Under the Goods and Services Tax (GST) regime, certain domestic transactions are treated as exports even though the goods do not leave India. These transactions are known as deemed exports.
Deemed export under GST typically applies to notified supplies such as goods provided to export-oriented units (EOUs), electronic hardware technology park (EHTP) units, software technology park (STP) units and other notified categories. Businesses eligible for refunds must submit a claim through their GST portal, attaching relevant invoices, shipping bills and declarations.
What is the eligibility criteria?
To be treated as deemed exports under GST, the following conditions must be satisfied:
- Deemed export benefit applies strictly to goods. Services do not qualify.
- The supplier making the deemed export supply must be registered under GST.
- The transaction should be specifically covered under the relevant GST notification for deemed exports.
- The supplies are treated as deemed exports if they remain in India.
What supplies are classified as deemed exports under GST?
Under GST, only a few specific types of transactions qualify as deemed exports. If a business makes any of the following supplies, they may be treated as deemed exports and become eligible for refund benefits:
- If goods are supplied to a buyer who holds a valid Advance Authorisation issued by the Director General of Foreign Trade (DGFT) for export purposes.
- If capital goods are supplied to a buyer operating under the export promotion capital goods (EPCG) scheme for export-linked production.
- This includes supplies made to EOUs, EHTP units, STP units and Biotechnology Park (BTP) units.
- When gold is supplied by a notified bank or public sector undertaking under the prescribed customs notification conditions.
How are these supplies taxed under GST?
GST is payable on deemed export supplies at the applicable rate, and the supplier must issue a tax invoice charging tax in the normal course of business. Such supplies can be made on payment of tax and cannot be supplied under a bond or LUT.
The GST paid can subsequently be claimed as a refund, either by the supplier or by the recipient, subject to fulfilment of prescribed conditions and submission of required documentation.
Who can claim a refund on deemed exports and what is the process?
Under the third proviso to Rule 89(1) of the CGST Rules, 2017, a refund application for deemed export supplies can be filed by either the recipient or the supplier. Subject to the condition that no input tax credit (ITC) is claimed and the same is furnished. For instance, the supplier can file the refund application if the recipient does not avail the ITC on the deemed export supply and provides an undertaking confirming that the supplier is authorised to claim the refund.
Impact on ITC
The ITC treatment in deemed export cases depends on who claims the benefit and whether the supplier has opted for the notification benefit.
- If the supplier has availed the benefit of Notification No. 48/2017-Central Tax, the recipient can claim a refund of ITC on other inputs or input services used for making zero-rated supplies.
- In such cases, the recipient cannot export goods on payment of Integrated GST. Exports must be made without payment of tax, subject to applicable provisions.
In simple terms, once the supplier opts for the deemed export benefit under the notification, the recipient’s ITC and export options become restricted and must be planned accordingly.
What is the process of claiming a refund?
To claim a refund of tax paid on deemed export supplies, the eligible applicant must follow the prescribed procedure under GST.
- File form GST RFD-01: The supplier or recipient, as applicable, must file an online refund application in Form GST RFD-01 on the GST portal along with supporting documents.
- Submit required documentary evidence: Where the supplier is claiming the refund, the following documents are required:
- A statement containing invoice-wise details of deemed export supplies.
- Acknowledgement from the jurisdictional tax officer of the Advance Authorisation or EPCG holder confirming receipt of goods or in case of EOU, EHTP, STP or BTP units, a copy of the tax invoice signed by the recipient confirming receipt of goods.
- An undertaking from the recipient stating that no ITC has been claimed on such supplies.
- An undertaking from the recipient confirming that no refund will be claimed for the same supplies.
- Declaration in Statement 5B: The required declaration must be filled in Statement 5B and form part of Annexure I to the RFD-01 application.
Note: The refund application must be filed within two years from the date on which the relevant return relating to the deemed export supply is furnished electronically.
What are the invoice and compliance requirements for deemed exports?
Deemed export supplies are subject to specific invoicing and procedural requirements. Businesses must ensure strict compliance to avoid having a refund denied.
1. Special conditions for supplies to EOU, EHTP, STP and BTP units
Where goods are supplied to an EOU, EHTP, STP or BTP unit, the following additional steps apply:
- Prior intimation in Form A: The recipient unit must file Form A in advance and share it with:
- The supplier, and
- The jurisdictional GST officers of both the supplier and the recipient.
Form A must have a running serial number and include details of goods proposed to be procured. It must be pre-approved by the development commissioner.
- Supply under tax invoice: The supplier must issue a proper tax invoice while supplying the goods.
- Endorsement of invoice: The tax invoice must be endorsed by the recipient unit confirming receipt of goods. The endorsed copy must be shared with:
- The supplier, and
- The jurisdictional GST officers of both parties.
- Maintenance of records in Form B: The recipient unit must maintain a record of goods received in Form B.
2. GST return reporting requirements
- In Form GSTR-3B, deemed exports must be reported under outward taxable supplies.
- Any amendment to B2B deemed export invoices must be reported in Table 9A (B2B amendments).
- Amendments relating to debit notes or credit notes must be disclosed in Table 9C.
Accurate invoicing, timely endorsements and correct return reporting are critical to ensure smooth processing of refunds and to avoid compliance disputes.
Conclusion
Deemed export provisions are technical, document-driven and closely monitored under GST. A small lapse in endorsement, reporting or documentation can delay refunds and block working capital. The key lies in planning upfront. Decide who will claim the refund. Align ITC treatment accordingly. Ensure forms, endorsements and return disclosures are completed accurately and on time.
Using a powerful software like TallyPrime can simplify this process. From generating compliant tax invoices and tracking deemed export transactions to accurate GSTR-3B reporting and maintaining audit-ready records, the right accounting software reduces manual errors and improves refund efficiency.
