General VAT Treatment of Exports

• Exports of goods are generally not subject to VAT under most state VAT laws in India
  
• Such transactions are categorized as zero-rated sales, meaning tax is levied at 0%
  
• Though VAT is not charged on the invoice, the dealer is still required to report the sale in VAT returns
  
• Exporters are eligible to claim input tax credit or refund of VAT paid on purchases used in exports
  
• The zero-rating mechanism is designed to make Indian goods competitive in international markets

Conditions for Claiming VAT Exemption on Exports

• The goods must be physically exported outside India, supported by shipping bills and customs documentation
  
• The sale should result in the movement of goods from India to a place outside India
  
• A valid export order or contract must exist before the movement of goods
  
• The dealer must file appropriate Form H (under CST rules) to support exemption claims
  
• Export documentation such as bill of lading, airway bill, and foreign buyer invoice must be retained

Input Tax Credit and Refunds on Export Sales

• Since exports are zero-rated, dealers can claim refund of VAT paid on input goods used for manufacturing or trading
  
• Refunds are processed based on evidence of actual export and proper accounting of input VAT
  
• Input tax refund helps avoid cost accumulation and ensures that export goods remain tax-free
  
• Dealers may need to file a refund application with annexures and proof of tax payments
  
• Delay or mismatch in documentation may lead to rejection or hold-up of VAT refunds

Documentation and Compliance Requirements

• Exporters must maintain separate records for domestic and export sales
  
• VAT returns must clearly reflect zero-rated turnover under the appropriate column
  
• Form H is a critical requirement to validate that the sale qualifies as an export
  
• Other compliance documents include purchase invoices, VAT paid challans, and customs clearance certificates
  
• Inspections or audits may be conducted to verify refund claims and export legitimacy

Transition to GST and Its Impact on Export VAT

• Under GST, exports continue to be zero-rated, but with a more streamlined refund system
  
• Legacy VAT rules still apply to transactions before July 1, 2017, and are relevant for audits and disputes
  
• Pending VAT refund applications related to exports must be pursued with the state VAT departments
  
• Exporters who dealt in petroleum or alcohol may still encounter VAT on inputs, even post-GST
  
• Understanding VAT rules on exports remains important for finalizing legacy cases and tax reconciliations