Section 147 of the Central Goods and service tax Act, 2017 defines Deemed Exports as such exports, which may be notified on the recommendations of the council. Although the Foreign Trade Policy 2015-20 under chapter 8 has already defined the term ‘Deemed Export’, however amid certain apprehensions on the part of trade scope of confusions, need was felt that the GST regime should define supplies exclusively which could be categorised as deemed exports.
Deemed Export Meaning- Basic Concept of Deemed Export
Deemed exports are essentially the supply aspect under GST within the country but have implications to the effect of getting currency from outside the country.
The payment for such supplies is received either in Indian rupees or in convertible foreign exchange.
It must be noted that deemed export is applicable only in case of supplies of Goods and not applicable in case of supplies of services.
Deemed Exports are not the supplies where, the goods have to necessarily leave the political boundary of country but in effect there is subsequent inflow of currency to the homeland.
So, if you are supplying the goods to a body within country which either runs on foreign funds or is obliged under law to export the Goods, is a case of DEEMED export.
Suppose, you supply the goods to a factory X which operates within SEZ, is an EOU, or has Advance Authorization licence, or EPCG your supply is a Deemed Export. And by virtue of provisions of Deemed Export you will be eligible for all the export incentives/drawbacks, an exporter would have availed in course of normal Exports.
If observed minutely, Deemed Exports are provisioned in place to extend the Export benefits to the lower strata of suppliers who are actually supporting the Big units to make the exports outside the country.
Deemed exports are not zero-rated supplies by default, unlike the regular exports. Hence all supplies notified as supply for deemed export will be subject to levy of taxes i.e. such supplies can be made on payment of tax and cannot be supplied under a Bond/LUT. However, the refund of tax paid on the supply is provisioned in place.
Deemed Export Regulations- Notification Empowering Deemed Exports
GST Notification No. 48/2017- Central Tax dtd 18th October, 2017 seeks to notify certain supplies as DEEMED EXPORTS under section 147 of the CGST Act, 2017.
Four kinds of supplies have been brought within purview of DEEMED EXPORT
(1)Supply of goods by a registered person against Advance Authorisation
(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.
Clarification Of The Terms Under Notification 48/2017
(a)“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.
(b) “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.
(c)“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.
Deemed Export Benefits-Provision of Refund under Deemed Exports
Like exports under normal course, wherein Tax refund is availed in the form of drawback, or input tax credit, Deemed Exports are also eligible for refund.
Rule 89 of CGST Rules, 2017 contains provisions regarding the refund related to the tax paid on deemed exports.
Under the said rule Refund application may be filed: either by the recipient of deemed export supplies; or the supplier of deemed export supplies.
The supplier of DEEMED EXPORT can though, file the refund application only when the recipient does not avail of input tax credit on such supplies and he/she issues an undertaking to the effect that the supplier may claim the refund.
Application in Form GST RFD-01 is required to be filed for obtaining refund by the recipient or supplier of DEEMED EXPORT, as the case may be.
Deemed Export Compliance- Time Limit for Filing Refund Claim
For GST refund pertaining to deemed exports, the refund application should be filed through the common portal, either directly or through a Facilitation Centre notified by the Commissioner before the expiry of two years from the date on which the return relating to such deemed export supplies is to be furnished electronically. After expiry of the period of two years, the refund claim cannot be filed.