When a seller in India conducts a transaction with a buyer outside the country, it constitutes an “Export of Goods or Services.” Recognizing exports as vital for wealth generation and trade promotion, the Government of India encourages and incentivizes such activities. Consequently, sellers are relieved from paying GST on exported goods.
Compliance with Goods and Services Tax (GST) requirements is imperative for all businesses. Among these requirements, proper invoicing holds significant importance. An invoice is evidence of a transaction and includes crucial details such as seller and buyer addresses, HSN code, duty rate, quantity sold, and date. With a valid invoice, businesses can claim input tax credit. Therefore, business owners must ensure all necessary details are accurately included in invoices to avoid penalties and maximize benefits under the GST Act.
Let’s delve deeper into the intricacies of exports and export invoices.
Understanding Export Invoices
An export invoice is a document that outlines the goods or services supplied by an exporter and the corresponding amount owed by the importer. While the format is akin to a standard tax invoice, some additional details specific to exports are included.
Importance of export invoices
- An export invoice is a crucial shipping document, aiding Customs Officers in identifying the goods being exported.
- The export invoice serves as documentary evidence for initiating an insurance claim in case of goods lost at sea.
- Importers may require the export invoice to facilitate the clearance of goods at Customs Stations in their own country.
- Governmental authorities utilize export invoices to ascertain the actual value of goods and determine the applicable tax rates.
- If goods are returned for repairs, the export invoice helps the seller verify the items and ensure no duplicates are sent.
- The export invoice can be submitted to the RBI for guidance if an exporter encounters difficulties repatriating payment for sold goods or provided services.
Export invoice regulations for India
Export under Bond/LUT
Exporting goods or services without settling IGST payments is possible under this category known as Export under Bond/LUT. The provisions for exporters opting for IGST-free exports are outlined in section 96A of the CGST regulations, 2017. Filing a Letter of Undertaking (LUT) when engaging in such exports is mandatory. LUTs streamline the process by eliminating the need for refunds and blocking funds through tax payments. Under the GST regime, registered individuals intending to supply goods without IGST cost to overseas destinations, SEZs, or within India must furnish an LUT as per the GST RFD 11 form.
Export with IGST
Unlike the first method, exporters opting for this approach must pay IGST at the time of export and subsequently claim a refund. Refunds can be claimed for unutilized Input Tax Credit (ITC) and IGST spent on exported goods and services.
SEZ with IGST
Certain tax relaxations are provided to incentivize exports. Supplying goods to a Special Economic Zone (SEZ) is treated as a zero-rated supply, exempting exporters from paying export taxes.
Format of Export Invoice
Credentials of the Supplier:
This section includes the supplier’s name, address, and contact details, such as email addresses and phone numbers.
Credentials of the Buyer:
Similar to the supplier’s details, this part includes the buyer’s name, address, contact information, email addresses, and phone numbers.
GSTIN of Supplier:
The Goods and Services Tax Identification Number (GSTIN) is a unique identifier for all taxable persons registered under the GST Act.
Details of Goods or Services:
This field provides information about the goods sold or services supplied, including their rates, quantities (for goods), and amounts.
Invoice Date:
This denotes the date on which the invoice was generated.
Invoice Number:
A unique combination of numbers and alphabets arranged serially to record various transactions.
Conversion Rate:
Since exports involve currencies other than the Indian rupee, this rate indicates the conversion between the Indian rupee and another currency.
Amount:
The total value of the invoice, including insurance, freight, and taxes.
Type of Export:
Indicates whether the export is under a bond or a letter of undertaking to a Special Economic Zone (SEZ) or after the payment of IGST.
Details of Shipping Bill:
A comprehensive document was filed with the customs officer declaring the type and value of goods to be exported.
Signature:
A physical or digital supplier signature ensures the transaction’s authorization.
Notes:
If applicable, any additional remarks or instructions from the supplier to the importer.
Timing of raising an export invoice:
The timing of raising an invoice is governed by the provisions outlined in the Central Goods and Services Tax Act. As per Section 31 of the CGST Act, 2017, the following guidelines apply:
For Goods:
When the supply involves the movement of goods, the invoice should be issued before or at the time of removal of the goods for delivery.
For Services:
When the supply involves the provision of services, the invoice should be issued before the time of supply of services or within a specified time, typically within 60 days after the provision of services.
For Goods Sent for Sale on Approval Basis:
In scenarios where goods are sent for sale on an approval basis, the invoice issuance follows these principles:
If approval is received within six months, the invoice date should be the approval date. Approval was not received within six months, and the buyer has not intimated refusal. The invoice date shall be the expiry date of the six months.
Also Read: What Are The Consequences Of Not Generating An E-Waybill For Exports?
Conclusion
For companies involved in global trade, understanding export invoicing is paramount. An export invoice is a vital document for shipments, aiding in customs clearance and providing transaction evidence for various purposes. Compliance with the Goods and Services Tax Act is essential during export invoice generation, considering the diverse tax implications associated with different recognized export types. Key elements of an export invoice encompass prompt billing, realization of export revenues, and inclusion of pertinent details such as supplier and customer credentials, GSTIN, goods/services information, shipping particulars, and currency considerations. While e-invoicing may be crucial for certain firms, the option to cancel an export invoice remains feasible when necessary.
Frequently Asked Questions(FAQs)
Is E-Invoicing Mandatory for Exports?
No, e-invoicing is not mandatory for all exporters. Government departments, local authorities, and Special Economic Zones (SEZs) are exempt from issuing e-invoices. However, enterprises with a combined turnover surpassing Rs. Fifty crores are mandated to adopt the e-invoicing system, as per the notification released on March 8, 2021.
Can Export Invoices be issued in INR?
No mandatory requirement states that export invoices must be issued only in foreign currency. Exporters have the flexibility to issue invoices in Indian Rupees (INR) as well, providing them with convenience and simplicity in their invoicing processes.
What is meant by DBK for Export?
DBK, or Duty Drawback Scheme, entails refunding excise duty paid on exported goods. This scheme facilitates exporters by providing them with a refund on the excise duty paid, thereby promoting and incentivizing exports.
Is it permissible to issue export invoices in Indian rupees?
Yes, no mandatory stipulation states that export invoices must be denominated in foreign currency.
What does the term ‘letter of undertaking’ signify?
A letter of undertaking is a self-declaration provided by the exporter, confirming adherence to GST Act regulations when exporting goods or services without remitting IGST.
