All About Goods Exports to Nepal and Bhutan: GST Compliance, Notifications & Procedures

Exporting goods to Nepal and Bhutan involves specific GST regulations and procedures. This guide provides detailed insights into the legal framework, documentation, and compliance requirements for exporters.

1. Legal Definition of Export

Under Section 2(5) of the Integrated Goods and Services Tax (IGST) Act, 2017, "export of goods" is defined as:

“Taking goods out of India to a place outside India.”

Therefore, goods physically transported from India to Nepal or Bhutan qualify as exports, irrespective of the currency of payment.

2. GST Treatment for Exports to Nepal and Bhutan

Zero-Rated Supplies

Exports are considered zero-rated supplies under GST, allowing exporters to:

• Export under bond or Letter of Undertaking (LUT) without payment of IGST and claim a refund of unutilized Input Tax Credit (ITC).

• Export with payment of IGST and claim a refund of the tax paid.

Payment in Indian Rupees (INR)

While exports typically require payment in convertible foreign exchange, exceptions exist for Nepal and Bhutan. As per Notification No. 42/2017-Integrated Tax (Rate) dated 27th October 2017, services supplied to Nepal and Bhutan against payment in INR are exempt from IGST.

3. Documentation Requirements

Exporters must ensure the following documents are prepared:

• Export Invoice

• Packing List

• E-way Bill (if applicable)

• Shipping Bill or Bill of Export

• Bond/LUT (if exporting without payment of IGST)

• Transport Documents (e.g., lorry receipt, railway receipt)

• Certificates required by Nepal or Bhutan authorities

4. Export Procedures

Registration

Exporters must have:

• GST Registration

• Importer-Exporter Code (IEC) from the Directorate General of Foreign Trade (DGFT)

Customs Clearance

Exports to Nepal and Bhutan are primarily through land customs stations (LCS) such as:

• Nepal: Raxaul, Sonauli, Jogbani, Panitanki

• Bhutan: Jaigaon (near Phuentsholing), Gelephu, Samdrup Jongkhar

Exporters must file the Bill of Export at the designated LCS and comply with customs procedures.

5. Refund Mechanism

Exporters can claim refunds under two scenarios:

1. Export under Bond/LUT: Claim refund of unutilized ITC.

2. Export with IGST Payment: Claim refund of IGST paid on exports.(CBIC GST)

Timely filing of GSTR-1 and GSTR-3B is essential for processing refunds.

6. Key Notifications and Circulars

• Notification No. 30/2017-Central Tax (Rate): Exempts services associated with transit cargo to Nepal and Bhutan.

• Notification No. 42/2017-Integrated Tax (Rate): Exempts IGST on inter-state supply of services to Nepal and Bhutan against payment in INR.

• Circular No. 8/8/2017-GST: Clarifies conditions for furnishing LUT in place of bond for exports.

7. Special Considerations

Transit Cargo Services

Services related to transit cargo to and from Nepal and Bhutan are exempt from GST, as per Notification No. 30/2017-Central Tax (Rate).

Electronic Cargo Tracking System (ECTS)

For exports to Nepal, the Electronic Cargo Tracking System (ECTS) is implemented to monitor cargo movement. Exporters must comply with ECTS regulations, including executing a general bond and procuring ECTS from authorized service providers. 

Conclusion

Exporting goods to Nepal and Bhutan offers significant opportunities for Indian businesses. However, adherence to GST regulations, proper documentation, and understanding of specific exemptions are crucial for seamless operations. Staying updated with the latest notifications and circulars ensures compliance and maximizes benefits under the GST regime.