Under the Goods and Services Tax (GST) regime, deemed exports refer to domestic supplies of goods and services that are treated as exports for tax purposes, even though the goods do not physically leave India. This provision is designed to encourage export-oriented units and entities that contribute to India’s international trade. To ensure businesses can benefit from the deemed export provisions, certain eligibility criteria must be met. In this article, we’ll discuss the key factors that determine eligibility for deemed exports under GST.
1. Supply to Specific Entities
The primary criterion for a transaction to qualify as a deemed export is that the goods or services must be supplied to specific entities or under certain conditions outlined in the GST Act. These include:
Export-Oriented Units (EOUs)
An Export-Oriented Unit (EOU) is a unit that primarily manufactures goods for export. When goods are supplied to EOUs, they qualify as deemed exports under GST. The EOU itself will process the goods and export them or use them for export-related activities.
Special Economic Zones (SEZs)
Goods or services supplied to Special Economic Zones (SEZs) are also considered deemed exports. SEZs are areas designated for export-based industries and are given special tax incentives. Supplies made to units within these zones, although physically remaining within India, are treated as exports for GST purposes.
Government Entities and Projects
Supplies made to government bodies for specific projects can also be considered deemed exports. For example, when goods are supplied to the government for large-scale infrastructure projects, defense projects, or other government schemes, these supplies may qualify as deemed exports.
Export Promotion Schemes
Certain government schemes designed to promote exports, such as the Merchandise Exports from India Scheme (MEIS), provide benefits to exporters. Goods supplied under such schemes to the designated recipients may also qualify for deemed export status.
Recommended: GST Refund for Exporters
2. Goods and Services Intended for Export
While goods or services supplied in a deemed export transaction do not physically leave India, they must be intended for export or use in export activities. This means that the recipient (like an EOU, SEZ, or government project) must have the intention to use the goods for manufacturing export goods or to export them in the future.
3. Appropriate Documentation
To claim benefits under the deemed export provisions, the transaction must be supported by the necessary documentation. The documentation ensures that the supply is indeed meant for export or export-related activities, and includes:
Tax Invoices: Proper invoices showing GST details for the goods or services supplied.
Export Declarations: Declarations from the recipient (such as EOUs or SEZ units) that the goods are intended for export use or will be used in export-oriented activities.
Supply Confirmation: Confirmation from the recipient that the goods or services are being supplied to a recognized export-related entity, like an EOU or SEZ.
Other Supporting Documents: Depending on the type of deemed export transaction, additional documents may be required, such as purchase orders, contracts, or project details.
4. Nature of the Goods or Services
The nature of the goods or services supplied also plays a role in determining whether the transaction qualifies as a deemed export. Some specific goods or services may be eligible under government schemes designed to promote exports, or they may be intended for use in manufacturing products meant for export.
For instance, if a company is supplying raw materials to an EOU that will then use them to manufacture finished goods for export, those raw materials will qualify as deemed exports.
5. Zero-Rated Supply
Deemed exports are zero-rated supplies under GST. This means the supplier of goods or services is not required to charge GST on the sale, but the transaction is treated as an export for tax purposes. As a result, businesses can claim a refund of the input tax credit (ITC) on the GST paid on inputs used for the production or supply of these goods or services.
To avail of this benefit, the supplier must ensure compliance with all relevant procedures and documentation requirements, as the refund process can be complex if the proper steps are not followed.
6. Exemptions and Benefits for Deemed Exports
Goods and services qualifying as deemed exports enjoy several exemptions and benefits under the GST regime, including:
Exemption from GST on the output supply: No GST is charged on deemed export transactions.
Eligibility for Input Tax Credit (ITC): Suppliers of deemed exports can claim ITC on goods or services purchased for making the deemed export supply.
Refunds on ITC: Since deemed exports are zero-rated supplies, businesses can apply for a refund of any input tax credit that has accumulated.
These benefits encourage businesses to supply goods and services to export-related units without facing the typical tax burdens associated with regular domestic transactions.
Conclusion
Deemed exports under GST are an important provision for businesses involved in export activities or selling goods to export-oriented units, SEZs, or government entities. Using platforms like the MYGST Refund Consultant can help streamline the refund process, making it easier for businesses to claim their rightful GST refunds without unnecessary delays.To qualify as deemed exports, certain criteria must be met, including supplying goods or services to specific recipients, the intention of export, and proper documentation. Businesses that meet these criteria can enjoy tax exemptions, input tax credit refunds, and other benefits that make deemed exports an attractive option for increasing exports and promoting trade.
