Deemed Export under GST: Meaning, Provisions, and Compliance Guide

The introduction of the Goods and Services Tax (GST) in India aimed to simplify indirect taxation and bring uniformity across states. Among the many unique concepts introduced under GST, one that often confuses taxpayers is “deemed export.”

Unlike traditional exports where goods physically cross borders, deemed exports refer to certain domestic transactions that the government treats as exports for GST purposes. This mechanism helps in avoiding double taxation, reducing working capital pressure, and encouraging industries involved in exports.

This blog provides a detailed explanation of deemed exports under GST, including meaning, features, notified categories, refund process, benefits, and compliance requirements.

Understanding Deemed Export under GST 

In GST, deemed export refers to cases where goods are supplied within India but are still given the same treatment as exports, even though the goods never leave the country.

This concept is defined under Section 147 of the CGST Act, 2017, which empowers the government to identify and notify specific categories of such supplies.

Important highlights:

• Applicable only for goods and not for services
• The goods remain within India’s borders.
• Payment for such supplies can be accepted in Indian Rupees or in convertible foreign currency.
• GST is levied on the transaction, but the tax paid is refundable either the supplier or the recipient can claim it, depending on the agreement.

Characteristics of Deemed Export Supplies

Deemed exports have features that set them apart from both regular domestic sales and international exports:

1. Domestic supply but special treatment – The transaction happens within India’s territory, but GST law treats it similar to export.
   
   
2. Taxability – GST is charged at the applicable rate on such supplies.
   
   
3. Refund option – Either the supplier or the recipient is eligible to claim back the GST paid.
   
   
4. Government notification – Only categories notified by the government are covered.
   
   
5. Currency flexibility – Payments can be made in INR or convertible foreign exchange, unlike exports which generally require foreign currency.

Categories Recognized as Deemed Exports

The government has specifically listed supplies that qualify as deemed exports through Notification No. 48/2017 – Central Tax (dated 18 October 2017). These include:

1. Supplies under Advance Authorisation – Inputs supplied to manufacturers holding advance authorisation for duty-free imports are treated as deemed exports.
   
   
2. Supplies under EPCG Authorisation – Goods supplied to holders of an Export Promotion Capital Goods (EPCG) licence also fall under this category.
   
   
3. Supplies to some specified units by registered persons– Goods provided to Export Oriented Unit (EOU)/ Electronic Hardware Technology Park Unit (EHTP) / Software Technology Park Unit (STP) / Bio-Technology Park Unit (BTP) are covered.
   
   
4. Supply of gold by specified banks/PSUs – Supplies of gold by banks or designated PSUs under customs notifications for jewellery exporters qualify too.

Only these categories, unless updated by future notifications, are eligible for deemed export benefits. 

Deemed Export vs. Normal Export

It’s important to distinguish between physical exports and deemed exports:

GST Treatment of Deemed Exports

Many taxpayers mistakenly assume that deemed exports enjoy the same zero-rated benefit as physical exports. In reality, that’s not the case.

• Deemed exports are treated as taxable supplies under GST.
  
  
• The supplier is required to levy GST at the applicable rate at the time of supply.
  
  
• Once the tax is paid, either the supplier or the recipient can later apply for a refund.

This arrangement ensures that GST does not become an additional cost for businesses. The refund system keeps such transactions tax-neutral and helps Indian exporters remain competitive in global markets.

Who is Eligible to Claim Refund?

Refund of GST paid on deemed export supplies can be claimed by either of the following:

1. The supplier – provided the recipient issues a declaration confirming they will not avail input tax credit (ITC) or apply for a refund themselves.
   
   
2. The recipient – if they decide to claim directly, subject to meeting conditions.

To avoid duplication, refund for a single supply can be claimed only once—either by the supplier or by the recipient, not both.

Documentation and Compliance Needs

To successfully claim refund benefits under deemed export provisions, maintaining proper documentation is critical. Businesses generally need to provide or ensure:

• Acknowledgement from the recipient confirming receipt of goods.
  
  
• Endorsement from the relevant authority (e.g., Development Commissioner for EOUs).
  
  
• Valid authorisation documents such as Advance Authorisation or EPCG licence.
  
  
• Declaration from the recipient that ITC has not been availed.
  
  
• An undertaking from the recipient confirming they will not seek refund if the supplier does.
  
  
• A GST-compliant tax invoice issued by the supplier.
• All returns (GSTR-1, GSTR-3B, etc.) due up until the date of filing the refund application are filed.
  
  

Since refund claims are subject to officer verification, accurate and complete records help avoid delays.

Refund Application Procedure

Refund applications for deemed export supplies are made online through the GST portal using Form GST RFD-01. The typical process is as follows:

1. Log in to the GST portal → go to Refunds → Application for Refund.
   
   
2. Select the category “Refund on account of deemed exports.”
   
   
3. Upload the required documents including invoices, endorsements, and declarations.
   
   
4. Submit the application digitally with a valid signature.
   
   
5. The jurisdictional GST officer reviews the claim and processes the refund.
   
   

The application must be submitted within two years from the date of furnishing the relevant GST return to remain valid.

Advantages of Deemed Export Provisions

The deemed export framework under GST has several advantages:

• Removes double taxation: Refund ensures exporters are not burdened with extra GST costs.
  
  
• Encourages domestic suppliers: Makes supplies to EOUs and EPCG holders financially viable.
  
  
• Supports Make in India: Promotes manufacturing activities intended for exports.
  
  
• Reduces working capital blockage: Businesses can claim back GST paid, improving liquidity.
  
  
• Simplifies supply chains: Creates a clear framework for transactions involving authorised exporters.

Challenges and Issues in Practice

Despite benefits, businesses face hurdles in availing deemed export provisions:

• Lengthy documentation – multiple declarations, endorsements, and authorisations increase compliance effort.
  
  
• Delayed refunds – processing often takes longer than expected, blocking funds.
  
  
• Confusion over responsibility – disputes sometimes arise between supplier and recipient on who should claim refund.
  
  
• Lack of awareness – many small businesses are unaware of the deemed export facility and end up absorbing GST costs.

Deemed Export vs. Zero-Rated Supply

Another important distinction:

• Zero-rated supplies (like exports and supplies to SEZs) are GST-free from the start. Suppliers can either export without tax under LUT/Bond or export with tax and claim refund.
  
  
• Deemed exports require charging GST upfront, and only after compliance can refunds be claimed.

This difference significantly impacts cash flow management for businesses.

Impact on Businesses

For manufacturers, traders, and suppliers dealing with EOUs or EPCG holders, deemed exports are a vital compliance aspect. By properly using this mechanism:

• Businesses avoid unnecessary tax costs.
  
  
• Working capital cycles remain healthier.
  
  
• Competitive pricing is maintained for export-related supplies.

Especially for MSMEs, awareness of deemed export provisions can make a big difference in cash flow and profitability.

Conclusion

Deemed exports under GST bridge the gap between regular domestic supplies and physical exports by extending export-like benefits to certain notified categories. Though the goods never cross India’s borders, the GST framework ensures such transactions remain tax-neutral through a refund mechanism.

For businesses, especially those supplying to EOUs, Advance Authorisation or EPCG licence holders, understanding and using the deemed export provisions is essential. Proper documentation, timely refund applications, and clear agreements with recipients help in smooth compliance.

By easing the tax burden and improving liquidity, deemed exports play a significant role in strengthening India’s manufacturing and export ecosystem.