12 June 2017
As an export company purchase taxable goods like dry chilly and export Bangladesh. I want to know when purchase goods from Andhra pradesh paid tax 5% and after refund claim or fully exempted. I heard that export er submit bond then fully exempt tax. kindly briefly discuss.
24 July 2024
In India, when goods are purchased domestically for the purpose of export, there are specific provisions under the GST (Goods and Services Tax) regime that allow exporters to either claim a refund of taxes paid on inputs or procure goods without paying taxes under a bond or letter of undertaking (LUT). Here’s a brief overview of the options available for exporters:
### Option 1: Refund of Tax Paid on Inputs
1. **GST Refund Process:** - **Input Tax Credit (ITC):** When a registered exporter purchases goods (like dry chilly) domestically, GST is typically paid on these purchases. - **Export Refund:** The exporter can claim a refund of the GST paid on inputs used in the exported goods. - **Conditions:** The refund process involves filing Form GST RFD-01 on the GST portal. The exporter must substantiate the claim with relevant documents showing the goods were exported and taxes were paid.
2. **Time Limit:** Refunds should generally be claimed within two years from the relevant date.
### Option 2: Procurement under Bond/LUT (Letter of Undertaking)
1. **Exemption under Bond/LUT:** - **Procedure:** Instead of paying GST on inputs and then claiming a refund, exporters have the option to procure goods under a bond or LUT without paying GST upfront. - **Conditions:** A bond or LUT needs to be furnished to the GST authorities, ensuring compliance with export requirements and timely export of goods. - **Benefits:** This eliminates the need to block working capital in paying GST upfront and waiting for refunds.
### Specific Scenario for Purchasing Goods like Dry Chilly
- **GST Rate on Purchase:** If you purchase dry chilly from Andhra Pradesh and pay GST at a rate of 5%, you can choose between claiming a refund of this GST after exporting the goods or opting for an exemption under a bond/LUT.
- **Bond/LUT Requirement:** To avail exemption under a bond or LUT, you need to execute the bond or furnish the LUT to the satisfaction of the Commissioner, agreeing to comply with the provisions related to exports.
### Steps to Take:
1. **Decide on Approach:** Evaluate whether claiming a refund or opting for exemption under a bond/LUT is more beneficial based on your cash flow and operational needs.
2. **Compliance:** Ensure all GST compliance requirements are met, including proper documentation of exports and adherence to procedural norms for claiming refunds or availing exemptions.
3. **Consultation:** It’s advisable to consult with a GST expert or tax consultant who can provide tailored advice based on your specific business operations and GST regulations.
By understanding these options and complying with the GST regulations, exporters can effectively manage their tax liabilities and optimize cash flow related to domestic procurements for export purposes.
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