What is Deemed Exports
The definition of deemed exports as provided by FTP differs from the definition provided under the GST law and should not be confused with, while applying GST provisions. A particular supply of goods can be deemed exports under FTP but may not qualify as deemed exports under GST.
What supplies are notified as Deemed Exports?
Categories of Supply under Deemed Exports:
Supply of goods under following categories (a) to (d) by a manufacturer and under categories (e) to (h) by main / sub-contractors shall be regarded as “Deemed Exports”
A. Supply by Manufacturer of Goods
(a) against Advance Authorisation / Advance Authorisation for annual requirement / DFIA;
(b) to EOU / STP / EHTP / BTP;
(c) against EPCG Authorisation (Capital Goods)
B. Supply by Main / Sub-Contractor(s)
(e)
(i) of goods to projects financed by multilateral or bilateral Agencies / Funds as notified by Department of Economic Affairs (DEA), MoF, where legal agreements provide for tender evaluation without including customs duty.
(ii) Supply and installation of goods and equipment (single responsibility of turnkey contracts) to projects financed by multilateral or bilateral Agencies/Funds as notified by Department of Economic Affairs (DEA), MoF, for which bids have been invited and evaluated on the basis of Delivered Duty Paid (DDP) prices for goods manufactured abroad.
Thus for Example
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Supply of steering wheel by a manufacturer in Chennai to an automobile manufacturer who has availed EPCG Authorisation, would be considered Deemed Exports.
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Similarly, supply of turmeric powder by a farmer based in Andhra Pradesh to a pharmaceutical unit based in a Biotechnology Park, would also be considered Deemed Exports.
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In fact, supply of goods manufactured/produced in India and supplied against AA/ AAA/ DFIA or to an EOU/STP/EHTP/BTP would all be considered Deemed Exports.
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Supply of goods to even any project funded by UN agencies are also considered as Deemed Exports
How can I claim a refund on the tax paid on Deemed Exports?
For obtaining a refund of tax paid on deemed exports, the supplier or recipient is required to file an application in Form GST RFD – 01 with supporting document. In case the supplier is claiming a refund of tax paid on deemed exports, the following details/ documents are required
- A statement containing Invoice-wise details of deemed export supplies made by the supplier.
- Acknowledgement by jurisdiction tax officer of AA or EPCG holder that the said deemed export supplies have been received OR in case of EOU/ EHTP/ STP/ BTP/ Copy of tax invoice signed by the recipient that said deemed export supplies have been received.
- Undertaking by the recipient that no ITC has been claimed.
- Undertaking by the recipient that it shall not claim a refund in respect of such supplies.
In cases where the recipient does not avail of input tax credit on such supplies furnishes an undertaking to the effect that the supplier may claim the refund
How can I claim a refund on the tax paid on Deemed Exports?
For obtaining a refund of tax paid on deemed exports, the supplier or recipient is required to file an application in Form GST RFD – 01 with supporting document. In case the supplier is claiming a refund of tax paid on deemed exports, the following details/ documents are required
- A statement containing Invoice-wise details of deemed export supplies made by the supplier.
- Acknowledgement by jurisdiction tax officer of AA or EPCG holder that the said deemed export supplies have been received OR in case of EOU/ EHTP/ STP/ BTP/ Copy of tax invoice signed by the recipient that said deemed export supplies have been received.
- Undertaking by the recipient that no ITC has been claimed.
- Undertaking by the recipient that it shall not claim a refund in respect of such supplies.
In cases where the recipient does not avail of input tax credit on such supplies furnishes an undertaking to the effect that the supplier may claim the refund
Deemed Exports Benefits
Deemed exports shall be eligible for any / all of following benefits in respect of manufacture and supply of goods,
qualifying as deemed exports, subject to terms and conditions as given in HBP and ANF- 7A
OR
Deemed Exports Benefits
Deemed exports shall be eligible for any / all of following benefits in respect of manufacture and supply of goods,
qualifying as deemed exports, subject to terms and conditions as given in HBP and ANF- 7A
OR
To understand it better, let us instance a Mr X, a registered dealer in Tamil Nadu who supplies his goods to an EOU Dealer, who further sells the received goods to his customer in USA. In the given instance, the supply of goods from Mr X to the EOU is considered as Deemed export, while the supply of goods from EOU to his customer in USA is an Export. Mr. A is allowed to Claim either an Advance Authorisation/ Annual AA/ DFIA against such supplies to the EOU or he is allowed to claim Deemed Duty DBK on such supplies to the EOU.
Deemed Exports Evidences
Required
| S.No | Evidence |
|---|---|
|
1 |
Acknowledgement by the jurisdictional Tax officer of the Advance Authorisation holder or Export
Promotion Capital Goods Authorisation holder, as the case may be, that the said deemed export
supplies have been received by the said Advance Authorisation or Export Promotion Capital Goods
Authorisation holder, or a copy of the tax invoice under which such supplies have been made by the
supplier, duly signed by the recipient Export Oriented Unit that said deemed export supplies have
been received by it. |
|
2 |
An undertaking by the recipient of deemed export supplies that no input tax credit on such supplies
has been availed of by him. |
|
3 |
An undertaking by the recipient of deemed export supplies that he shall not claim the refund in
respect of such supplies and the supplier may claim the refund |
Additional conditions to be
fulfilled by EOU/STP/HTP
The EOU/ EHTP/ STP/ BTP units are required to give prior intimation to the supplier and the jurisdictional GST officer of supplier and recipient by filing Form A.
Form A must bear a running serial number and contain details of goods to be procured, which is pre-approved by the Development Commissioner.
The supplier is required to supply the goods under the cover of a tax invoice.
The recipient, wherein the endorsed copy of the same must be sent to the supplier and jurisdictional GST officer of supplier and recipient must endorse the tax invoice.
Record of such goods received by EOU/ EHTP/ STP/ BTP unit must be maintained in Form B.
Why do I have to pay tax on the
supply of Deemed Exports?
Although deemed exports are to be treated similar to exports, these supplies are not zero-rated supplies by default.
Thus, GST shall be applicable on all the deemed export at the point of supply.
Furthermore, these Supplies cannot be made under Bond / LUT without payment of tax.
However, the supplier or the recipient of the goods can claim a refund on the tax paid on such supply.
But once the refund has been claimed, the recipient will not be able to claim the ITC on the same.
Conclusion
So many circulars and notifications have been issued on Deemed Exports over the last few years that keeping a proper track of it has become almost impossible. Similarly, Deemed Exports has not got benefits as real physical exports too.
Earlier Deemed Exports was eligible for DEPB Benefits but now with replacement of DEPB with MEIS Scheme, those benefits have been withdrawn under the MEIS Scheme.
Currently, the Deemed Exports Scheme seems to benefit only a select few and does not really seem to live it’s purpose.
Our Suggestions under
Deemed Exports Schemes
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Why not qualify supplies under Deemed Exports for MEIS Benefits, with proper checks to avoid any misutilisation of the Scheme?
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Why only qualify supplies to project under International Competitive Bidding (ICB) only for Deemed Export Benefits and why not many other prestigious infrastructure projects which are not allotted through ICB?
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Why only qualify supplies to United Nation Projects and Nuclear Power Projects for Deemed Export Benefits and exclude supplies to prestigious Port Infrastructure Projects for the benefits under this Scheme?