Tax Invoice for Exports: Compliance Requirements and Documentation

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Published Date:  23-01-2024   Author:   yash-elwadhi
captainbiz tax invoice for exports compliance requirements and documentation

Exports serve as a cornerstone in driving economic prosperity for India, offering dual benefits by bolstering revenue for domestic manufacturers and injecting essential foreign exchange into the economy. The dynamism of international trade is a crucial contributor to the overall growth and stability of the nation’s economic landscape.  This strategic alignment between taxation policies and export promotion underscores a commitment to harnessing the full potential of international trade for sustained and inclusive economic development.

What constitutes an export invoice?

Documentation for export service billing outlines the goods supplied by an exporter and the corresponding amount owed by the importer. While the format resembles a standard tax invoice, an export invoice incorporates additional details such as exporter and importer information, export type, shipping bill, and more.

Significance of Issuing an Export Invoice 

Insurance Claim Documentation:

  • The export invoice functions as crucial proof in the event of an insurance claim, providing necessary documentation.

Transaction Confirmation:

  • It serves as tangible evidence that a specific exchange has taken place between the buyer and seller, establishing the legitimacy of the trade.

Integral Shipping Documentation:

  • The Compliance requirements for exported services is significant among shipping-related documents, contributing to the comprehensive paperwork for transporting goods.

Government Reference for Taxation:

  • Government authorities may rely on the export invoice to ascertain the actual value of goods, aiding in calculating applicable taxes.

Customs Clearance Necessity:

  • Importers can utilise the export invoice to facilitate customs clearance in the destination country, streamlining the process for smooth importation.”

Type of Export Invoice

  • Export under Bond/Letter of Undertaking (LUT)

Exporting goods or services without paying IGST is a viable option.  Export service invoice obligations fall under section 96A of the CGST Regulations, 2017 outlines the provisions for exporters opting for IGST-free exports. A mandatory requirement in this scenario is filing a Letter of Undertaking (LUT) when exporting goods or services without IGST payments.

The LUT is a convenient alternative for exporters, saving them from the complexities of refund procedures and preventing the tying up of funds through tax payments. Any registered person under the GST regime intending to supply goods without IGST payment, whether to overseas locations, SEZs, or within India, must furnish the LUT using the GST RFD 11 form.

  • Export with IGST

In contrast to the first method, exporters choosing to pay IGST during export can later claim a refund. This refund applies to the unutilised portion of the Input Tax Credit (ITC) and the IGST paid on the exported goods and services.

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  • SEZ with IGST

Tax relaxations are provided to stimulate economic growth through exports. Supplying goods to a Special Economic Zone (SEZ) is considered a zero-rated supply, eliminating the need to pay taxes on the exported goods.

Services that Qualify as Exports under the GST

Legal considerations for export service invoices arise in accordance with Section 2(6) of the 2017 IGST Act, which deems services as exports when-

  • Service providers are located in India.
  • Service recipients are situated outside India.
  • The place of supply (POS) of services is outside India. In cross-border transactions, unless explicitly stated otherwise, the default POS for services is the location of the service recipient.
  • Providers of these services have received payment in convertible foreign exchange.
  • Service providers and recipients are not merely establishments of a distinct person.

Timeframe for Issuing an Export Invoice under Indian Law

Export service invoice obligations, in adherence to Section 31 of the CGST Act, 2017, are contingent on the nature of the supply, discerning between the supply of goods and services

  • Supply Involving Movement of Goods:

The invoice must be issued before or at the time of the removal of goods for delivery.

  • Supply Involving Services:

The invoice should be issued before or after providing the service, but within a specified period.

Also Read: GST And Deemed Exports: A Quick Guide For Smooth Business Operation

Compliance requirements for exported services

The compliance guide for export service invoices provides essential directives and regulations for ensuring adherence to legal requirements and seamless processing in international service transactions. These compliances includes:

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Exporter’s Information:

Name, address, contact details, and GSTIN of the exporter.

Recipient’s Information:

Name, address (billing and shipping), and any other relevant details of the recipient.

Invoice Details:

Date of issue, due date, and a unique invoice number for reference.

Currency Information:

The conversion rate from INR to the applicable currency facilitates international trade transactions.

Invoice Value:

The total value of the invoice, specifying the amount due for the exported goods or services.

Export Specifications:

Type of export, providing clarity on the nature of the exported items or services.

Shipping Document Details:

Information about the shipping bill is essential for logistics and transportation.

Authorisation Signature:

Signature, physical or digital, of the authorised person validating the invoice.

Due Date Information:

A clear indication of the due date for payment, ensuring transparency in financial transactions.

Additional Notes:

Optional notes to convey messages or additional information, especially beneficial when addressing the importer.

Packing and Shipping Details in an Export Invoice:

In the context of international shipments, including packing and shipping information is crucial to ensure the accuracy and security of cargo. To facilitate this, a packing list is often included to safeguard against any discrepancies in the transported goods. This document not only supports the shipment process but can also accompany a certificate of inspection. Within the export invoice, specific details related to packing and shipping are outlined, encompassing:

Container Information:

The container number is a vital identifier for tracking and logistics.

Country Details:

Information regarding the country of origin and destination clarifies the shipment’s route.

Port Information:

Port of origin and destination, specifying the starting and ending points of the shipment.

Shipping Mark:

A shipping mark, aiding in the identification and sorting of packages during transportation.

Container Seal Number:

The seal number of the container ensures the security and integrity of the shipped goods.

Goods Description:

Comprehensive details of the goods, including Harmonized System Nomenclature (HSN) codes, rates, quantity, and units, facilitating proper categorisation and handling.

Conclusion

The export invoice is a pivotal document in world trade, playing a crucial role in assisting government authorities in ascertaining the true value of exported goods and calculating the corresponding taxes. This document serves as a transparent record of the transaction, providing essential details such as the value of the goods, which aids in precise taxation assessments.

For exporters, strict compliance with documentation requirements is imperative. Submitting the necessary documents, including the export invoice, is a mandatory step in the customs clearance process within the destination country. By adhering to these requirements, exporters contribute to a seamless and lawful cross-border trade environment. 

Frequently Asked Questions(FAQs)

  1. Who is responsible for creating an export invoice?

The exporter is responsible for creating an export invoice. This document serves as proof of the sale transaction and is issued to the importer. Shippers must generate export invoices to ensure a smooth and efficient process, avoiding potential problems or delays when exporting goods internationally.

  1. Is it possible to conduct exports without a commercial invoice?

Exporting with a commercial invoice is feasible. Global customs authorities rely on commercial invoices for inspection, customs duties estimation, and international trade statistics. A commercial invoice would be necessary for the export process.

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Yash Elwadhi

Yash Elwadhi is a highly skilled and experienced finance content writer with a proven track record of providing insightful and engaging content to a wide range of clients in the financial industry. He has collaborated with prominent financial institutions, fintech companies, and wealth management firms, and is known for his ability to convey complex financial concepts in a clear and engaging manner. Yash is committed to delivering high-quality content that adds value to his clients' target audience and helps them achieve their financial goals.

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