How Does GST Impact Exports And Imports?

Impact of GST on Exports and Imports in India

Impact on Exports:

1. Zero Rating of Exported Goods:

Exported goods are treated as zero-rated supplies under GST, meaning that no GST is levied on them. This ensures that exports are not burdened with domestic taxes, making Indian goods competitive in the global market.

2. Input Tax Credit (ITC) Refunds:

Exporters are eligible to claim refunds of input taxes paid on inputs and input services used in the manufacturing or processing of goods meant for export. This helps in reducing the cost of exports and maintaining competitiveness.

3. Export Under Bond/Letter of Undertaking (LUT):

Exporters have the option to export goods without payment of integrated goods and services tax (IGST) by furnishing a bond or a Letter of Undertaking (LUT). This facilitates seamless export transactions and eliminates the need for upfront payment of taxes.

4. Export Promotion Schemes:

GST provides for various export promotion schemes such as Advance Authorization, Export Promotion Capital Goods (EPCG) scheme, and Export Oriented Unit (EOU) scheme, which aim to incentivize exports and boost foreign exchange earnings.

5. Compliance Requirements:

Exporters need to comply with GST provisions related to export documentation, invoicing, and filing of returns. This ensures transparency and accountability in export transactions.

Impact on Imports:

1. Levy of Integrated Goods and Services Tax (IGST):

Imported goods are subject to integrated goods and services tax (IGST) at the point of importation. IGST is levied on the value of imported goods along with customs duties.

2. Customs Duties and IGST:

Customs duties such as basic customs duty (BCD), customs cess, and IGST are levied on imported goods. These duties are payable at the time of customs clearance.

3. Input Tax Credit (ITC) on Imported Goods:

Importers can claim input tax credit (ITC) on the IGST paid on imported goods, subject to compliance with GST regulations. This helps in reducing the cost of imported inputs used for manufacturing or trading activities.

4. Reverse Charge Mechanism (RCM):

Under the reverse charge mechanism (RCM), importers are liable to pay GST on certain imported services received from non-resident suppliers. The importer is required to self-assess and pay GST on such services.

5. Compliance Requirements:

Importers need to comply with GST provisions related to import documentation, payment of IGST, filing of returns, and reconciliation of input tax credit. This ensures proper reporting and payment of taxes on imported goods and services.