Impact of GST on the Indian Exports and Import Sector

Atul Mittal

October 3, 2019

GST Impact on Indian Export Sector

Are you looking for the impact of GST on exports and import sector in India? Is it good for Indian Economy? Find all the answers here for import and export of goods.

Ever since the implementation of GST in India, the export sector has been reportedly facing a decrease in business. The most immediate impacts include the unavailability of labour, issues with banking capital allotment, and delay in refunds which is also impacting the production capability of the related businesses.

Many Indian manufacturers are even afraid that this might result in foreign clients shifting to other countries in search of quicker supply. Many handmade product corporations are still not clear about the GST related paperwork, new prices, labour rates and other related things which have kind of put a temporary hold on exports from the country.

According to a news report, the production of handmade items has decreased by about 40% after GST. The largely impacted sectors are gems & gold jewellery, pharmaceuticals, readymade garments and other corporates that are involved in the export of handmade goods.

It also seems that many dealers are unhappy with the new GST rates as the GST Council has so far received over 133 requests for change in GST rates of different products. This may also be a major reason behind the decrease in the exports.

Impact of GST on Exports

Exports are treated as zero-rated supplies under GST, No tax on goods or services. The imports of goods/services under GST are treated as inter-state supplies and are liable for integrated tax (IGST), which will be paid by the importer on reverse charge basis. The export of goods/services is, however, kept free from GST, but the tax will still be levied on the inputs or raw material for the export of such GST exempted goods.

The IGST or any other tax paid by exporters on the inputs can be claimed back under the input tax credit scheme. Now, the issues with current exports are as follows.

  • The GST rate on the inputs and GST on imports of input/raw items
  • Procedure of application for claiming input credit
  • Delay in the refund of input tax credit which affects the export timing
  • Inability of small manufacturers to understand and file GST paperwork

With the implementation of GST, it was expected that the export industry in the country will experience a boost in sales due to a decrease in product cost because of tax relaxation on exports and the availability of input credits on related services. But so far, we have only noticed chaos and confusion among export businesses and a drop in export sales. If this continues, the government may soon be forced to take effective measures to deal with the situation.

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FAQs (Questions) about GST on Exports & Imports

How will GST be levied on Imports?

A. The imports of goods/services will be treated as inter-state supplies under GST and are liable for integrated tax (IGST), which will be paid by the importer on reverse charge basis. However, for information and data related imports, the tax will be paid by the supplier.

How is GST levied on exports?

A. Exports are treated as zero-rated supplies under GST. So, no tax will be levied on the actual export of any goods or services, but the inputs (of raw material) will still be liable for tax, which will be refunded back in the form of input tax credit.

What are all import duties replaced by GST?

A. Under GST, the previous CVD (Countervailing Duty) and SAD (Special Addition Duty) are replaced with the IGST (Integrated Goods and Services Tax).

How is import duty determined under GST in India?

A. The import duty payable to customs is determined based on IGST and Basic Customs Duty at the time of imports of goods.

How is IGST calculated for imports?

A. IGST is calculated on the transaction value of the particular commodities and any other taxes charged under other statutes.

How is IGST on imports different from the IGST on domestic goods?

A. IGST is applicable to every import transaction and is paid before taking delivery of such imported goods.
IGST against domestic inter-state supplies is paid through the monthly GST returns.

Is IGST, CGST or SGST paid on imports of goods is refundable on eligibility?

A. Yes, any of the GST tax on imports can be claimed back if eligible.

Is Basic Customs Duty (BCD) applicable on imports? If yes, how is it paid?

A. Yes, the Basic Customs Duty in addition to the integrated tax is applicable on imports of goods, both of which are levied as per the Customs Tariff Act. The BCD is added to the transaction value of the imported items.

Are antidumping duty and safeguard duty also applicable to imports under GST?

A. Yes, both these duties will still be calculated and incorporated in the total import duty payable on any imports.

Who is the beneficiary of the tax amount levied on imports?

A. The IGST levied on the imports of goods is kept by the Central government. If the goods are also eligible for cess tax, the same will collected and sent to the state government where the supply is consumed.

For more information click here: GST Helpline India

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