Important Keyword: Section 74, Section 75, Section 7(5)(b) IGST Act 2017, Section 16 IGST Act 2017, Notifications No. 03/2017-Integrated Tax, Section 7(5)(b) IGST Act, Circular No. 48/22/2018-GST, Rule 89 CGST Rules 2017, Section 89(1) CGST Rules 2017, Rule 96A CGST Rules 2017, Section 16 Integrated Tax Act 2017, Circular No.2/2/2017-GST, Notification No. 37/2017-Central Tax, Notification No. 57/2000-Custom, Notification No. 26/2017- Custom, Notification No. 77/2017-Custom, Section 12(3)(c) IGST Act, Circular No. 48/22/2018- GST, Section 7(5)(b) IGST Act, Section 8(1) CGST Rules 2017.
3rd Edition: 15th December 2018
(Note: Changes announced in GST Council meeting held on 22nd December 2018 are being incorporated and the updated edition will be uploaded shortly)
Table of Contents
Contents
- Overview of Goods and Services Tax (GST)
- Levy of and Exemption from Tax
2.1 Composition Levy - Registration
3.1 Amendment of Registration
3.2 Cancellation of Registration - Meaning and Scope of Supply
- Time of Supply
- Valuation in GST
- GST Payment of Tax
7.1 TDS Scheme - Electronic Commerce and Tax Collected at Source
- Job Work
- Input Tax Credit
- Concept of Input Service Distributor in GST
- Returns Process
- Assessment and Audit
13.1 Invoice, Credit and Debit Note
13.2 Accounts and Records under GST
13.3 E Way Bill - Refunds
14.1 Refunds by UINs - Demands and Recovery
- Appeals/Revision
- Advance Ruling
- Inspection, Search, Seizure and Arrest
- Offences, Penalties, Prosecution and Compounding
- Overview of the IGST Act
- Exports and Imports
21.1 Exports
21.2 Export of Services
21.3 Duty Drawback Scheme
21.4 Special Economic Zone(SEZ)
21.5 Export Oriented Units
21.6 Imports - Place of Supply of Goods and Service
22.1 Place of Supply of Goods
22.2 Place of Supply of Services (Location of supplier as well as recipient are in India)
22.3 Place of Supply of Services (Location of supplier or recipient is outside India) - GSTN and Frontend Business Process on GST Portal
- Transitional Provisions
- Anti-profiteering provisions
CENTRAL BOARD OF INDIRECT TAXES & CUSTOMS
NEW DELHI
21.3 Duty Drawback Scheme
Q 35. Is there any impact of GST on the Duty Drawback Scheme for exporters?
Ans. Following changes have been done in the Duty Drawback scheme in Customs:
- No amendments have been made to the drawback provisions (Section 74 or Section 75) under Customs Act 1962 in the GST regime.
- However, the duty drawback rules have substantially been amended and new Customs and Central Excise Duties Drawback Rules, 2017 with effect from 01.10.2017, have been issued. (Notification No. 88/2017-Customs (N.T) dated 21st September, 2017)
- The definition of drawback has been amended to exclude Integrated Tax and GST Compensation Cess, hence no refund of any of the GST taxes.
- A new Duty Drawback schedule, comprising of only one rate for every product irrespective of whether ITC is taken by the exporter or not has been introduced with effect from 01.10.2017. (Notification No. 89/2017-Customs (N.T) dated 21st September, 2017)
- The rates of drawback have substantially been reduced. The earlier rebate had been done away with. Instead now, refund of integrated tax, if paid by the exporter, is refunded by Customs.
- The refund of integrated tax is irrespective of whether drawback is taken by the exporter or not.
- The drawback scheme will continue in terms of both section 74 and section 75. Option of All Industry Rate (AIR) as well as Brand Rate under Section 75 shall also continue.
- Drawback under Section 74 will refund Customs duties as well as Integrated Tax and Compensation Cess paid on imported goods which are re-exported. However, a part of the Integrated Tax and Compensation Cess paid on imported goods would have gone to the respective States/UT, therefore, the same can only be refunded only if the concerned State/UT has not refunded it and the importer has not taken ITC of the same.
Q 36. Will drawback at higher rate be available to exporters who do not avail Input Tax Credit (ITC) like presently available to those who do not avail CENVAT credit?
