The Goods and Services Tax (GST) regime has significantly impacted the way import and export transactions are carried out in India. The GST law has introduced a uniform tax structure across the country, replacing the earlier multiple taxes that were levied on goods and services. This has not only simplified the taxation process but also facilitated the movement of goods and services across borders. In this blog, we will discuss the impact of GST on import and export transactions in India.
Import under GST
In India, the import of goods is treated as a taxable supply under GST. The tax on the import of goods is charged under the Integrated Goods and Services Tax (IGST), which is a combination of Central GST (CGST) and State GST (SGST). The IGST is charged on the value of imported goods, along with any customs duty or other charges levied by the government.
The process of import under GST involves the following steps:
- Importer files the bill of entry: The importer is required to file a bill of entry with the customs department, which includes the details of the imported goods, their value, and the applicable tax.
- Payment of IGST: Once the customs department assesses the value of the imported goods, the importer is required to pay the IGST on the value of the goods along with any customs duty or other charges.
- Claiming Input Tax Credit (ITC): The importer can claim the input tax credit on the IGST paid on imported goods. The ITC can be used to offset the output tax liability on the subsequent supply of goods or services.
Export under GST
Under GST, exports are treated as zero-rated supplies, meaning that no tax is levied on the export of goods or services. However, the exporter is eligible to claim a refund of the tax paid on inputs used in the production of the exported goods or services.
The process of export under GST involves the following steps:
- Furnishing a Letter of Undertaking (LUT): To export goods or services without payment of tax, the exporter needs to furnish a Letter of Undertaking (LUT) to the authorities. The LUT is a guarantee that the exporter will abide by the provisions of the GST law and will not claim any input tax credit.
- Refund of input tax credit: The exporter is eligible to claim a refund of the input tax credit on the inputs used in the production of the exported goods or services. The refund can be claimed either by submitting a refund application online or by filing a manual application with the tax authorities.
In conclusion, the GST regime has streamlined the taxation process for import and export transactions in India. The introduction of IGST has simplified the tax structure for imports, while zero-rating of exports has made them more competitive in the global market. However, there are still some challenges that need to be addressed, such as the delay in the processing of refund claims and the complexity of the GST law. Nevertheless, the GST regime has brought significant benefits to the import and export sector, and it is expected to continue to drive growth in the Indian economy in the coming years.