Realization of Export proceeds, Goods and Services Tax - GST

[Deepak Bubna]

Hello,

What is the implication for an exporter under LUT if proceeds from such exports are received from a third party.

Posts / Replies

[YAGAY andSUN]

As per FEMA laws, if you had mentioned on the Shipping Bill that Export Proceeds will be received from Third Party and the Third Party is related to/with the Original Importer, then there is no issue at all.  If no such declaration was provided then you have to provide documentary proofs about such realization of export proceeds from third party that it was a fair transaction as per the provisions of International Trade.

[YAGAY andSUN]

Relevant Provision of FEMA

(v) Third party payments for export / import transactions

Taking into account the evolving international trade practices, it has been decided to permit third party payments for export / import transactions subject to conditions as under:

a) Firm irrevocable order backed by a tripartite agreement should be in place. However, it may not be insisted upon in cases where documentary evidence for circumstances leading to third party payments / name of the third party being mentioned in the irrevocable order/ invoice has been produced subject to:

(i) AD bank should be satisfied with the bona-fides of the transaction and export documents, such as, invoice / FIRC.

(ii) AD bank should consider the FATF statements while handling such transaction.

b) Third party payment should be routed through the banking channel only;

c) The exporter should declare the third party remittance in the Export Declaration Form and it would be responsibility of the Exporter to realise and repatriate the export proceeds from such third party named in the EDF;

d) It would be responsibility of the Exporter to realise and repatriate the export proceeds from such third party named in the EDF;

e) Reporting of outstanding, if any, would continue to be shown against the name of the exporter. However, instead of the name of the overseas buyer from where the proceeds have to be realise, the name of the declared third party should appear in the outstanding report.

f) In case of shipments being made to a country in Group II of Restricted Cover Countries, (e.g. Sudan, Somalia, etc.), payments for the same may be received from an Open Cover Country; and

g) In case of imports, the Invoice should contain a narration that the related payment has to be made to the (named) third party, the Bill of Entry should mention the name of the shipper as also the narration that the related payment has to be made to the (named) third party and the importer should comply with the related extant instructions relating to imports including those on advance payment being made for import of goods.

[Deepak Bubna]

Thank you for insight. However, what will be the implication on taxability under GST Act ?

[YAGAY andSUN]

Exports are not chargeable to IGST. If paid, then refund can be sought or refund of accumulated ITC can be applied.

[Deepak Bubna]

My question is : What will be the implication under GST Act if exports were made under LUT but proceeds of such exports were received from third party and not recipient of goods/services :) 

[Shilpi Jain]

Under GST consideration can be received from any person. Though when it's an international transaction it's always better to check other compliances as well. 

If it's a genuine transaction, no further liability under GST

[YAGAY andSUN]

If your AD (Bank) accepts Third Party Payment, realization data is sent to RBI for generation of E-BRC or you opt self generation of E-BRC on the basis of IRM, and get such S/Bs cleared from EDPMS data base, then, it will tantamount as completion of Exports. If export is completed then there is no issues from GST side.