GST on benefits from merchant exporter

[Kaustubh Karandikar]

XYZ(Manufacturer) is supplying goods for export through PQR (Merchant Exporter). 1) In case of FOREX gain to PQR, XYZ will issue debit note to PQR to recover the same. 2) DBK amount received by PQR, will be transferred to XYZ 3) MEIS scrip will be transferred in the name of XYZ by PQR without any monetary benefit. Is XYZ liable to pay GST on all these transactions?

[MUKUND THAKKAR]

1) In case of FOREX gain to PQR, XYZ will issue debit note to PQR to recover the same.

If issuing debit note XYZ need to pay GST on applicable rate of GST. because it is established that export latter on converted in local sales.

2) DBK amount received by PQR, will be transferred to XYZ.

DBK directly credited to exporter account.

3)MEIS scrip will be transferred in the name of XYZ by PQR without any monetary benefit.

yes sales or transfer of MEIS is nil rated

[KASTURI SETHI]

In response to a FAQ, it was clarified (vide advertisement dated 27-7-2017), that MEIS and other scrips like SEIS and IEIS are goods classified under heading 4907

C.B.I. & C. Circular F. No. 332/2/2017-TRU, dated December, 2017

S. No.57. What is the classification and GST rate for sale of Export Incentives Licences like MEIS, SEIS and IEIS ?

1. Duty Credit Scrip [MEIS etc.] fall under heading 4907.

2. Prior to 22-9-2017, Duty Credit Scrip [MEIS etc.] attracted 12% GST.

3. With effect from 22-9-2017, Duty Credit Scrip [MEIS etc.] attracted 5% GST. [Notification No. 27/2017-Central Tax (Rate)]

4. With effect from 13-10-2017, Duty Credit Scrip [MEIS etc.] attract Nil GST. [Notification No. 35/2017-Central Tax (Rate)]

[KASTURI SETHI]

Sh.Mukand Thakkar Ji,

Sir, Why have you stopped contributing to TMI in this forum ? Your replies always enrich all (including experts.). Pl. continue.

[MUKUND THAKKAR]

Sir,

Thanks for apperception.. In fact your self and Sanjay sir, and Ganesh sir Inputs always referring and try to understand the new act. Thanks all of you..

[Ganeshan Kalyani]

Thanks Sri Mukund Sir for your acknowledgement. The new act is not stable yet, so everyone is a learner. The querist needs views of an expert. You being an expert continue contributing. It enriches the knowledge of others.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

You are right. We are also learners. An expert driver is he who can ride his car on bumpy, muddy and crowded road otherwise on a smooth road every Tom, Dick & Harry can drive a car. Driving on a smooth road is not qualification.We are going through such trajectory and period. Sh. Mukund Thakkar is capable of driving a car on bumpy, muddy and crowded road. So he must come forward.

[YAGAY and SUN]

On 1 & 2 points, GST will be applicable and on point no. 3 though GST is not applicable however, proportionate ITC would be reversed, if availed at the time of procurement of services etc. being exempted sale.

AI Summary

GST on export-related benefits: debit note recoveries taxable, scrip transfers nil-rated but ITC may require reversal.
Recovery of a foreign exchange gain by issuing a debit note is treated as a local taxable supply and attracts GST; duty drawback credited to the exporter is to be credited and adjustments between parties may attract GST when characterised as consideration; MEIS and similar duty credit scrips are presently nil-rated, so their transfer without monetary consideration does not attract GST, but any ITC claimed earlier in relation to supplies rendered exempt by such transfers must be proportionately reversed.