GST on Exports

[Prakalp Mehta]

Hi all,

Our company is a chemical manufacturing company based in Thane, Maharashtra. We have been supplying chemicals only to the local market till date and we would like to start exporting now. I have a few queries after reading a few posts on this forum.

1. I understand there are a number of ways by which we can claim GST or have a reduced rate of GST. Out of the two ways of claiming refund (one by claiming refund of ITC by selling under LUT and other by claiming refund of IGST) which one is simpler and easier to claim refund?

How long will it take for the refund to be credited in the bank account?

Are there any special documents that have to be maintained?

Any precautions that have to be taken to avoid any questions from the Tax department in future?

2. If we export under IGST 18% then do we have to make two invoices? One a normal IGST invoice for the Sales tax department which we file in our records and another one without showing the IGST that goes to the overseas customer? Any guidance on the documentation will be highly appreciated.

3. On which value should the IGST be levied? FOB or CIF?

Assuming we quote the customer a CIF value then do we still charge IGST on CIF value or should we charge on FOB value?

And while claiming the refund, how much will the refund be credited if IGST has been charged on the CIF value? Will it be the entire value or will it still be calculated on FOB value and part of the refund will have to let go?

4. How should we manage the exchange rates? For eg. if the price of a particular product we quote on FOB terms is ₹ 100 then the IGST value will be ₹ 18. We then, assuming an exchange rate of 75.00, convert ₹ 100 into USD and make commercial and custom invoice. When the shipping bill is made the exchange rate taken could be 74.00. Also when we actually receive the money from the customer, it could be based on actual exchange rate which could be different from the assumed exchange rate or the shipping bill exchange rate and the money received could be more or less. Then how should this difference be addressed? What kind of documentation should be maintained for this? Are there any changes that have to be made at the end of quarter/ year?

Thank you very much.

AI Summary

Chemical Manufacturer Seeks Guidance on GST Refunds, Invoicing, IGST Levies, and Exchange Rate Fluctuations for Exports A chemical manufacturing company in Maharashtra is exploring export options and seeks guidance on claiming GST refunds, invoicing, IGST levies, and managing exchange rate fluctuations. The company is considering two refund methods: one involves claiming a refund of ITC by selling under LUT, and the other involves claiming a refund of IGST. They inquire about the ease of claiming refunds, required documentation, and precautions to avoid tax issues. Responses advise on automated refund processes, the necessity of preparing two invoices for GST and commercial purposes, charging IGST based on the realized value, and addressing foreign exchange fluctuations without GST implications.