Page 257 - DMGT546_INTERNATIONAL_TRADE_PROCEDURE_AND_DOCUMENTATION

International Trade Procedures and Documentation

Notes Duty Drawback

Income Tax Concessions
Export Promotion Capital Goods
Duty Free Import Authorisation Schemes
Duty Exemption Passbook Scheme
Free Trade & Warehousing Zones
Star Export Houses
EOUs, Electronic Hardware Technology Parks, Software Technology Parks
Biotechnology Parks
Deemed Exports

12.1 Sales Tax/VAT Exemption

An exporter has to duly register with sales tax/value added tax authorities. However, no sales
tax/value added tax is payable for goods meant for exports. Sales tax/VAT is an indirect tax that
the manufacturer collects from the customer and deposits to the Central/state authorities. To
make export prices internationally competitive, exports have been kept immune from the impact
of sales tax/value added tax.

Sales tax in India has been replaced by Value Added Tax (VAT). The new system came into effect
from April 1, 2005. VAT is a multipoint tax system. As each item passes through various stages
of production and distribution, some value addition takes place at each stage. VAT is a tax on
such value addition at each stage. It provides for set off of tax paid on purchases at each point of
sale. VAT is a superior system than the earlier used sales tax as it does away with tax on tax.
For exports, the goods exported are zero rated under VAT. This actually means that the exporter
will get full input tax credit and the rate applied to such transaction will be zero. Simply put,
under this system the exporter need not charge any tax or pay any VAT on his export sales and
he can reclaim any VAT that he has been charged on the goods exported or any input tax that he
has incurred in the production of goods exported.

Did u know? VAT at zero rate and full credit of input tax is also available to a dealer
directly selling to an exporter provided the same goods are actually exported.

The exporter needs to provide the following documents as evidence of goods exported:
Copy of export contract or order from a foreign buyer
Copy of the customs clearance certificate
Copy of the commercial invoice issued to the foreign buyer
Copy of Bill of Lading/Air-Way Bill

Proof of payment from the foreign purchaser or letter of credit
The exporter can make use of ‘H Forms’ supplied by the CST (Central Sales Tax) authorities that
are being continued even now in the VAT regime. The exporter needs to apply in the prescribed
application form to the concerned sales tax office for issue of Form H. The application has to be
supported by the following documents:
Copy of Customs Certified Shipping Bill

Copy of Customs Certified Invoice

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