Deemed Exports
Under GST, a "deemed export" refers to a transaction where goods supplied do not physically leave India, but the supply is still treated as an export for tax purposes. These supplies are notified by the Central Government under Section 147 of the CGST/SGST Act, 2017.
Central Tax Notification No. 48/2017 outlines the categories of supply that qualify as deemed exports under GST. These include the supply of goods against an Advance Authorisation (AA), Export Promotion Capital Goods (EPCG) authorisation, and supplies to Export Oriented Units (EOUs), Electronic Hardware Technology Park (EHTP) Units, Software Technology Park (STP) Units, or Bio-Technology Park (BTP) Units. Additionally, the supply of gold by a bank or Public Sector Undertaking against an Advance Authorisation is considered a deemed export.
• Standard rate: For most deemed export supplies, the supplier charges and collects GST at the normal rate applicable to those goods, based on their Harmonized System of Nomenclature (HSN) code.
• Concessional rate for merchant exporters: In some specific cases, such as a supplier providing goods to a merchant exporter for final export, a concessional GST rate of 0.1% may be charged. This is a separate provision from deemed exports, though the terms are sometimes conflated.
Deemed Exports under GST are supplies of goods, manufactured in India, that do not physically leave the country but are still treated as exports under specific government notifications. Unlike regular exports, they are not zero-rated at the time of supply, meaning GST is paid upfront and later claimed as a refund. The objective is to provide a level playing field for domestic manufacturers.
Key characteristics and conditions
• Only for goods, not services: The deemed export status applies only to the supply of goods, not services.
• Goods must stay in India: For a supply to be considered a deemed export, the goods must not physically leave the Indian territory.
• Notification by the government: The transaction must be explicitly notified as a deemed export by the Central Government under Section 147 of the CGST Act.
• Payment in convertible foreign exchange or Indian Rupees: Payment for these supplies can be received in Indian Rupees or any freely convertible foreign exchange.
• Taxable at the standard rate: The supplies are subject to the applicable GST rate at the time of the transaction and cannot be made under a Bond or Letter of Undertaking (LUT).
• Refund is admissible: The GST paid on the supply is eligible for a refund, which can be claimed by either the supplier or the recipient, subject to certain conditions.
Notified categories of deemed exports
As per Notification No. 48/2017–Central Tax, the following supplies are considered deemed exports:
• Supply to Advance Authorization (AA) holders: Goods supplied by a registered person to a recipient holding an AA.
• Supply to Export Promotion Capital Goods (EPCG) holders: Capital goods supplied to a recipient holding an EPCG authorization.
• Supply to Export Oriented Units (EOUs), etc.: Supply of goods to an EOU, Electronic Hardware Technology Park (EHTP) Unit, Software Technology Park (STP) Unit, or Bio-Technology Park (BTP) Unit.
• Supply of gold: Supply of gold by a bank or Public Sector Undertaking against an AA.
Key differences from regular exports
Unlike regular exports, deemed exports are not zero-rated supplies and cannot be made under a Bond or Letter of Undertaking (LUT).
Feature Deemed Exports Regular Exports
Physical movement Goods do not leave India. Goods are taken out of India.
Tax status Not zero-rated; GST is paid on the supply. Zero-rated; no GST is charged.
LUT/Bond Cannot be supplied under a Bond or LUT. Can be supplied under a Bond or LUT without paying tax.
Refund A refund of the GST paid can be claimed by either the supplier or the recipient. A refund of the Input Tax Credit (ITC) can be claimed.
Refund procedure
The tax paid on deemed export supplies can be claimed as a refund by either the supplier or the recipient. The recipient of the deemed export supply is required to file the refund application on the GST portal using Form RFD-01.
Special provision for EOUs
In some cases, such as supplies to Export Oriented Units (EOUs), a lower concessional GST rate of 0.1% may be applicable. The EOU must provide a prior intimation and an endorsement on the tax invoice to complete the process.
Deemed Exports the Government may, on the recommendations of the Council, notify certain supplies of goods as deemed exports, where goods supplied do not leave India, and payment for such supplies is received either in Indian rupees or inconvertible foreign exchange, if such goods are manufactured in India.
Related provisions of the Statute Section or Rule Description
Section 2(39) Definition of ‘Deemed exports’
Section 2(52) Definition of ‘Goods’
Section 2(56) Definition of ‘India’
Section 2(72) Definition of ‘Manufacture’
Introduction This section deals with notification of certain supplies of goods as deemed exports upon recommendation by the GST Council.
Analysis The notified goods would be deemed to be exported, if such goods are manufactured in India although they do not leave India and payments are received in Indian rupees or convertible foreign exchange
This section authorizes the Government to notify transactions which will be declared to be deemed exports. It is clear that ‘deemed exports’ are NOT exports but placed in a class of its own to be eligible to benefits of NIL GST on procurement subject to conditions to be specified.
Related provisions Section 2(39) of the CGST Act, 2017 defines the term ‘deemed exports. This would be relevant for extending refund benefit under section 54 of the CGST Act.
Rule 89 of the CGST Rules is relevant for claiming refund in respect of deemed exports. This rule prescribes forms & procedures for claiming refund in case of supplies made to a special economic zone.
Second proviso to rule 89(1) states that in respect of in respect of supplies regarded as deemed exports, the application may be filed by, -
(a) the recipient of deemed export supplies; or
(b) the supplier of deemed export supplies in cases where the recipient does not avail of input tax credit on such supplies and furnishes an undertaking to the effect that the supplier may claim the refund.
Documents required for Refund in case of Deemed Export
1. Acknowledgment by the jurisdictional 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.
Reporting in Annual Return Deemed export transactions is to be reported in Table-4E of GSTR-9.
Q1. Can an exporter get exemption from the payment of GST on the export product?
An exporter could get exemption from the payment of GST on the final product and claim refund of GST paid on inputs.
Q2. What are the GST refund options available to the exporters?
An exporter would be eligible to claim refund under one of the following two options, namely –
(a) He may export under bond, without payment of IGST and claim refund of unutilized input tax credit or
(b) He may export on payment of IGST and claim refund of IGST paid on goods and services exported. The SEZ developer or SEZ unit receiving zero rated supply can also claim refund of IGST paid by the firm making supply to SEZ.
Q3. How are exports treated under GST?
All exports under GST law are deemed as inter-State supplies. Exports of goods and services are treated as zero rated supplies. The exporter has the option either to export under bond/Letter of Undertaking without payment of tax and claim refund of ITC or pay IGST by utilizing ITC or in cash at the time of export and claim refund of IGST paid.
