How to handle GST for export Business as an NRI

Zero-Rated Supply Framework

Under GST, both goods and services exported from India qualify as zero-rated supplies, meaning no CGST, SGST, or IGST is levied at the point of export. Exporters still fund working capital—unless they use the LUT route—but enjoy:

• Full Input Tax Credit (ITC): On domestic purchases of goods and services used in exports.
• Streamlined Refund Options: No more protracted duty-drawback processes for CGST/SGST components.

1.2. Refund Mechanisms: LUT vs. IGST Route

1. Letter of Undertaking (LUT):
   • No IGST payment on exports; file LUT annually (valid until March 31 of each FY).
   • Claim refund of unutilized ITC via the common GST portal, attaching shipping bills and CA certification.
2. IGST Payment & Refund:
   • Pay IGST upfront; shipping bill acts as deemed refund application once the export manifest is filed.
   • File refund under Section 54 of CGST Act.

CA Insight: For high-volume exporters, LUT conserves cash. However, rigorous documentation—export manifests, shipping bill details, and timely LUT renewals—are non-negotiable to avoid rejection of refund claims.

2. Deemed Exports & Domestic Zero-Rated Supplies

GST extends zero-rated treatment under “deemed” exports:

• Advance Authorisation / EPCG supplies
• Sales to EOUs, SEZ units, or notified technology parks
• Supply of capital goods against EPCG authorisation

Action Points:

• Monitor authorisation expiry dates.
• File GST returns incorporating LUT/IGST details and shipping bill references.
• Maintain a checklist of Advance Authorisation, shipping bills, and CA certificates to substantiate claims.

3. Setting Up an Export/Import Venture: CA-Backed Roadmap

Foreign entrepreneurs and NRIs find India’s export-import space attractive but complex. A CA’s role is to demystify regulatory steps and embed tax efficiency from Day One.

StepChartered Accountant’s FocusEntity RegistrationChoose structure—Private Ltd., Branch, or Liaison Office—based on liability, repatriation norms, and FDI caps.Licences & CodesObtain IEC (mandatory), GST registration (if turnover ≥ threshold), and sector-specific licences (FSSAI, BIS).Banking SetupOpen FCNR/NRE accounts for foreign currency inflows; advise on transfer pricing policies and repatriation routes.Operational LogisticsEngage freight forwarders; vet customs-compliance health; negotiate duty-incentive schemes (DEPB, RoDTEP).Digital ComplianceImplement cloud-based ERP modules to auto-generate GST returns and e-invoices; set up reminder workflows.

CA Tip: Pre-empting FEMA and RBI approvals—especially for liaison or branch offices—can truncate lead times by weeks. Leverage professional networks to expedite DGFT clearances.

4. NRI Income-Tax & ITR Strategy

NRIs with export businesses or investments in India must navigate direct tax obligations carefully. A CA crafts strategies around residential status, treaty benefits, and optimal tax regime selection.

4.1. Residential Status & Tax Scope

• Non-Resident (NRI): Taxed only on income earned or accrued in India.
• Resident / RNOR: Scope broadens to global income (residents) or conditional (RNOR).

CA Practice: Maintain a travel log and passport stamps to substantiate NRI status. Even a few extra days in India can trigger residential status shifts and expose offshore income to Indian tax.

4.2. Income Heads & Rates

Income TypeTax Treatment for NRIsRental IncomeTaxable at slab rates; 30% standard deduction + municipal taxes.Capital Gains12.5% (equity) or 20% (other assets) + surcharge & cess.Interest / Dividends20% flat (special rates); 5% on certain infra debt funds.Royalties / Fees for Tech20% plus surcharge & cess (if no PE in India).

4.3. DTAA & Tax Credits

• Tax Residency Certificate (TRC): Mandatory to claim treaty benefits.
• Relief Methods: Exemption or tax-credit mechanism, depending on the treaty.

CA Insight: TRCs can take 4–6 weeks to procure. Plan ahead of remittance deadlines to apply the correct lower withholding rate and avoid manual refund relics.

4.4. Deductions & Regime Choice

• Exemptions: NRE/FCNR interest, certain bond incomes, long-term capital gains up to ₹1.25 lakh.
• 80C & 80D: Maximize ₹1.5 lakh ELSS/ULIP/PPF, health insurance premiums, and preventive check-up benefits.
• Old vs. New Regime: Compare with and without deductions; often NRIs benefit from the old regime if structured investments exceed ₹4–5 lakh annually.

CA Tool: Develop an ITR-comparison template to project tax liability under both regimes. Update it each March to align investments before year-end.

5. Conclusion & Proactive Recommendations

A robust export strategy entwines GST mastery with prudent direct tax planning—areas where Chartered Accountants deliver transformative value. Key takeaways:

1. Leverage GST Zero-Rating
   • Blanket ITC recovery via LUT; choose IGST route only for clients with simpler compliance bandwidth.
2. Streamline Compliance
   • Digital ERP for e-invoices, auto-reminders for LUT renewals, shipping-bill integration to fast-track refunds.
3. Align Entity Structure with Goals
   • For NRIs, Private Limited setups often offer repatriation ease; liaison offices remain billing-only arms.
4. Optimize NRI Tax Position
   • Cement NRI status with travel logs; draft CA-certified TRCs; harness DTAA and deductions to minimize tax outgo.
5. Annual Tax-Regime Audit
   • Reconcile investments by February; switch regimes if investments/deductions shift the tax-benefit balance.

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