zero rated service exports without GST registration

[Sudhir Singh]

Zero rated exports(software services abroad) were done without GST registration of 55L INR, I do not wish to claim any input credits. My business is 100% zero rated export of software services abroad. Would I have to pay 10000 INR as penalty or also 18% GST with penalty on the 55L INR?

[KASTURI SETHI]

If you have all proofs of export of service and the department is satisfied with the same, the department may not demand GST but procedural lapses are certainly therein and penalty can be imposed upon for each lapse.

Since Govt. is liberal regarding exports, you can make request to the department for not imposing penalty. Some circular may help you in this regard. You are to prove your bona fides. Burden of proof is cast upon you.

[KASTURI SETHI]

Have you filled up SOFTEX Declaration ? If services have been actually exported, GST cannot be demanded.

[Sudhir Singh]

yes, softex was filed in time.

[Sudhir Singh]

Seems to me that LUT is not an enforceable document. It should not decide the location of payment and if someone recieves payment in their foreign account for export of services, the provisions of LUT would be broken even if there was no GST actually due. LUT seems to be more of a FEMA/GST GST mix as the same income/money should not be able to be double taxed.

[SOWMYA CA]

A registered person has to file LUT for availing zero rating on export transactions. To avail zero rating, two conditions are listed in the LUT 1) The goods needs to be exported out of India within 3 months from the date of issue of Invoice. 2) The payment for services must be received in convertible foreign currency within 1 year from the date of issue of invoice. The first condition is pertaining to goods and the second condition is pertaining to services.

In your case, if payment for the service is not received within 1 year from the date of issue of invoice, then you are liable to pay tax on the export turnover along with Interest @18% as you have not fulfilled the conditions of the LUT for zero-rating.

Now coming to the aspect of registration, the supply of software services effected by you is an Inter-state supply of Service. Therefore you are required to be registered without any threshold benefit. The consequence of not taking registration is 1) You may receive notice u/s. 63 for assessment of unregistered persons within 5 years from the due date of filing annual return of the year of export 2) liable for penalty u/s. 122(xi) of an amount ₹ 10,000/- or 10% of tax due whichever is higher.

Therefore if you have received the payment for the exports completed within the time prescribed, then you may be liable only for the penalty for non-registration. However you may receive notice ASMT - 14 for assessment of unregistered persons upto 5 years. Hope this helps...

[KASTURI SETHI]

Sh.Sudhir Singh Ji,

I do not agree with your views at serial no.4 above. The views expressed by Madam Sowmya CA are legally correct. I agree with her views. Non-obtaining registration, non-filing all GST returns and exporting services without registration and without taking permission/approval from GST department are very serious lapses. Rules and regulations and procedures framed by Govt. are to be followed and honoured,

Pl. do not take procedural lapses lightly. It is sincere advice and it is in your own interest.

AI Summary

Zero-rated exports risk tax and penalty if GST registration or LUT conditions are not met despite export documentation.
Exported software services that are supported by SOFTEX declarations and proof of receipt in convertible foreign exchange remain zero-rated, but failure to obtain GST registration or to meet LUT conditions (timely foreign payment for services) exposes the supplier to assessment as an unregistered person and to statutory penalties and interest; the burden of proving bona fide exports rests with the supplier and administrative relief from penalties may be sought.