TAXABILITY OF EXPORT TO NEPAL

[ROHIT GOEL]

Sale to Nepal and Bhutan is taxable or it will be considered as zero rated supply if payment has been realized in Indian currency .

[Rajagopalan Ranganathan]

Sir,

Export to Nepal is zero rated but export to Bhutan is liable to IGST.

[ROHIT GOEL]

Sir but payment has been realized in INR and not in foreign currency

[Alkesh Jani]

Sir, My point of view is that export of goods to Nepal or Bhutan fulfills the condition of GST law for taking goods out of India, hence, it will be treated as zero rated supplies. With regards to realization in Indian currency is concern, the Circular No. 8/8/2017-GST dated 04/10/2017 may be taken into consideration. The relevant portion is reproduced below:-

"2 (k) Realization of export proceeds in Indian Rupee: Attention is invited to para A (v) PartI of RBI Master Circular No. 14/2015-16 dated 01stJuly, 2015 (updated as on 05th November, 2015), which states that “there is no restriction on invoicing of export contracts in Indian Rupees in terms of the Rules, Regulations, Notifications and Directions framed under the Foreign Exchange Management Act, 1999. Further, in terms of Para 2.52 of the Foreign Trade Policy (2015-2020), all export contracts and invoices shall be denominated either in freely convertible currency or Indian rupees but export proceeds shall be realized in freely convertible currency. However, export proceeds against specific exports may also be realized in rupees, provided it is through a freely convertible Vostro account of a non-resident bank situated in any country other than a member country of Asian Clearing Union (ACU) or Nepal or Bhutan”. Accordingly, it is clarified that the acceptance of LUT for supplies of goods to Nepal or Bhutan or SEZ developer or SEZ unit will be permissible irrespective of whether the payments are made in Indian currency or convertible foreign exchange as long as they are in accordance with the applicable RBI guidelines. It may also be noted that the supply of services to SEZ developer or SEZ unit under LUT will also be permissible on the same lines. The supply of services, however, to Nepal or Bhutan will be deemed to be export of services only if the payment for such services is received by the supplier in convertible foreign exchange"

In view of above payment of services exported to Nepal or Bhutan shall be in convertible foreign exchange and not for GOODS.

[Rajagopalan Ranganathan]

Sir,

As per the reply given to question 8 of FAQ on Exports issued by CBEC "Export of goods to Nepal or Bhutan fulfils the condition of GST Law regarding taking goods out of India. Hence, export of goods to Nepal and Bhutan will be treated as zero orated and consequently will also qualify for all the benefits available to zero rated supplies under the GST regime. However, the definition of ‘export of services’ in the GST Law requires that the payment for such services should have been received by the supplier of services in convertible foreign exchange. But with effect from 27.10.2017 this condition of receipt of export proceeds in foreign exchange had been removed vide Sl. No. 10 D of Notification No. 9/2017- Integrated Tax (Rate) dated 28.6.2017 as amended by Notification No. 42/2017-Integrated Tax (Rate) dated 27.10.2017.

[Alkesh Jani]

Sir, Thanks for your valuable views, In the instant case it may be treated as Export of service with Nil rated.

[Kishan Barai]

Make sure in your "Bills of Exports" there would be one condition that weather supply ment against LUT/Bond in it one needs to tick Y or N, one of my clients forwarder has made tick in Y by mistake, bellow all IGST paid amount was mentioned, which was applied for refund, we ask for refund & because of Y error instead of N they denied, to change Bill of Exports we took pain staking efforts to get a letter from commissioner & did amendment in Bills of Exports & was allow refunded, so make sure you take care about such matters in advance, rest suggessions are correctly coined by other experts.

AI Summary

Export of goods to Nepal and Bhutan zero rated under GST; export of services depends on foreign exchange receipt rules. Exports of goods to Nepal and Bhutan qualify as zero rated supplies under GST and may be covered by LUT acceptance regardless of payment in Indian rupees if compliant with RBI guidelines and Circular guidance; supplies of services historically required receipt in convertible foreign exchange but subsequent FAQs and notification amendments adjusted that requirement, and practitioners must attend to procedural particulars such as accurate entries on Bills of Exports to avoid refund denials.