Ans. Prior to GST, there were two All Industry Rates (AIRs) of duty drawback on exports. The higher rate rebated Customs duties, Central Excise duties and Service tax on inputs or input services used in the manufacture of export goods subject to the condition that no input credit i.e. CENVAT credit was claimed. The lower rate rebated Customs duties on inputs and Central excise duty on fuel for generation of captive power, used in the manufacture of export goods.
In the post GST era, as Central Excise duties and Service Tax have been subsumed in Goods and Services Tax, for which full input tax credit is available, only single rate of AIRs have been continued.
Therefore, there will be no difference in rate of Drawback for exporters not availing ITC in Goods and Services Tax regime. In Goods and Services Tax regime, drawback will be admissible only at lower rate determined on the basis of customs duties paid on imported materials used in the manufacture of export goods.
However, as an export facilitation measure, for the transition period of 3 months from July to September 2017, drawback at higher composite rates were continued to be granted subject to the condition that no input tax credit of CGST/IGST was claimed, no refund of IGST paid on export goods was claimed and no CENVAT credit was carried forward.
Q 37. Do state taxes also are refunded through duty drawback scheme?
Ans. No. The central taxes which are outside Goods and Services Tax but are embedded in exports namely Customs, Central Excise are refunded under the Duty Drawback Scheme. The State taxes are only refunded in respect of apparel and clothing under the Refund of State Levies (RoSL) scheme wherein the amount is refunded from the budget of Ministry of textiles.
21.4 Special Economic Zone(SEZ)
Q 38. How are supplies by and to SEZs treated in GST?
Ans. There is no change in the SEZ scheme. All imports by SEZs are exempted from any duty/tax. As per section 7(5)(b) of the IGST Act, 2017, a supply of goods or services or both to or by a SEZ developer or a SEZ unit is treated to be a supply of goods or services or both in the course of inter-State trade or commerce.
Further as per section 16 of IGST Act, 2017 supply of goods or services or both to a SEZ developer or a SEZ unit is considered as zero rated supply.
Q 39. What will be the IGST rates when goods or services or both are supplied to SEZ unit?
Ans. Supplies to SEZ unit or developer are considered as zero rated. As such, the supplier can choose to either supply on payment of IGST and claim refund or supply without payment of IGST and in that scenario can only claim the refund of unutilized ITC, if any.
The IGST rates when supplying goods and services to SEZ unit on payment of tax and taking refund route, will be as per rate Notifications No. 01, 02 and 03/2017-Integrated Tax (Rate) dated 28.06.2017(for goods) and rate Notifications No. 08 and 09/2017 dated 28.06.2017(for Services) as amended from time to time.
Q 40. An SEZ unit in Mumbai avails hotel accommodation in Goa. Whether such supply is intra-state or inter-state supply?
Ans. It is an established principle of interpretation of statutes that in case of an apparent conflict between two provisions, the specific provision shall prevail over the general provision. section 7(5)(b) of the IGST Act is a specific provision relating to supplies of goods or services or both made to a SEZ developer or a SEZ unit, which states that such supplies shall be treated as inter-State supplies.
Accordingly, CBIC vide Circular No. 48/22/2018-GST dated 14.06.2018 has clarified that services of short-term accommodation, conferencing, banqueting etc., provided to a SEZ developer or a SEZ unit shall be treated as an inter- State supply.
Q 41. Whether SEZ unit or developer needs to pay IGST when it received supplies which are under reverse charge mechanism?
Ans. All supplies to SEZs are zero rated. However, the suppliers are given two options. In this case, the supplier is not liable to pay Goods and Services Tax as the supply is under reverse charge mechanism. The recipient is considered as deemed supplier. Therefore, SEZ has to pay Goods and Services Tax in this case.
Q 42. What is the refund mechanism when a DTA supplier supplies goods/services to SEZ Unit?
