GST on Unrealised export

[Ethirajan Parthasarathy]

A client of mine effected export by despacthing goods by ship. To their misfortune the ship was hijacked and goods never reached the destination. On technical grounds my client could not get any compensation from insurance company.

My query is whether the client should pay applicable out put tax on the export value or it is enough if ITC is reversed on the cost of the inputs of the goods stolen as provided under sect 17(5)(h) of the CGST Act.

If the opinion of the experts is, applicable output tax is payable, then the party is liable to pay the tax with interest to be calculated after expiry of 9 months from despatcth

If the opinion of the experts is that, only ITC on inputs is to be reversed, then it should be done based on the date of hijacking of the ship.

AI Summary

Zero-rated export supply: no output tax where goods left India; address ITC reversal risk and FEMA/EDPMS compliance.
If goods dispatched for export are regarded as taken out of India, the transaction is a zero-rated supply and no output tax is payable; in that event reversal of input tax credit for goods lost is not required. Conversely, if export completion is contested or documentary facts/doctrines of delivery and territorial limits show the goods were not exported, advisers expect ITC disallowance and accounting disclosure as inventory lost in transit. RBI/EDPMS and FEMA write-off procedures and audit/reconciliation consequences must be addressed before finalising treatment.