Deemed exports are a critical concept under GST that allows domestic suppliers to claim refund benefits similar to physical exports. Understanding the eligibility criteria and refund procedure for deemed exports is essential for businesses engaged in supply to export-oriented sectors. This comprehensive guide explains the eligibility, procedure, recent changes in the filing process, and documentation requirements.
What Are Deemed Exports?
Deemed exports refer to transactions where goods manufactured in India are supplied to specified categories of recipients and do not leave the country, yet are treated as exports for certain benefits. Under the GST framework, deemed exports are eligible for refund of tax paid on such supplies, subject to conditions.
The Goods and Services Tax Network (GSTN) on May 08, 2025, issued a notification regarding updates in the refund filing process for recipients of deemed exports. These changes aim to simplify and streamline the refund process for recipients of deemed exports.
Eligibility for Deemed Export Refund
Who Can Claim Refund?
As per Rule 89 of the CGST Rules, the application for refund on account of deemed exports may be filed by:
- The supplier of deemed export
- The recipient of deemed export
In respect of supplies regarded as deemed exports, the application may be filed by the supplier or the recipient.
Eligible Supplies
Deemed export supplies include:
- Supply of goods to an export-oriented unit (EOU)
- Supply of goods to a unit in a Special Economic Zone (SEZ)
- Supply of goods to a project funded by certain international agencies
- Supply of goods to a project in India under the foreign aid program
- Supply of goods to a project of the Government of India
Recent Changes in Deemed Export Refund Filing Process
The GSTN has implemented significant updates to the refund filing process specifically for recipients of deemed exports effective May 8, 2025.
Key Changes
1. Chronological Filing Removed Taxpayers are no longer required to select "From Period" and "To Period" while filing refund applications. Refund applications under this category no longer need to be filed in chronological order of tax period.
2. Return Compliance Mandatory Taxpayers must ensure that all returns (GSTR-1, GSTR-3B, etc.) due till the date of refund application are filed.
3. Revised Refund Table A new five-column table has been introduced that auto-calculates eligibility based on uploaded invoices and Electronic Credit Ledger (ECL) balance.
The columns of the revised table are:
- Column 1: Balance in ECL at the time of filing - auto-populated
- Column 2: Net ITC of Deemed Exports (as per uploaded invoices) - auto-populated based on invoices in Statement 5B
- Column 3: Refund amount as per uploaded invoices - downward editable
- Column 4: Eligible Refund Amount - auto-calculated
- Column 5: Refund amount not eligible as insufficient balance in ECL
4. Improved Functionality The system maximizes eligible refund based on total ITC across all Heads, even if individual Head balances are insufficient.
5. Grievance Redressal Taxpayers can raise issues on the GST portal if problems arise during filing.
Documentation Requirements
For Deemed Export Refund Claims
- FORM GST RFD-01 (application for refund)
- Statement containing the number and date of invoices along with such other evidence as may be notified
- Statement 5B for Deemed Exports (by Supplier)
- Proof of supply of goods
- Endorsement from the recipient (where applicable)
- Declaration that tax has not been collected from the recipient
- CA certificate (for claims exceeding ₹2 Lakhs)
Statement 5B
In case of Deemed Exports, the application by Supplier requires Statement 5B to claim the refund. The refund amount as per uploaded invoices reflects the sum of the amount of ITC claimed under all major Heads (IGST/CGST/SGST/UT) as per the invoices uploaded by the taxpayer in Statement 5B.
Refund Procedure
Step 1: Identify Eligible Supply
Determine whether the supply qualifies as a deemed export under the notified categories.
Step 2: File Returns
Ensure all due returns (GSTR-1, GSTR-3B, etc.) are filed up to the date of the refund application.
Step 3: Upload Invoices
Upload invoices in Statement 5B (for supplier) with details of deemed export supplies.
Step 4: File FORM GST RFD-01
File the refund application electronically on the GST portal under the category "On account of Refund by Recipient of deemed export" or "Refund by Supplier of Deemed export."
Step 5: System Auto-Calculation
The system auto-calculates the eligible refund amount based on uploaded invoices and ECL balance.
Step 6: Submit Application
Submit the application after verifying all details.
Step 7: Receive ARN
Upon successful filing, an Application Reference Number (ARN) is generated.
Step 8: Processing
The application is processed by the jurisdictional officer.
Step 9: Receive Refund
Upon sanction, the refund is credited to the bank account.
Time Limits
Refund claims must be filed within two years from the relevant date.
Common Mistakes to Avoid
Mistake 1: Not Filing All Due Returns All returns (GSTR-1, GSTR-3B) must be filed before applying for refund.
Mistake 2: Incorrect Statement 5B Errors in Statement 5B lead to incorrect refund calculation and deficiency memos.
Mistake 3: Insufficient ECL Balance Refund is limited to the balance available in the Electronic Credit Ledger.
Mistake 4: Time-Barred Claims Claims filed after two years are time-barred.
Mistake 5: Missing Endorsement Endorsement from the recipient may be required in certain cases.
Best Practices
Maintain Proper Documentation: Keep all invoices, proof of supply, and endorsements ready.
File Returns Timely: Ensure all returns are filed before applying for refund.
Verify ECL Balance: Check that sufficient balance is available in the Electronic Credit Ledger.
Use Updated System: Leverage the improved functionality that maximizes eligible refund.
Seek Professional Guidance: Deemed export refund rules have complexities; professional advice is recommended.
Deemed export refunds are a valuable benefit for suppliers to export-oriented sectors. With the recent updates to the filing process, the system has become more streamlined and efficient. By understanding the eligibility criteria, following the correct procedure, and maintaining proper documentation, businesses can claim refunds efficiently.
Need help with deemed export refunds? Our GST experts provide comprehensive advisory and support.
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