Ans. The supplier to SEZs has following two options:
- Supply goods or services or both to SEZ unit or developer on payment of Integrated tax and claim refund
- Supply goods or services or both to SEZ unit or developer without payment of Integrated tax under LUT/Bond and claim refund of unutilized ITC
Option I: Supply goods or services or both to SEZ unit or developer on payment of Integrated tax and claim refund
The supplier has to follow the procedure outlined in rule 89 of the CGST Rules, 2017. The refund in respect of supplies to a SEZ unit or a SEZ developer, the application for refund shall be filed by the –
- supplier of goods after such goods have been admitted in full in the Special Economic Zone for authorised operations, as endorsed by the specified officer of the Zone;
- supplier of services along with such evidence regarding receipt of services for authorised operations as endorsed by the specified officer of the Zone
The refund application in form GST RFD-01 shall be accompanied with:
- a statement containing the number and date of invoices as provided in rule 46 along with the evidence regarding the endorsement specified in the second proviso to sub-rule (1) in the case of the supply of goods made to a Special Economic Zone unit or a Special Economic Zone developer;
- a statement containing the number and date of invoices, the evidence regarding the endorsement specified in the second proviso to sub-rule (1) and the details of payment, along with the proof thereof, made by the recipient to the supplier for authorised operations as defined under the Special Economic Zone Act, 2005, in a case where the refund is on account of supply of services made to a Special Economic Zone unit or a Special Economic Zone developer;
- a declaration to the effect that the Special Economic Zone unit or the Special Economic Zone developer has not availed the input tax credit of the tax paid by the supplier of goods or services or both, in a case where the refund is on account of supply of goods or services made to a Special Economic Zone unit or a Special Economic Zone developer;
(Section 89(1) of Central Goods and Services Tax (Rules), 2017.)
Option II: Supply goods or services or both to SEZ unit or developer without payment of Integrated tax under LUT/Bond and claim refund of unutilized ITC
The supplier has to follow the procedure outlined in rule 96A of the Central Goods and Services Tax Rules, 2017. He needs to submit a bond/LUT in FORM GST RFD-11 to the jurisdictional Commissioner, binding himself to pay the tax due along with the interest specified under sub-section (1) of section 50 within a period of —
- fifteen days after the expiry of three months, or such further period as may be allowed by the Commissioner,] from the date of issue of the invoice for export, if the goods are not exported out of India; or
- fifteen days after the expiry of one year, or such further period as may be allowed by the Commissioner, from the date of issue of the invoice for export, if the payment of such services is not received by the exporter in convertible foreign exchange.
Q 43. Whether a DTA supplier has to furnish a Bond or LUT while supplying goods/services without payment of integrated tax?
Ans. Yes, a DTA supplier has to furnish a Bond or LUT while supplying goods/services without payment of integrated tax as per Section 16 of the Integrated Tax Act, 2017.
Q 44. Whether the Bond/LUT by a DTA supplier should be submitted to the Development Commissioner SEZ or the jurisdictional proper officer of GST?
Ans. As per Circular No.2/2/2017-GST dated 04.07.2017 Bond/LUT shall be furnished to the jurisdictional Deputy/Assistant Commissioner having jurisdiction over the principal place of business of the exporter.
Q 45. What are the requirement for submitting Bond/LUT?
Ans. The requirement of Bond/LUT will be as prescribed under Circulars No. 4, 8 and 40/2017. The registered person (exporters) shall fill and submit FORM GST RFD-11 on the common portal. An LUT shall be deemed to be accepted as soon as an acknowledgement for the same, bearing the Application Reference Number (ARN), is generated online. No document needs to be physically submitted to the jurisdictional office for acceptance of LUT.
If it is discovered that an exporter whose LUT has been so accepted, was ineligible to furnish an LUT in place of bond as per Notification No. 37/2017-Central Tax, then the exporter’s LUT will be liable for rejection. In case of rejection, the LUT shall be deemed to have been rejected ab initio.
[Circular 8/2017 as amended by 40/2018 dated 06.04.2018].
Q 46. Whether Bond/LUT is required to be submitted in case of exempted /non-GST goods?
Ans. In case of zero-rated supply of exempted or non-GST goods, the requirement for furnishing a bond or LUT cannot be insisted upon. In this regard, the circular no. 45/19/2018-Central Tax dated 30-05-2018 clarifies that in respect of refund claims on account of export of non-GST and exempted goods without payment of integrated tax, LUT/bond is not required.
Q 47. If a DTA supplier is supplying the goods to SEZ unit without payment of integrated tax what will the taxable value as per the format prescribed for SEZ supply?
Ans. The taxable value will be the invoice value of the goods supplied to the SEZ unit.
Q 48. Whether Bank as a nominated agency in the non-processing area of SEZ will be eligible for exemption granted to SEZs?
Ans. No. Bank as a nominated agency in the non- processing area of SEZ will not be eligible for exemption granted to SEZ.
Q 49. Whether the exemption granted to nominated agency pre GST regime will continue in the post GST regime for importing gold?
Ans. The bank as a nominated agency will continue to get the exemption of Customs duty as prevailed before the Goods and Services Tax regime vide Notification No. 57/2000-Cus dated 08.05.2000.
