Impact of GST on Import and Export of India

Before 2014, the import bills of India were huge, and the government wanted to take action to reduce the import bills. This was when they came up with the Make in India policy. The government incentivized local manufacturing, and over the years, India has become a net exporter in many areas. Eventually, there were reforms in the taxation policies, and GST was launched. It was a moment of suspense because everyone was not sure about the impact of GST on their industry. If you would also like to know how GST has impacted the Imports and Exports of India, then you are on the right page.

Today, we will talk about how the GST has impacted the exports and Imports of India. To make it easy for you to understand, we have divided the page into two portions. In the first section, we will talk about the imports and then cover the exports. Let us get into the details now.

Import and Export

Impact of GST on Imports of India

Under the old regime, the goods and services were subjected to many taxes. This was difficult to understand, and it created a certain level of difficulty while importing anything. Under the GST regime, all these taxes were integrated under the IGST. IGST stands for Integrated Goods and Service Tax. Most of the goods that are now imported fall under the purview of GST. However, some things still attract education cess, anti-dumping duty, and safeguard duty.

You might also know that GST is a consumption-based tax. And hence for the import, the GST is levied on the services/ services received or consumed. IGST can also be paid using the input tax credit you might receive from the state or central. So basically, you can use CGST input tax credit for IGST and CGST. Similarly, you can use SGST input tax credit for IGST and SGST.

It should be noted that the importer must submit monthly tax returns. To file the taxes, the importer needs to fill GSTR-2 form. If it was pertaining to the import of services, then table-6 should be filled in, and if the importer is importing goods, then table-5 should be filled in the form.

Talking about the exemptions, pre-GST, there was no service tax on the transportation of goods by inbound shipment or aircraft. However, after the implementation of GST, no such exemption is available to the importer.

Impact of GST on Exports of India

The export of any product or service is considered a zero-rated supply. This means that the government will not be charging GST on the export of goods and services. Before the implementation of GST, there was a provision for duty drawback. Under the old laws, traders had to claim the duty drawback, and it was a challenging process. The GST helped traders eliminate duty drawbacks, which has also encouraged the local manufacturing industry to go global.

To export the items without IGST, the exporter must submit a bond or letter of undertaking. If the letter is not submitted, the exporter needs to pay IGST, and he can claim a refund in the later stages. GSTR-1 form is available to claim the refund of IGST, and the trader needs to fill table 6A in this form. To get these benefits, the exporter is required to provide the GST invoice during the shipping. An invoice is considered valid only if it has the following parameters –

  • Name, address and GSTIN of supplier
  • Name and address of the person receiving
  • Data and invoice number
  • HSN code of goods, along and the description
  • Total quantity and value of goods
  • Signature of supplier

Final Take

Under the new regime, IGST covers both exports and imports. Since exports are GST-free, many manufacturers are encouraged to export their products outside India. Moreover, the government has found an effective way of discouraging imports. Under the GST, imports have a basic customs duty and the IGST. The exporters are certainly enjoying the new GST regime. There had been initial hiccups during the implementation of the new tax regime, but over the years, it has been reaping benefits. The system has changed for the good, and we are sure that the government will bring more positive changes to the tax regime.

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Sumit Kumar Yadav has experience analyzing business and finance of big to small companies. Loan, Insurance, Investment data analysis are his key areas.