Zero Rated GST ASMT10

[Tapash K]

So, I have foreign e-commerce income in the form of digital products and Payments do come in USD which is then converted by the bank in INR. I have been under the impression that export of OIDAR services are zero rated for GST therefore I have been filing Nil returns all this time and I had no idea about the existence of LUT until recently I got a ASMT-10 notice asking to explain the Nil returns filed since there were some TCS deductions. I'm not sure how to take things from here so any advice is welcome. Thanks

[Sadanand Bulbule]

Dear Sir

Admittedly you have fulfilled all the conditions of Section 2[6] of the IGST Act for export of OIDAR. So take the best advice from your tax consultant which may solve your problem legally.

[KASTURI SETHI]

Sh.Tapash K Ji,

In this situation, the place of supply is determinant factor as per Section 13 (12) of IGST Act which is extracted below : (Peruse all the parameters)

SECTION 13. Place of supply of services where location of supplier or location of recipient is outside India.

(12) The place of supply of online information and database access or retrieval services shall be the location of the recipient of services.

Explanation. - For the purposes of this sub-section, person receiving such services shall be deemed to be located in the taxable territory, if any two of the following non-contradictory conditions are satisfied, namely :-

(a) the location of address presented by the recipient of services through internet is in the taxable territory;

(b) the credit card or debit card or store value card or charge card or smart card or any other card by which the recipient of services settles payment has been issued in the taxable territory;

(c) the billing address of the recipient of services is in the taxable territory;

(d) the internet protocol address of the device used by the recipient of services is in the taxable territory;

(e) the bank of the recipient of services in which the account used for payment is maintained is in the taxable territory;

(f) the country code of the subscriber identity module card used by the recipient of services is of taxable territory;

(g) the location of the fixed land line through which the service is received by the recipient is in the taxable territory.

[Sadanand Bulbule]

Dear Sir

It is a sagacious suggestion.

[Shilpi Jain]

Its only an error of improper disclosure in the returns. Additionally, LUT is a condition which can be post facto also complied. There is a Circular No. 37/11/2018-GST which has clarified as below

4.1. In this regard, it is emphasised that the substantive benefits of zero rating may not be denied where it has been established that exports in terms of the relevant provisions have been made. The delay in furnishing of LUT in such cases may be condoned and the facility for export under LUT may be allowed on ex post facto basis taking into account the facts and circumstances of each case.

Basis this you can make submissions to the department and ask them to condone and drop any further proceedings

[KASTURI SETHI]

Yes, delay is condonable. Also see para no.44 of Board's Circular No.125/44/2019-GST dated 18.11.19 which  is extracted below :-

Clarifications on issues related to making zero-rated supplies

"44. Export of goods or services can be made without payment of Integrated tax under the provisions of rule 96A of the CGST Rules. Under the said provisions, an exporter is required to furnish a bond or Letter of Undertaking (LUT) to the jurisdictional Commissioner before effecting zero rated supplies. A detailed procedure for filing of LUT has been specified vide Circular No. 8/8/2017-GST dated 4.10.2017. It has been brought to the notice of the Board that in some cases, such zero-rated supplies were made before filing the LUT and refund claims for unutilized input tax credit got filed. In this regard, it is emphasized that the substantive benefits of zero rating may not be denied where it has been established that exports in terms of the relevant provisions have been made. The delay in furnishing of LUT in such cases may be condoned and the facility for export under LUT may be allowed on ex post facto basis taking into account the facts and circumstances of each case."

[Ganeshan Kalyani]

Sir, can you elaborate the method of e-commerce sales you do and receipt of payment process for better understanding. 

[Yash Shah]

As per Circular 37/11/2018, "the Export of goods or services can be made without payment of integrated tax under the provisions of rule 96A of the Central Goods and Services Tax Rules, 2017 (the CGST Rules). Under the said provisions, an exporter is required to furnish a bond or Letter of Undertaking (LUT) to the jurisdictional Commissioner before effecting zero-rated supplies. A detailed procedure for filing of LUT has already been specified via Circular No. 8/8/2017 –GST dated 4th October, 2017. It has been brought to the notice of the Board that in some cases, such zero-rated supplies have been made before filing the LUT and refund claims for unutilised input tax credits have been filed.

4.1. In this regard, it is emphasised that the substantive benefits of zero rating may not be denied where it has been established that exports in terms of the relevant provisions have been made. The delay in furnishing of LUT in such cases may be condoned and the facility for export under LUT may be allowed on ex post facto basis taking into account the facts and circumstances of each case."

As the basis of this circular, the benefit of Zero-rate can not be denied merely because the LUT was not filled.

AI Summary

Zero-rated OIDAR services: place-of-supply criteria and post-facto LUT condonation enable retrospective zero-rating and refunds.
Export of OIDAR services to recipients located outside the taxable territory qualifies for zero-rated GST if place of supply conditions (such as billing address, IP address, card issuance, and bank location) show the recipient is abroad. A Letter of Undertaking (LUT) is the procedural vehicle to make zero rated supplies without payment of integrated tax; administrative circulars permit condonation of delayed LUT filing and retrospective zero rated treatment and refund claims where exports are established, and taxpayers should file submissions seeking condonation when notices query nil returns or TCS records.