Import of gold by specified banks and specified PSUs as mentioned in Notification No. 77/2017-Cus dated 13.10.2017 attracts Nil IGST. However, other banks will have to pay the IGST as per the Notification No. 26/2017- Cus dated 28.06.2017 as no exemption has been granted for payment of IGST duty to these.
Q 50. Can bank recover the IGST rate from the SEZ Unit while supplying gold to the SEZ Unit?
Ans. No. The banks cannot recover IGST rate from the SEZ Unit. However, the Banks can claim the refund of the IGST paid on imports after supplying the goods to the SEZ Unit.
Q 51. Whether services of short term accommodation, conferencing, banqueting etc., provided to a SEZ developer or a SEZ unit shall be treated as an intra or inter-State supply?
Ans. Even though as per section 12(3)(c) of the IGST Act, the place of supply of services by way of accommodation in any immovable property for organizing any functions is the location at which the immovable property is located and therefore the above supply should be intra state supply, it is an established principle of interpretation of statutes that in case of an apparent conflict between two provisions, the specific provision shall prevail over the general provision.
Section 7(5)(b) of the IGST Act is a specific provision relating to supplies of goods or services or both made to a SEZ developer or a SEZ unit, which states that such supplies shall be treated as inter-State supplies. Therefore, the services of short term accommodation, conferencing, banqueting etc., provided to a SEZ developer or a SEZ unit shall be treated as an inter-State supply.
(CBIC Circular No. 48/22/2018- GST dated 14th June, 2018)
Q 52. Whether the benefit of zero rated supply can be allowed to all procurements by a SEZ developer or a SEZ unit such as event management services, hotel and accommodation services, consumables etc?
Ans. Subject to the provisions of section 17(5) of the Central Goods and Services Tax Act, if event management services, hotel, accommodation services, consumables etc. are received by a SEZ developer or a SEZ unit for authorized operations, as endorsed by the specified officer of the Zone, the benefit of zero-rated supply shall be available in such cases to the supplier.
(CBIC Circular No. 48/22/2018- GST dated 14th June, 2018)
Q 53. Whether a company having a unit in SEZ and a unit in DTA require separate registration for both the units?
Ans. Yes, as per Section 8(1) of CGST (Registration) Rules, 2017 a person having a units(s) in a Special Economic Zone or being a Special Economic Zone developer shall make a separate application for registration as a business vertical distinct from his other units located outside the Special Economic Zone.
In the CGST Amendment Act, 2018, the concept of business vertical has been removed. However, following proviso has been inserted in section 25(2), making it mandatory for SEZs to have separate registration.
“Provided further that a person having a unit, as defined in the Special Economic Zones Act, 2005, in a Special Economic Zone or being a Special Economic Zone developer shall have to apply for a separate registration, as distinct from his place of business located outside the Special Economic Zone in the same State or Union territory.”
Q 54. Whether a SEZ unit or SEZ developer procure any goods or services from an unregistered supplier, and whether these will be zero rated supplies?
Ans. Supplies to SEZ unit or SEZ developer have been accorded the status of inter-State supplies under the IGST Act. Under the GST Law, any supplier making inter-State supplies has to compulsorily get registered under GST. Thus, anyone making a supply to a SEZ unit or SEZ developer has to necessarily obtain GST registration.
Q 55. Whether SEZ Act/Rules are aligned with the GST?
Ans. SEZ Rules, 2006 have been synced with the GST Provisions vide SEZ (Amendment) Rules, 2018. The terms like Service Tax, Stamp Duty etc replaced with CGST/SGST/IGST/UTGST etc. GST registration certificate required instead of Sales tax registration earlier for establishment / setting up of SEZ unit(s)
Q 56. Whether duty drawback is admissible on supplies by DTA units to SEZs?
Ans. Yes. Supplies made by DTA unit to SEZ Unit or developer are eligible for drawback in cases where the SEZ Unit or developer issues a disclaimer to the DTA supplier and drawback is claimed by the DTA supplier.
Drawback shall be processed and paid by the office of Principal Commissioner or Commissioner of Customs/ Customs (Preventive) in whose jurisdiction the DTA Unit falls. Brand rate fixation also to be done by the office of Principal Commissioner/ Commissioner of Customs/ Commissioner of Customs (Preventive).
Read More: FREQUENTLY ASKED QUESTIONS (FAQs) ON FINAL GOODS AND SERVICES TAX (GST) Part- 21.2
Download Pdf: https://gstcouncil.gov.in/sites/default/files/faq/Final-GST-FQ-31218.pdf
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