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.

[Ganeshan Kalyani]

Sir, pointwise reply is as below:

1. Refund under with payment of IGST: The refund is processed automated. That is the export turnover shown in GSTR-3B is matched with GSTR-1. Also, the shipping bills, invoice value, tax etc. is matched by GSTR-1 with the details in ICEGATE. All these are automatic. If the details in all the said places are matched, the refund is allowed and disbursed into the bank account. From one of the source, I could learn that the time taken for receiving retund is 10 days from the date of filing GSTR-3B.

Refund under without payment of IGST: Here, the application has to be filed online. The applicaiton is verfied and if found correct, then the refund is disbursed. I dont have any update as regard how much time it takes for the refund to come in this method.

2. Yes, two invoices are prepared. One for GST purpose, a Tax Invoice. Second , Commercial Invoice, for foreign customer.

3. IGST should be charged on the value of the goods. That is the amount which you are going to realise from your customer.

4. There is no GST on the income due to foreign exchange fluctuation.

[Prakalp Mehta]

Hello Sir,

Thank you very much for your response!

AI Summary

IGST refund mechanisms: automated refund on matched returns or verified LUT application for export supplies. Exports with IGST payment qualify for an automated refund when export turnover in GSTR-3B matches GSTR-1 and shipping bill/ICEGATE details; exports under LUT require a verified online refund application. Taxpayers must reconcile invoices, GSTR-1 entries and shipping bills to avoid queries. Prepare both a tax invoice for GST records and a commercial invoice for the overseas buyer. IGST is levied on the value realised from the buyer, and foreign exchange gains or losses are not subject to GST.