In today’s global economy scenario, Indian businesses engage in cross-border transactions involving importing goods, exporting services and dealing with foreign clients. Understanding GST on cross-border transactions is important for ensuring compliance, avoiding penalties and optimising tax benefits.
Here is a detail of GST rules for foreign transactions including GST on imports and exports and how businesses manage GST compliance for global trade effectively.
GST on imports
When goods and services are imported into India, Integrated GST or IGST is levied under the Customs Act 1962. Along with IGST, businesses also will have to pay basic customs duties and other applicable charges. IGST on imports is based on the applicable GST rate of product/service. Businesses can claim the Input tax credit on IGST paid. Custom duties including BCD are not eligible for Input tax credit.
GST on Exports
Under Indian GST law, exports of goods and services are zero-rated supplies, they are thus not subject to GST. Exporters can choose one of the two options. They can export under a letter of undertaking where no GST is charged and ITC can be claimed as a refund or they can export with IGST payment, where the exporters pay IGST upfront and claim a refund later.
What are the key points on GST Imports and Exports?
- Exports are tax-free but businesses must claim ITC refunds.
- Filing LUT is mandatory for tax-free exports.
- Proper documentation- invoices, shipping bills etc are required for GST refunds.
Reverse Charge mechanism on imported services
When Indian businesses avail services from a foreign entity, GST is applicable under the Reverse Charge mechanism. This means the Indian recipient, not the foreign supplier is responsible for paying GST.
GST Compliance for Global Trade on Imported Services
- Importers must self-declare GST under RCM.
- ITC can be claimed on RCM GST payments.
- Common RCM services include SaaS, digital marketing and consulting.
Rules of GST for foreign transactions and compliance
To ensure GST for global trade, businesses must-
- Register under GST if engaged in cross-border transactions.
- File GST returns correctly
- Maintain invoices, LUTs, and shipping documentation.
- Claim ITC refunds timely to optimize cash flow.
Businesses engaged in global trade must comply with GST for international business to avoid penalties and maximize their tax benefits. GST for imports and exports are complex, businesses should work with the right international tax services in India to streamline GST compliance and refunds.
The professional international tax experts provide guidance on custom duties, documentation and tax-saving strategies, minimizing risks and improving cash flow. By working with the GST experts, importers and exporters can ensure smooth GST compliance for international trade and avoid legal complications.
Work with dedicated tax experts to ensure compliance with GST for global trade and enhance financial efficiency. The professional tax services have a team of GST experts who will help you navigate the process without hassle.
