Deemed Exports Under GST: Meaning and Refunds

A deemed export is the one kind of "export" where nothing leaves India. You sell goods to a buyer down the road, get paid in rupees, charge GST on the invoice like any domestic sale, and still end up with an export-style refund. That combination confuses people in both directions: suppliers try to invoice deemed exports without tax as if they were SEZ supplies, and recipients forget the refund exists. This post covers what the law actually treats as a deemed export, who gets the refund, and the paperwork the refund officer will ask for.

What a deemed export is under Section 147

Section 147 of the CGST Act lets the government, on the recommendation of the GST Council, notify certain supplies of goods as deemed exports. The section sets three conditions before a notification can even apply:

• the goods do not leave India;
• payment is received in Indian rupees or in convertible foreign exchange; and
• the goods are manufactured in India.

The policy logic is simple. The buyer in each notified category is itself part of the export chain: it will use the goods to make something that is exported, or it is a unit set up to export. Taxing its domestic inputs and leaving the tax stuck would make Indian goods more expensive than imported ones, which those buyers can often bring in duty-free. The deemed export refund removes that disadvantage.

Two things follow from the wording. First, the list is closed: a supply is a deemed export only if it fits a notified category, not because it "feels like" an export. Second, it covers goods only. There is no deemed export of services, which is why software and consulting firms supplying EOUs charge GST as usual. If you export services abroad, the rules you need are in GST for freelancers and service exports.

The four notified categories

The notification issued under Section 147 lists four categories. Each has its own conditions, and the recipient's licence or approval is what makes the supply qualify, so get a copy of it before you invoice.

For supplies to EOU-type units, the notified procedure expects the recipient unit to give advance intimation of the purchase to its own jurisdictional officer and to the supplier, and to acknowledge receipt of the goods afterwards. The exact forms and steps sit in CBIC's instructions, so confirm the current procedure on cbic-gst.gov.in rather than relying on an old checklist.

Deemed exports are taxed, not zero-rated

This is the single most common mistake. Zero-rated supplies are defined in Section 16 of the IGST Act, and they cover two things only: exports of goods or services, and supplies to an SEZ developer or SEZ unit. Deemed exports are not in that list.

So a supplier making a deemed export:

• issues a normal tax invoice and charges GST — CGST and SGST for an intra-state supply, IGST for an inter-state one;
• cannot supply under a Letter of Undertaking, because an LUT only works for zero-rated supplies (see LUT filing for exporters);
• pays the tax through GSTR-3B like any other outward supply; and
• reports the invoice in GSTR-1 in the B2B section with the invoice type marked as a deemed export.

The invoice itself carries the usual mandatory particulars covered in GST invoice format and rules. It helps to reference the recipient's Advance Authorisation, EPCG authorisation or EOU approval number on it, because the refund officer will match the two.

Who claims the refund: recipient or supplier

Rule 89 of the CGST Rules lets either side claim the refund of tax paid on a deemed export, but not both, and the default runs in favour of the recipient.

The recipient's claim. The recipient — the Advance Authorisation holder, EPCG holder or EOU — files the refund application for the tax charged on the supplies it received. On the portal this is filed in Form GST RFD-01 under the deemed export category. The recipient needs a declaration from the supplier that the supplier has not claimed the same refund.

The supplier's claim. The supplier can claim instead, but only where the recipient does not avail input tax credit on the supply and furnishes an undertaking that it will not claim the refund. This route suits a supplier that has to price the goods net of tax to win the order: it charges GST, recovers it by refund, and the recipient never books the credit.

Agree the route in writing before the first invoice. If the recipient has already taken credit of the tax in its books, the supplier route is closed for that supply. If neither side has the other's declaration, the claim will stall. The general rules on when credit can be taken are in input tax credit rules explained, and capital goods bought against EPCG raise the specific points covered in ITC on capital goods.

One knock-on effect for the recipient: a business that has received inputs with deemed export benefits is generally restricted from exporting its own output on payment of IGST and claiming that IGST back. In practice such exporters export under an LUT and claim accumulated input tax credit instead. Check the current wording of Rule 96 with your adviser before choosing a route for outward exports.

The evidence a deemed export refund needs

Rule 89(2)(g) requires the application to carry a statement of the invoice numbers and dates, along with the evidence the government has notified for deemed exports. That evidence has three parts:

1. Acknowledgement of receipt. An acknowledgement by the jurisdictional tax officer of the Advance Authorisation holder, EPCG holder or EOU that the goods were received. For EOUs this typically takes the form of the unit's endorsement on the tax invoice.
2. No-ITC undertaking. An undertaking from the recipient that it has not availed input tax credit on the supplies, where the supplier is the one claiming.
3. No-refund declaration. An undertaking that the other party will not claim, or has not claimed, the refund — from the recipient when the supplier claims, and from the supplier when the recipient claims.

Beyond those, expect the officer to ask for copies of the invoices, the authorisation or approval that makes the recipient eligible, and proof that the tax was actually paid. The mechanics of filing, acknowledgement and deficiency memos are the same as any other RFD-01 claim; the GST refund process guide walks through each form.

Deemed exports vs SEZ supplies vs physical exports

Deemed exports sit next to two other export-type supplies, and the treatment differs on almost every axis that matters. SEZ supplies are covered in detail in GST on supplies to SEZ units and developers.

The practical difference is cash flow. With an SEZ supply or a physical export you can avoid paying tax upfront by using an LUT. With a deemed export someone always funds the tax first and waits for the refund, so build that working capital into the price.

Time limit and practical checks

Section 54 gives two years from the "relevant date" to apply for any refund. For deemed exports, the relevant date is tied to the date on which the return relating to those supplies is filed. Definitions of relevant date have been amended over time, so confirm the current text on cbic-gst.gov.in before you rely on a particular deadline, and do not leave a claim to the last month: a deficiency memo closes the application but does not reset the clock.

A short checklist before and after each deemed export supply:

• Get a copy of the recipient's Advance Authorisation, EPCG authorisation or EOU/EHTP/STP/BTP approval, and check the goods fall within it.
• Confirm the recipient's GSTIN and legal name match that document.
• Agree in writing whether the recipient or the supplier will claim the refund.
• Charge GST on the invoice, pay it through GSTR-3B, and report the invoice as a deemed export in GSTR-1.
• Collect the recipient's acknowledgement of receipt and the relevant undertakings promptly, not at refund time.
• Track the relevant date for each return period so no claim runs out of time.

If you supply many EOUs or authorisation holders, checking their GSTINs one by one gets tedious; the bulk verification page handles a whole customer list at once.

Frequently asked questions