My client is engaged in exporting goods which are procured from China and directly shipped to customer in Africa. Goods do not come to India. Though we are showing the supply as Export without payment of duty in GSTR 1, actually this is a supply from one non-taxable territory to another non-taxable territory and does not fall in the definition of a GST supply. Client is paying a very big commission in India to procure such export orders and due to which the GST paid on the commission invoice is getting accumulated as ITC credit. As per the rules of refund of accumulated ITC credit, only in 2 cases it is allowed.
1] On export of goods without payment of duty [considered as zero rated supply]
2] Inverted duty structure. Both above are not applicable to my client as I cant apply for refund under exports as there is no shipping bill from India. Any solutions to get refund ?
GST on cross-border direct shipments: refund eligibility under Section 54 and zero-rated supply rules (Section 16 IGST) A taxpayer arranges exports where goods are procured abroad and shipped directly from the foreign supplier to a foreign buyer, so the movement never enters Indian territory. The taxpayer records these as 'export without payment of duty' in GSTR-1 but contends they are supplies between two non-taxable territories and thus not taxable under GST. Significant GST on domestic commission fees is accumulating as input tax credit. Statutory refunds of accumulated ITC are available only for zero-rated exports (with shipping documents) or inverted duty structures, so the taxpayer appears ineligible. Practical options include restructuring contracts/invoicing so supplies are treated as exports from India with appropriate shipping documentation, challenging the taxability of the commission/its place of supply, or seeking advance/authoritative ruling; obtain specialist GST advice for case-specific compliance and litigation strategy. (AI Summary)
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