Trading activities for export by an E.O.U.

[Amresh kumar]

Respected Sir

As per New F.T.P. Policy 2023

Para 6.01(a) An E.O.U. may export all kind of Goods And Services except Items that are prohibited in ITC(HS)

Para 6.01(d)(i)(iii) may procure all types of Goods from D.T.A. on payment of applicable G.S.T.

Para 6.07 (a)(i) E.O.U. may sell finished goods manufactured by them as specified in L.O.P.

After Combined reading of Para 6.01(a) and 6.01(d)(i)(iii) can the E.O.U. do the trading activities for Export i.e. procure Goods from D.T.A. in terms of Para 6.01(d)(i)(iii) avail ITC and export in terms of Para 6.01(a) even if it is not specified in L.O.P.

Example:

An E.O.U. (XYZ) gets an order from overseas buyers and then places an order to a local D.T.A. unit (ABC) who is manufacturing/ supplier of the same product.

The D.T.A unit (ABC) supplies the goods to E.O.U.(XYZ) after payment of G.S.T.

The E.O.U. unit avails I.T.C. and after relabelling Exports to the Overseas buyer.

Is the above procedure correct and allowed post G.S.T. or is it mandatory to have the said product specified in L.O.P.

[Rajagopalan Ranganathan]

Sir,

Since the EOU unit exports the goods procured from a DTA unit without payment of gst, the EOU unit has to reverse the ITC taken in respect of gst paid by the DTA unit.

[KASTURI SETHI]

Supply to EOU by DTA is at par with other GST units except exemption from BCD. DTA unit will issue tax invoice charging IGST or CGST/SGST whichever applicable and thus EOU is entitled to avail ITC on tax paid. Moreover, here DTA (ABC) has supplied goods to EOU after payment of GST. No restriction on availing ITC. Supply to EOU is also deemed export.

Regarding the pre-approval of the goods to be procured from DTA by EOU, from the Development Commissioner, please see Board's Circular no.14/14/17-GST dated 6.11.17 as amended. It is mandatory.

 

[Shilpi Jain]

The term manufacture under FTP is wide. It could cover re-labelling as well.

[Ramakrishna Malapaka]

May peruse.. IGST is exempt on supplies to EOU under Notfn. No. 37/2022 Cus. Dt. 30.06.2022.... para 6.01(d)(ii) FTP Policy.

AI Summary

Entitlement to Input Tax Credit for EOUs when procuring from domestic suppliers-subject to pre approval and GST treatment. An E.O.U. may procure goods from the D.T.A. on payment of GST and, in principle, avail Input Tax Credit on such supplies; supplies to EOUs are treated under normal GST invoices and may benefit from IGST exemptions, but the E.O.U. must comply with administrative requirements including prior approval from the Development Commissioner, ensure items are addressed under its Letter of Permission when applicable, and may face ITC reversal obligations where the export transaction does not effect appropriate tax treatment.