Export refund under GST

[THYAGARAJAN KALYANASUNDARAM]

Dear experts,

One of my clients exporting drug medicine through airway which is purchasing within India and paying GST tax. Further, he realise the payment through the aggregator who is also in India and by paying only INR to my client. However, the goods will be exported directly to the foreign buyer with invoice and mentioning their name & address.

In this scenario, my query is that,

1. whether he is eligible to obtain LUT?

2. Whether he can apply for refund u/s 54 of GST Act.

Thanks in Advance.

[KASTURI SETHI]

Regarding realization of export proceeds in Indian Currency there are conditions laid down in C.B.I. & C. Circular No. 88/07/2019-GST, dated 1-2-2019. Relevant paras extracted below

"3.1 Original Para 2(k)

Realization of export proceeds in Indian Rupee: Attention is invited to para A (v) Part- I of RBI Master Circular No. 14/2015-16 dated 01st July, 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 countries outside India 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.

3.2 Amended Para 2(k)

Realization of export proceeds in Indian Rupee: Attention is invited to para A (v) Part- I of RBI Master Circular No. 14/2015-16 dated 01st July, 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”. Further, attention is invited to the amendment to section 2(6) of the IGST Act, 2017 which allows realization of export proceeds of services in INR, wherever allowed by the RBI."

Accordingly, it is clarified that the acceptance of LUT for supplies of goods or services to countries outside India 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.

2. Refund can be claimed under Section 54 but disclaimer certificate is required.

3. No LUT is required as goods are tax paid. The purpose of LUT is to safe guard Govt. revenue.

For your information the term,'Aggregator' in GST has been dispensed with. This term is meant for 'Uber' 'Ola' taxis which are webbased.

AI Summary

Export proceeds in Indian rupees: LUT may be accepted if RBI guidelines followed; refund claim requires disclaimer certificate. Acceptance of a Letter of Undertaking (LUT) for supplies to countries outside India and to SEZ developers or units is permissible irrespective of whether payments are made in Indian rupees or convertible foreign exchange, provided realization of export proceeds is in accordance with applicable RBI guidelines; realization of export proceeds of services in Indian rupees is allowed where RBI permits. A refund of integrated tax on exports may be claimed under the refund provisions subject to submission of a required disclaimer certificate. Where goods are tax paid domestically prior to export, a LUT is not required.