All about Export Invoices

Ankita Tiwari

15 Dec, 2023

Every business knows the GST requirements for intrastate and interstate invoices. But questions arise when the place of supply is outside India. Export invoices aid the customs authority in verifying the shipment’s contents and calculating their applicable taxes. An export invoice is a document that contains details of the goods or services supplied by an exporter and the amount due from the importer. It has a similar format to a regular tax invoice with a few additional details.

Importance of raising an export invoice

1. The export invoice is a proof document in case of an insurance claim.
2. An export invoice serves as evidence for the transaction.
3. Export invoice is an integral part of shipping-related documents.
4. The export invoice is referred to by the government authorities to determine the actual value of the goods and calculate the applicable taxes.
5. The importer uses an export invoice to clear the goods from the customs in the destination country.

Laws on the export invoice in India

Often, confusion arises about whether commercial and export invoices are the same. It includes the elements such as a commercial invoice, proforma invoice and packing list. Government authorities use export invoices to assess and calculate taxes and duties to be levied. Under the GST law, there are three types of exports:

Export under Bond/LUT: As per section 96A of the CGST Act 2017, exporting services without paying IGST is possible. However, filing a Letter of Undertaking (LUT) is mandatory when goods or services are exported without paying IGST. LUT saves the exporter from the hassle of seeking a refund and eliminates the blocking of funds using tax payments. The LUT is furnished under Form GST RFD 11 by any registered person under the GST Regime¹ and either wants to supply goods without payment of IGST or intends to supply goods overseas or to places in India itself or to SEZs or export with IGST.

Under this method, the exporter will have to pay the IGST at export and then later on claim a refund. A refund can be claimed for:

1. The portion of the Input tax credit (ITC) is unused.
2. IGST is paid on the exported goods and services.
3. SEZ with IGST.

Certain relaxations have been given in terms of taxes to be paid on exports to boost exports. Any supply of goods to an SEZ is treated as zero-rated, meaning the export taxes need not be paid.

Time frame to issue an export invoice

Section 31 of the CGST Act 2017 prescribes the time limit for the supply of goods or services.

1. When the supply includes the movement of goods, the invoice is to be issued on or before the removal of the goods for delivery.
2. When the supply involves services, the invoice will be issued before or after the service is provided within a prescribed period.

Contents of an export invoice

1. Exporter’s name, address, contact details and GSTIN
2. Recipient’s name and address
3. Issue date of the invoice
4. Due-date
5. Number of the invoice
6. Rate of conversion from INR to the applicable currency
7. Total value of the invoice
8. Type of export
9. Details of the shipping bill
10. Signature of the authorised person
11. Notes

The manner in which packing and shipping are dealt with within an export invoice

A packing list is required in International Shipments to guard against incorrect cargo. Export invoice supports goods being shipped from one business to another. It accompanies a certificate of inspection. The export invoice contains specific details related to packing and shipping. The following details are provided in the export invoice:

1. Number of the container
2. Details of the country of origin and destination
3. Port of origin and destination
4. Shipping mark
5. Container seal number
6. Description of goods -HSN, Rate, Quantity and Units.

Use of currency in an export invoice

The Master Directions RBI/FED/2015-16/11 issued by the Reserve Bank of India does not restrict export invoices to contain foreign currency only. It can be presented in INR as well.

1. The invoices may be presented in freely convertible currency or Indian Rupees.
2. Export receivables may be collected in freely convertible currency.
3. For specific exports, proceeds can be realised in INR subject to a condition that the funds are received via a freely convertible Vostro account of a non-resident bank in a country except a member of the Asian Clearing Union or Bhutan or Nepal.

Types of Export Invoices

Commercial Invoice: A commercial invoice, also known as “Documents of Contents”, typically contains data needed to prepare all other documents. There is no set format for a commercial invoice, but they generally include the following:

1. Date of the invoice
2. Name and address of the seller and buyer
3. Order number/Performa number
4. Description of goods along with their quantity and quality
5. Teams of sales
6. Point of shipping and its destination
7. Value of goods
8. Advance paid
9. Shipping mark or shipping number
10. Other certifications required under the credit
11. Consular Invoice

A certificate from the consulate or the embassy of the country to which the items are being exported is required before the shipment of the product overseas, known as the consular invoice. A consular invoice provides accurate details of the kind of goods transported, amount, value, etc., which makes it easier to set the importer’s country’s duties. As a country’s consulate reviews it, it expedites the process of inspection in the importer’s country. The buyer gives an acknowledgement by mailing the purchase order after accepting the preliminary invoice and quotation.

• Performa Invoice: The initial offer by the exporter to the potential foreign customers is the Performa Invoice, which includes information regarding the nature and quality of items, its cost and other crucial details such as the weight and shipping costs.
• Customs Invoice: A customs invoice is generally required in nations like the USA, Canada and others. It must be prepared as per the template provided by the council office of the importer’s nation. Having knowledge of the customs import value at the destination port is the key goal. Additionally, the information provided in the commercial invoice, the seller must include data in the customs invoice such as freight value, insurance value, packing charges, etc.
• Legalised Invoice: The invoice is authorised by the importer’s country’s consul located in the exporter’s country. The difference between legalised and consular invoices is that a legalised invoice doesn’t follow a predetermined format. Such type of invoice is typically demanded in the Middle Eastern nations.

Conclusion

An export invoice is different from an accounting invoice. One cannot be substituted for another as both have distinct functions. Incorrect information may cause customs to hold up the product and may be subject to fines and penalties based on incorrect information. 

FAQs

1. https://www.gst.gov.in/