IGST ON ADVANCE RECIEVED FOR EXPORTS

GST DAILY DOSE OF UPDATION

IGST ON ADVANCE RECIEVED FOR EXPORTS:-

The government has released the revised CGST Act, IGST Act and Formats for various returns to be filed in GST regime. However, harmonious study of the material released by the government is leading to confusions for which there are no solutions. What can one really do is to wait for a suitable clarification from the government. This update seeks to analyse the applicability of IGST on advances received for export of goods/services.

Before proceeding to discuss the ambiguity, it is pertinent to refer to section 17 of the Revised IGST Act, 2016 which states that various provisions of CGST Act relating to registration, valuation, time of supply of goods, time of supply of services, input tax credit and utilization thereof, distribution of input tax credit by an Input Service Distributor, job work, accounts and records, payment, tax deduction at source, return, tax collection at source, audit, assessment, adjudication, demands, refunds, interest, recovery of tax, offences and penalties, inspection, search and seizure, prosecution andpower to arrest, appeals, review, advance ruling and compounding shall be applicable for levy of IGST as well. Consequently, we can say that the provisions pertaining to time of supply of goods contained in section 12 shall also be applicable for levy of IGST. Similarly, the provisions pertaining to time of supply of services contained in section 13 shall also be applicable for levy of IGST.

The section 12 pertaining to time of supply of goods states that the time of supply of goods shall be earliest of date of issue of invoice by the supplier or the last date of issuing invoice or the date of receipt of payment. Furthermore, the residuary sub-section (5) states that in cases where it is not possible to determine the time of supply under earlier provisions, the time of supply shall be due date of filing return where periodical return is to be filed or date of payment of CGST/SGST in any other case. Similar provisions are contained in section 13 pertaining to time of supply of services. Thus, one may conclude, that in case of export of goods or services, if any advance is received, the date of receipt of advance shall be treated as time of supply.

At the same time, it is pertinent to refer the meaning of export of goods given in section 2(5) means taking goods out of India to a place outside India. However, meaning of supply is stated as that defined in section 3 of CGST Act, 2016. Now, in case of exports, for the purpose of levy of IGST, when will the supply be said to have been made will be a matter of dispute. Although, export means taking out of India but there is no clear cut provision for export in the definition of supply. Therefore, in case of advance received for exports, whether IGST will be payable at the time of receipt of advance or not will be a question that is difficult to answer.

Simultaneously, if one pursues thedraft return formats, the GSTR-1 serial no. 10 pertains to details of supplies exported including deemed exports but only when invoices have been issued and export has been concluded as the details of shipping bill is to be given. Furthermore, serial no. 10A pertains to amendment to supplies exported including deemed exports in cases of revision of invoice. However, serial no. 11 of the GSTR-1 speaks of tax liability arising on account of time of supply without issuance of invoice in the same period. On perusal of the entries made in serial no. 11, it is found that there is no clarification as regards liability of tax in cases of advances received for exports. Since there is no specific mention of tax liability for advances received against domestic supplies only, it is presumed that even the advances received for exports will have to be captured in GSTR-1. However, this raises doubts as regards liability of payment of IGST in cases where the exports are being done on payment of IGST. Not only this, one may also ponder whether debit is required in the bond if the exports are being made without payment of duty in such cases.

Well, if the exporters are made liable to pay IGST even on advances received in lieu of probable exports, they will definitely be at disadvantageous position and it will lead to more compliance.

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IGST ON ADVANCE RECIEVED FOR EXPORTS

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