Provision regarding consignment export under GST Act

- Sales tax: Soham Mashruwala

Business has grown exponentially through e-commerce. Often suppliers have the opportunity to sell goods in countries other than India through e-commerce. There are many organizations known as e-commerce companies which have godowns abroad and suppliers based in India can supply goods through them. It is not necessary for the supplier to have received the customer's order at the time of shipment. Today's article discusses how to deal with such a case under the GST Act. Such a transaction is known as consignment export.

Export

It is a common belief that when goods are taken out of India, the transaction is considered as export. Export as per Section 3 (2) of the IGST Act means taking goods out of India to another country / place which is located outside India. But the mere act of taking goods out of India is not considered an export and should be included in the definition of supply. Of particular note is that consignment exports are not considered exports.

Transaction

The supplier, for example, wants to sell the goods in the US and send the goods abroad to its warehouse or godown with the help of an e-commerce company instead of opening a company abroad. For this, the goods have to be taken out of India and kept in the warehouse of the e-commerce company. What the supplier has to do to make this transaction is outlined below.

Process of consignment export

First of all the supplier has to decide the organization or unit which will be appointed as the importer on record abroad. The importer on record will be responsible for shipping all goods sent from India abroad and paying customs duties and all taxes there.

When goods are shipped from India, the Indian supplier will not be able to recognize the transaction as an export. CBIC Circular No. 106/6/2018 - As per the clarification made in GST dated 15th July 19th, this transaction will be treated as goods sent to Jangad and the supplier has to complete the supply within six months from the date of sending the goods and make final bill. . Section 41 (2) According to the CGST Act, when goods are sold abroad, the Indian supplier has to prepare a tax invoice as per CGST Rule 2 as well as Section 21 of the CGST Act. Note that in such a transaction, the export has to be done without paying IGST and refund will not be available as per Rule 3 as IGST was not paid at the time of shipment from India. Of particular note is that within six months of shipment, the goods must either be returned to India or sold abroad.

While for such export, it is obligatory to keep detailed details in the annexure mentioned in Circular No. 102/4 / 2018- GST in which the supplier has to show the details of goods movement and details of goods sold abroad. In addition, the supplier should take special care that under the FEMA Act, the foreign exchange arrives in India within the stipulated time. According to the existing provision, foreign currency has to be brought within 6 months from the date of export.

In order to calculate the time limit of six months, the date of departure from India has to be calculated from the date through which the goods have been sent, such as the date written in the EGM (export general manifesto) by the ship or aircraft.