What is an export invoice?
An export invoice is a document containing the details of goods or services issued by an exporter to the importer. In simple terms, it has the details of the particulars, taxes, weight, etc., and is created by the exporter for export outside the country. Its format is more or less similar to that of a normal tax invoice; it helps calculate what is levied on the supply of goods and services outside the country.
According to Indian laws, the CGST Act, 2017 makes it mandatory for every registered exporter to issue an export invoice.
The Indian government has various schemes under which it exempts both the exporter and the importer from paying certain taxes and duties such as-
This scheme was introduced under the Foreign Trade Policy 2015-2020. It exempts the importer with an Advance License from payment of duties on the import of raw materials required for the manufacture of the goods or services that would be exported in the future. Duties are exempted only on the inputs that will be used to manufacture the content to be exported and the export should take place. This scheme aims to enhance the competitiveness of India's manufacturing sector in the global market.
- Export Promotion Capital Goods Scheme (EPCG scheme)
EPCG scheme commonly known as Zero-Duty EPCG Scheme, is meant to make the import of Capital goods such as machinery that are used in the production process of manufacturing products meant for export custom duty-free. Heavy customs duties were charged on the import of machinery which discouraged the producers, the government made the import duty-free to increase the production and competitiveness of the manufacturing sector.
Why do you need an export invoice?
- An export invoice is proof of the transaction that has taken place between the exporter and the importer on a specific date.
- Customs authorities may refer to the invoice to calculate the actual taxes to be levied on the content to be exported.
- In case of any damage to the content during the process of transportation, the importer can claim the insurance on it.
- It's a significant part of the documents related to shipping.
Export invoice under GST
There are three types of exports under GST –
Export under LUT
It is an export of goods or services without paying the Integrated goods and services tax (ISTG). Section 96A of the CGST regulations, 2017 makes it mandatory to file a Letter of Undertaking for such an export.
By opting for this process, they don't have to go through the process of applying for a refund later under the zero-rated exports.
The entire process of filling the LUT has been made online so the exporter doesn't have to go through the hassle of running to physical offices. It saves the time and labour of filing a tax refund.
Benefits of using a Letter of Undertaking (LUT)
The exporter of goods and services doesn't have to pay the IGST and the person is eligible to avail of the zero-rated supplies if the export is made to the Special Economic Zone. LUT is valid for one year from the date of filing. If a person doesn't apply for a LUT, a lot of time is wasted in applying for a refund and getting the money back.
Export with IGST
Under this process, the exporter pays the Integrated goods and services tax (IGST) before the export and then later claims a refund on it. The shipping bill that is filed by the exporter serves as a refund claim. The refund can be claimed for an input tax credit on content that remained unused and on the IGST laid on the export of the content.
The exporter needs to fill out a form for claiming the refund which has to have the details given below :
The GSTIN/ Temporary ID
Legal Name
Trade name (if any)
Address
Tax period
Amount of refund claimed
The ground of refund claimed
Details of bank account
SEZ with IGST
A special economic zone (SEZ) is a zone where the government provides tax cuts and an easier legal process. These zones are considered to be foreign territories even though they are located within the nation's boundaries. As they are not considered a part of India, the Integrated goods and services tax (IGST) is applicable.
Exports under the Special Economic Zones are provided with a complete tax exemption. The export of goods or services to SEZ is treated as a zero-rated export. Neither the exporter nor the importer needs to pay IGST as exports under SEZ are zero-rated.
A supply from a Special Economic Zone is treated as an import and the recipient has to pay the tax under the Reverse charge basis for the import.
What should you include in your export invoice?
- The date, address, contact details, and GSTIN of the exporter needs to be in the invoice.
- Name, billing address, and shipping address of the recipient.
- Date of issue of the export invoice.
- Due date of the export invoice.
- Invoice number (a number having not more than 16 characters).
- Rate of conversion from Indian Rupee to the relevant currency selected by the customer.
- Type of the export –
(i) Export under LUT
(ii) Export with IGST
(iii) SEZ with IGST
- Detailed shipping bill including shipping portal code, shipping bill number, and date. Shipping bill details are required when the exporter claims a refund of the IGST paid.
- Signature (Digital or Physical) of the exporter or the authorized person.
- The total value of the invoice (In Indian as well as foreign currency). It is calculated at the end of the invoice.
- Notes (if any)
