In the world of Goods and Services Tax (GST), not all exports are created equal. While traditional exports involve physically sending goods across borders, there's a special category called "Deemed Exports" that offers similar benefits without ever leaving the country. Navigating this concept can be tricky, so let's dive deep into understanding Deemed Exports under GST and everything you need to know about them.

What are Deemed Exports?

Deemed Exports refer to supplies of goods manufactured in India that are treated as exports for tax purposes, even though they remain within the country. This means they enjoy benefits similar to actual exports, despite not crossing any geographical boundaries. The Central Government, under Section 147 of the CGST/SGST Act, 2017, has the power to notify specific categories of goods as Deemed Exports.

Also Read: TCS Refund Under GST: Impact on E-commerce and Other Businesses

Why Deemed Exports?

The government incentivizes deemed exports to promote certain sectors and boost domestic manufacturing. This includes encouraging supplies to specified categories like:

• Units in Special Economic Zones (SEZs): To incentivize manufacturing and export-oriented activities within SEZs.

• Suppliers to SEZ developers: To support the infrastructure development of SEZs.

• Supplies to foreign diplomatic missions: To facilitate smooth functioning of such missions.

• Supplies to United Nations (UN) organizations: To fulfill India's commitments to international bodies.

Taxation of Deemed Exports

Unlike regular exports, which are zero-rated (no GST levy), deemed exports are not automatically exempt from GST. They attract the prescribed GST rate at the point of supply. However, this doesn't mean the supplier bears the burden. Relief comes in the form of refund mechanisms:

• Refund by Supplier: The supplier can claim refund of the GST paid on deemed export supplies by filing an application with the tax authorities.

• Refund by Recipient: Under specific conditions, the recipient of the goods can also claim refund of the input tax credit (ITC) used in the manufacture of the deemed export goods.

Benefits of Deemed Exports

• Tax benefits: Unlike regular exports, Deemed Exports are not zero-rated supplies by default. However, they are subject to concessional GST rates, significantly reducing the tax burden on the supplier and recipient.

• Refund of input tax credit: The recipient of Deemed Export supplies can claim refund of input tax credit (ITC) used in making the goods, even if they were originally not eligible for ITC under the regular GST regime.

• Duty drawback scheme: Certain Deemed Exports may be eligible for the Duty Drawback Scheme, where the government refunds the customs duty paid on imported inputs used in the manufacturing process.

• Boost to exports: By offering tax benefits and incentives, Deemed Exports encourage domestic manufacturers to cater to specific sectors with high export potential, ultimately boosting the overall export performance of India.

Categories of Deemed Exports

The list of Deemed Exports is notified by the Central Government and can be updated periodically. Some common categories include:

• Supplies to units located in Special Economic Zones (SEZs)

• Supplies to Export Oriented Units (EOUs)

• Supplies to units in Software Technology Parks (STPs)

• Supplies of goods used in aircraft, ships, and satellites

• Supplies of notified high-tech goods

Deemed exports offer a unique opportunity for Indian businesses to leverage domestic supplies for export-like benefits. Understanding the nuances of notification categories, tax treatment, and refund procedures is key to unlocking the full potential of this scheme. With careful planning and execution, deemed exports can be a powerful tool for driving growth and competitiveness in the Indian market.

1. What is 0.1% GST on Deemed Exports?

Deemed exports are goods treated as exports under GST, even if they don’t physically leave India. The GST rate for deemed exports is generally 0.1% for specified supplies, like those to SEZs or government projects.

2. What Are Deemed Exports?

Deemed exports are goods supplied within India that are treated as exports for tax purposes. These include supplies to SEZ units, government projects, or exports under specific schemes.

3. Is GST Applicable on Deemed Exports?

Yes, GST is applicable, usually at a 0.1% rate, making the transaction tax-neutral for the supplier. They can claim a refund on input tax credits (ITC).

4. What is the Time Limit for Deemed Exports?

The time limit to claim refunds for deemed exports is typically two years from the relevant date (date of supply or payment).

5. How to Claim a GST Refund for a Deemed Export?

File GST returns (GSTR-1 and GSTR-3B), submit a GST RFD-01 refund application, and provide the required documents. If everything is in order, the refund will be processed.

6. What is the Difference Between Merchant Export and Deemed Export?

Merchant Export: Goods are sold to a foreign buyer and physically leave India.
Deemed Export: Goods are supplied within India but are treated as exports for tax purposes, often involving SEZs or government projects.