Friends!
In the Letter
of Undertaking, referred to in clause (a) of sub-section (3) of section 16 of
the Integrated Goods and Services Tax Act, 2017, read with rule 96A of the
Central goods and Services Tax Rules, 2017, a taxable person, who has prepared
an export invoice, has been required to give undertaking to -
(a)
export
the goods or services supplied without payment of integrated tax within time
specified in sub-rule (1) of rule 96A ;
(b)
observes
all the provisions of the Goods and Services Tax Act and rules made thereunder,
in respect of export of goods or services;
(c)
pay
the integrated tax, thereon in the event of failure to export the goods or
services, along with an amount equal to eighteen percent interest per annum on
the amount of tax not paid, from the date of invoice till the date of payment.
Suppose
that a supplier in India enters into a contract of supply of goods with a
foreign buyer, for supply at a place located outside India. Condition of
dispatch of goods requires that goods should be dispatched from India by a
particular date. The supplier starts procuring goods and prepares export
invoice in advance. However, the supplier fails in arranging part of the
consignment within the available time and because of this he fails to dispatch
goods by the agreed date. In the circumstances, recipient cancels the order. In
these circumstances, the supplier will cancel the invoice. Now following
questions may arise?
1. Would there be any liability of GST if goods procured are
lying in the stocks held by the exporter?; and
2. How the supplier will discharge his liability of GST in
respect of goods in respect of which exporter order has been canceled?
In my
opinion, the supplier will not be required to make any payment of GST till the
procured goods are lying in his stocks and his future liability will depend on
mode of disposal of goods. He may make -
(a)
intra-State
supply of such goods. In that case he will be liable for payment of State Tax
and the Central Tax to the State Government and the Central Government
respectively; or
(b)
inter-State
supply of goods within India, except a supply to SEZ unit or SEZ developer. In
that case, he will have to pay Integrated Tax to the Central Government.
(c)
Zero-rated
supply to SEZ unit or SEZ developer and
in that case avail benefits of zero-rating supply..
(d)
export
those goods against some other export supply order. In that case, zero-rated
supply benefits will be available to him.
(e)
Goods
may be disposed of or dispossessed in any other manner. In that case, he will
have to reverse the amount of input tax credit already claimed by him.
In
aforesaid circumstances, how a supplier can give undertaking "to pay the
integrated tax, thereon in the event of failure to export the goods or
services, along with an amount equal to eighteen percent interest per annum on
the amount of tax not paid, from the date of invoice till the date of
payment." Second thing is that liability arises as per provisions of Law
and not on failure of any supplier in making a supply. Tax event is supply of
goods or services or both and not on the activity of preparation of invoice.
Agreement or contract for supplying goods cannot be equated with supply of
goods. Taxable event is a completed event.
What I
could gather is that earlier to GST, under Central Excise, a manufacturer-exporter
was permitted to remove goods without payment of excise duty if goods were
meant for export. Similar was the situation in cases of merchant-exporter where
they used to procure excisable goods, without payment of excise duty, from
manufacturers. In export cases, there had been two events. One had been of levy
of excise duty and other had been export sale of manufactured goods. For this purpose, Notification No. 42/2001-Central Excise (N.T). dated June
26, 2001 was issued by the Department of Revenue, Ministry of Finance,
Government of India. Any exporter
(merchant-exporter or manufacturer-exporter) could have exported goods without
paying excise duty after giving the undertaking or bond of making payment of
excise duty if goods were not exported. Where, after removing goods, from place
of manufacture or registered warehouse, without payment of excise duty,
exporters were failed to export such goods within the stipulated time, they
were required to give intimation to the Excise Department and to make payment
of excise duty (It was a case of withdrawal of facility of rebate of excise
duty earlier availed by the exporter) alongwith interest.
Earlier
to GST, export sale was being dealt with
under VAT Law. Exemption on export sale was available on the basis of Shipping
Bill or Bill of Export. Benefit of ITC was also available. Sales, of un-exported
goods, were liable to tax as intra-State
sale or inter-State sale, as the case might have been. There had been no time limit for export of
goods.
Similar
are the facts with Bond required to be furnished before export of goods. Both
requirements are unnecessary and undesired. Condition of pre-deposit of any
amount before making export is also not required. Such provisions, in excise
regime were made in order to facilitate the export but in GST regime, such
requirements have put a burden on export.
Inclusion,
of export supplies in the category of supplies in the course of inter-State
trade or commerce, is not required. By including this provision, tax on export
supplies, of goods and services, has become leviable under sub-section (1) of
section 5 of the IGST Act. Any amount collected as tax becomes part of general
revenue of the State. Benefit of such amount cannot be given to tax payer or any other individual. Tax
can also not be levied for allowing refund to tax payer. As per several
decisions of Hon'ble Supreme Court where such type of provisions are made, they
render the levy invalid. Supplies to SEZ unit and SEZ developer may also be
looked on the same lines.
I hope
that the Government of India and the Goods and Services Tax Council of India
will look into the matter and will help the exporter in conducting hassle free
export business.
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