15 October 2013
Please advice whether sale to Bhutan is exempted from payment of excise duty, sales tax and vat. If so, please advice about the procedure and the steps to be taken for issuance and/or obtainable of necessary forms. CA S.R.Bhattacharyya
24 July 2024
Sales to Bhutan from India can be eligible for exemption from Excise Duty, Sales Tax (VAT), and Central Sales Tax (CST) under certain conditions and procedures. Here’s a detailed explanation:
### Excise Duty Exemption:
1. **Excise Duty Exemption**: Generally, exports of goods from India to Bhutan are eligible for excise duty exemption. The procedure involves obtaining specific documents like ARE-1 (Application for Removal of Excisable Goods for Export) to claim this exemption.
- **Procedure**: - Prepare the goods for export and ensure compliance with packaging and labeling requirements. - File ARE-1 with the Central Excise department, providing details of the goods intended for export to Bhutan. - Upon verification and approval, the goods can be removed from the factory for export without payment of excise duty.
2. **Documentation**: - **ARE-1 Form**: This form is essential for claiming excise duty exemption on goods intended for export. It includes details of the goods, quantity, invoice number, and destination. - **Shipping Bill**: This document is required for customs clearance and provides details of the goods being exported.
### Sales Tax (VAT) and CST Exemption:
1. **Sales Tax (VAT)**: - **Procedure**: Sales to Bhutan are typically considered as exports under Indian tax laws. As exports, they are zero-rated for VAT purposes, meaning no VAT is charged on the sale. - **Documentation**: Ensure proper documentation of the export transaction, including export invoice and shipping documents.
2. **Central Sales Tax (CST)**: - **Procedure**: CST is applicable on inter-state sales within India. Since exports to Bhutan are considered as sales in the course of export, CST does not apply. - **Documentation**: Maintain documentation to prove that the goods have been exported to Bhutan, such as export invoices, shipping bills, and proof of receipt of foreign exchange.
### Liability for Sales Tax and VAT:
- **No Liability**: There is no liability for Sales Tax (VAT) or CST on goods exported to Bhutan from India. These exports are zero-rated, meaning they are considered as supplies outside the scope of domestic taxation.
### Conclusion:
Exporting goods to Bhutan from India involves compliance with specific procedures and documentation to avail exemptions from Excise Duty, Sales Tax (VAT), and CST. Ensuring proper filing of forms like ARE-1 for excise duty exemption and maintaining accurate export documentation is essential. It’s advisable to consult with a tax expert or customs agent familiar with international trade regulations to ensure compliance and smooth export operations.
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