Section 31 of the CGST Act, 2017 mandates every registered person supplying goods or services to issue a tax invoice.
Tax invoice is nothing but a proof of sale that contains the details with regards to the goods or services supplied, quantity or value of such goods or services, tax charged etc. It enables the supplier to collect payment from the buyer as well as claim ITC under the GST Law.
It is an instrument that binds both the seller and the buyer to the terms of sale in a given transaction. Now, there are various types of invoices that can be issued depending upon the nature of supply, nature of goods or services supplied, payment terms, type of taxpayer etc.
Thus, where a taxpayer is an exporter, he is required to issue an export invoice. This is similar to the tax invoice issued in respect of the domestic transactions. However, there are certain additional details that go into the export invoice.
This article talks about export invoice under GST, its format and particulars that form part of such a tax invoice. But before understanding how export invoice is created, let’s first take a look at the important concepts that you must know in order to create export invoice under GST.
What is Export Under GST?
Exports as per IGST Act, 2017 means taking goods out of India to a place outside India. Similarly, export of services means supply of any service when:
- The supplier of service is located in India
- Recipient or buyer of service is located outside India
- Place of supply of service is outside India
- Supplier receives payment for such a service in convertible foreign exchange
- The supplier as well as recipient of service are not merely establishments of a distinct person
Type of Export Under GST
Exporters can undertake exports under GST in the following two ways:
a. Export Under Bond or LUT(Letter of Undertaking) Without Payment of IGST
Exporters can opt for exporting goods or services or both without paying IGST. Section 96A of CGST rules, 2017 lays down the provisions for exporters who choose to undertake exports without the payment of IGST.
As per this section, the exporters who undertake exports without the payment of IGST are required to file either a LUT or bond in form GST RFD – 11 to the jurisdictional commissioner.
Letter of Undertaking
Letter of Undertaking (LUT) – What is it?
In terms of export and import, a Letter of Undertaking is basically a guarantee that a bank provides to its customer (exporter in this case). Through this document of guarantee, the bank allows the customer to raise short – term credit from a foreign branch of any other Indian Bank.
That is, the bank undertakes to repay such credit in foreign currency, in case its customer (or the exporter) fails to do so.
The government introduced the option of filing LUT for exports undertaking exports without the payment of IGST. This was done to enable exporters to avoid the hassle of paying tax and then claiming refund later.
Who is Eligible to Export Under LUT?
All the registered taxpayers who seek to supply goods or services or both for export without payment of IGST can export under LUT.
Export Bond under GST
Export Bond under GST – What is it?
A bond is basically a financial instrument whereby the issuer of the bond is indebted to the holder of such an instrument.
That is to say, the issuer is liable to the holder interest thereon or repay the principal amount at a future date.
Who is Eligible to Export Under Bond?
All the exporters who do not meet the conditions specified under LUT can undertake exports without paying IGST by furnishing an export bond.
There are certain regulations that exporter needs consider while exporting under a bond.
b. Export by Paying IGST and Claiming Tax Refund Later
The exporter can choose to export supplies by paying IGST at the time of export and claim a refund of tax paid on exports at a later date. Here’s how the exports are undertaken by the way of paying IGST for exports:
- The exporter charges IGST on the export invoice at the rate applicable
- Since exports are zero rated supplies, the exporter can claim refund for IGST paid at the time of export.
- Once the IGST is paid, the refund can be claimed for the following two components:
- the unutilized portion of the input tax credit on goods and services
- the IGST paid on export of goods or services
c. Zero Rated Supplies
In order to give boost to Indian exports, the government gives certain reliefs and benefits to the exporters. One of the relaxations given under GST regime was to make all exports zero rated or tax free.
According to section 16 of the IGST Act, the term “zero rated supplies” means:
- Export of goods or services or both
- Supply of goods or services or both to a Special Economic Zone (SEZ) developer or unit
The intent of the government via zero rating was to make both the input as well as output for zero rated supplies tax free.
d. Deemed Exports
As per section 147 of the CGST Act 2017, supplies are considered Deemed Exports under GST if they meet the following two conditions:
- Supplies include goods and not services manufactured in India. Further, the goods produced do not leave India.
- Payment with regards to such supplies is received in Indian rupees or in convertible foreign exchange
Deemed exports are separate from zero rated supplies. Such exports do not form part of zero rated supplies by default. As a result, supplies categorized as deemed exports are liable to taxes. This means that such supplies are made by paying IGST and are not supplied based on a bond or Letter of Undertaking (LUT).
Further, the refund for tax paid on supplies considered as deemed exports is claimed either by the supplier or the recipient. Accordingly, the application for claiming such a refund is to be filed either by the supplier or the recipient of such deemed exports.
What is an Export Invoice Under GST?
An export invoice is nothing but an invoice created by an exporter for exporting goods and services. That is, supplying goods and services to a recipient outside India in a foreign currency.
The export invoice in its format as well as particulars is same as the normal tax invoice under GST. However, there are certain additional details that form part of GST Export Invoice.
The section below talks about various components that form part of GST Export Invoice.
Components of Export Invoice Under GST
- Name, address and GSTIN of the supplier (exporter in this case)
- Invoice Number – A Serial Number not exceeding 16 characters, in one or multiple series, containing letters or numerals or special characters
- Date of it issue
- Due date
- Name, Billing Address and Shipping Address (if the Shipping Address is different from the Billing Address) of the recipient
- Type of Export undertaken with a statement “Supply Meant for Export on Payment of IGST” or “Supply Meant for Export Under Bond Without Payment of IGST”. As mentioned above, the type of exports include (i) export under Bond or LUT or (ii) export by paying IGST.
- Shipping Bill details including Shipping Port Code, Shipping Bill Date and Shipping Bill Number. Export Invoice can be created without including Shipping Bill details. However, exporter supplying goods or services with payment of IGST would be needingShipping Bill details for claiming refund of IGST so paid. This is because Shipping Bill that contains GST invoice details furnished by the exporter is taken as application for claiming refund of IGST paid on such exports.
- Conversion Rate from Indian Rupee to customer’s selected currency. Such an exchange rate is specified on Bill of Export issued by Custom authorities.
- Digital Signature or Physical signature of the exporter or the person authorized on his behalf.
- Total value of the invoice both in terms of Indian Rupee as well as the foreign currency. This must be calculated towards the end of the invoice.