Deemed Exports Refund: Recipient vs Supplier Route and Undertakings That Decide Eligibility
Refund for deemed exports, procedure for recipients and suppliers and the documents that need to be submitted explained
The goods which are deemed exports do not leave India and the payment for the supplies of such goods is received either in Indian rupees or convertible foreign exchange. These deemed exports are manufactured in India.
The person who is responsible for the transaction has to prove that the transaction is a deemed export and has to take all precaution in assembling this documentary proof.
The documentation must demonstrate that their transaction qualifies as deemed export and they are eligible for refund under Section 54 of the CGST Act, 2017 read with Rule 89 of the CGST Rules, 2017. GST Rules have under Chapter X named Refund, Rule 89 which reads the Application for refund of tax, interest, penalty, fees or any other amount. Chapter XI of the CGST Act titled Refunds have Section 54 - Refund of taxes.
Refund application
The supplier or the recipient can claim a refund of deemed export supplies. The supplier can, only if the recipient has not claimed refund in respect of such supplies or has not availed any Input Tax Credit (ITC) on the said supplies. The receipt can, only if he undertakes that the refund has been claimed only for those invoices which have been detailed in Statement 5B for the tax period and that he has availed ITC on such invoices.
In May 2025, a new Goods and Service Tax Network advisory was released which changes categories from “Tax Period based filing” to “Invoice based filing”. Taxpayers can upload relevant invoices and claim refund in Statement 5B (among 2 and 4 for Export of Supplies and SEZ Supplies respectively) with the application by the supplier, in case of deemed exports.
The recipient must also declare that the supplier has not claimed a refund. ITC is a mechanism to avoid cascading of taxes. It helps businesses to reduce its tax burden by taking credit on directly paid GST regarding purchases or expenses associated with its taxable output.
The supplier has to produce relevant documents to prove that the transaction is a deemed export, these documents may be:
- Acknowledgement by the jurisdictional Tax officer of the Advance Authorisation holder or Export Promotion Capital Goods Authorisation holder; or
- In the case of supply to Export Oriented Unit: endorsement in tax invoice by recipient, undertaking by recipient that he has not claimed ITC on such goods, undertaking by recipient that he will not claim refund and the supplier may claim refund.
It has been clarified through Circular 125/44/2019, that the ITC availed by the recipient of deemed export supplies would not be subjected to the provisions of Section 17 of the CGST Act, 2017. The Section talks about apportionment of input tax credit (ITC) and the restriction of ITC (blocked credit) for specific goods and services.
Procedure
GSTR-1: Suppliers are to categorize deemed exports under GST and report the details of such invoices in Table 6C of Form GSTR-1.
GSTR-3B: The registered person should disclose the Assessable Value of such supply in entry 3.1(a) of GSTR 3B.
GST RFD 01 (Online): This online claim application must be accompanied with Declaration/Statement/Undertaking/Certificates which are listed in Annexure-A.
Supporting documents along with Declarations, Statements, Undertakings, and Certificates must be submitted online by the applicant, including the invoice details in Statement 5B.
It is to be noted that the refund application by the supplier or the recipient of tax paid on deemed export supplies have to provide, along with the application:
- Statement 5(B) under Rule 89(2)(g);
- Declaration under Rule 89(2)(g);
- Undertaking in relation to Section 16(2)(c);
- Self-declaration under Rule 89(2)(l) if the amount claimed does not exceed two lakh rupees;
- Certification under Rule 89(2)(m).
As Rule 89(2) clearly states:
“The application under sub-rule (1) shall be accompanied by any of the following documentary evidences in Annexure 1 in FORM GST RFD-01, as applicable, to establish that a refund is due to the applicant … ”
And sub-clause to Rule 89(2) in (g) states:
“a statement containing the number and date of invoices along with such other evidence as may be notified in this behalf, in a case where the refund is on account of deemed exports”
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
