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Impact of GST on Export and Import

Before GST could set-in, Excise, Service Tax, VAT and Customs Duty were levied on import and export of goods and services. With GST onboard, all the aforesaid taxes are subsumed into Goods and Service Tax, and the Basic Customs Duty (BCD) will continue to do its round in the import bills. In this post, we have attempted to explain the impact of GST on import and export of goods and services.

Understanding the Impact of GST on Import of Goods

In the GST regime, an importer is responsible for paying customs duty and IGST. IGST is basically a replacement of taxes levied on imports in the earlier taxation system pre-GST such as, Countervailing Duty (CVD) and Special Additional Duty (SAD). IGST will be applicable based on the tax rate applicable to the imported goods in India. An importer can claim complete input tax credit of IGST paid on import of goods/ services, but tax credit on customs duty paid will not be available and the importer will have to bear that cost.

For example, Sheena Leather Company, imports 300 leather bags from a supplier in Europe. Below mentioned is how the tax import duties are calculated in such a case:-

Understanding the Impact of GST on Import of Services:

A supply will be considered as an import of service on conditions such as, the supplier of the service is located outside India, the recipient of the service is located in India, and the place of supply of the service should be in India.

Understanding the Impact of GST on Export of Goods

The relationship between the supplier and recipient will be of distinct persons, therefore the exports will be zero rated under GST. An exporter can also claim refund of the tax paid on inputs used to manufacture/purchase/provide the exported goods or services.

Understanding the Impact of GST on Export of Services

A supply will be considered an export of service under GST based on conditions such as, the supplier of the service is located in India, and the recipient of the service is located outside India. Moreover, the place of supply of the service is outside India and the payment for the service has been received by the supplier in convertible foreign exchange. Lastly, the supplier and recipient are not establishments of the same person.

Overall, with GST India on-board, the costs of import and export are likely to reduce. Compliance will become easier with only one tax law regime to abide by – GST.

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