If you thought GST was tricky for local sales, wait till imports and exports get added to the plate. Suddenly it’s not just about whether you charge CGST + SGST or IGST — it’s about whether you should charge anything at all, and who actually ends up paying.
I’ve seen business owners panic when their first export order came in, or when customs slapped IGST on their imports. The law isn’t trying to confuse you, though it feels like it. The logic is actually simple: GST follows where things are consumed. Imports? India consumes, so India takes tax. Exports? Somebody abroad consumes, so India steps back.
Let’s walk through this slowly, the way you’d explain to a friend over chai.
Why Imports and Exports Need Special Rules
Picture this: a trader in Mumbai imports electronics from China. Those phones are going to be sold in India, so obviously India wants tax. Now flip it. A Jaipur handicraft exporter ships pottery to New York. The pots are going to be used there, not here. Should India charge GST on that? Nope. Otherwise Indian goods would become costlier abroad.
That’s why the law carved out neat rules — imports are taxed here, exports are zero-rated. On paper, that’s it. In reality? A hundred small conditions that can mess you up if you’re not paying attention.
Imports of Goods: Where the Tax Hits
Goods are easy to see — they land at the port. The rule is straight: place of supply = the state where the importer is located. Tax collected as IGST right at customs.
👉 Example: A Chennai company brings in machinery from Germany. The machine lands at Chennai port. Customs officer says, “Here’s your IGST bill.” You pay it, and later you can claim it as input tax credit if it’s for your business.
Most importers treat IGST at customs like a pass-through cost. Pay now, take credit later. Unless you’re importing for personal use — then you just eat the tax.
Imports of Services: The Sneaky One
Here’s where people slip. With goods, you see a container. With services, there’s nothing physical. And that’s why startups often think, “We don’t need to pay GST, the guy is abroad.” Wrong.
👉 Real case: A Delhi startup hired a US-based designer to redo their branding. The designer never stepped foot in India. Work delivered over email. But since the benefit was enjoyed here, the tax department says: place of supply = India. And because the US guy isn’t registered for GST, the Indian startup had to pay the GST themselves under reverse charge.
That’s the kicker with imports of services. RCM (Reverse Charge Mechanism) makes you, the buyer, responsible. You pay first, then claim ITC if it’s for business. If you miss it, the taxman catches up six months later with penalties.
Exports of Goods: The Zero-Rated Sweet Spot
Exports are India’s pride, so the law gives them a big advantage: zero-rating. That means no GST is charged, but you can still claim back the tax you paid on inputs.
👉 Example: A Surat textile exporter sends garments to Dubai. Invoice = zero-rated supply. No GST added. But all the GST he paid on fabric, thread, and packaging? He can file for a refund. That keeps his costs competitive overseas.
Sounds smooth, but exporters often forget paperwork. Your invoice must clearly say “zero-rated supply.” Skip that, and refunds get stuck in red tape.
Exports of Services: Same Idea, More Conditions
Services work like goods but with a checklist. For it to count as export of services:
- Supplier must be in India.
- Client must be outside India.
- Payment has to come in foreign currency.
- Place of supply must be outside India.
👉 Example: A Mumbai digital marketing firm runs Facebook ads for a UK-based client. Paid in dollars, client abroad, service consumed there. Perfect — export of services, zero-rated.
But imagine if the same firm got paid in Indian rupees by that UK client. Suddenly, it may not qualify as export, and GST might apply. Small detail, big consequence.
Common Goof-Ups Businesses Make
Let’s be real, not everyone reads GST law like bedtime stories. Most mistakes I’ve seen are the same ones over and over:
- Mixing exempt and zero-rated. They’re not the same. Exempt means no GST but no ITC refund either. Zero-rated means no GST and you can claim refunds.
- Forgetting RCM. Especially startups hiring foreign freelancers — design, coding, content writing. They forget GST applies under reverse charge.
- Wrong invoicing. Export invoices must be zero-rated. Import invoices must show IGST paid at customs.
- Payment in INR for exports. If money doesn’t come in foreign currency, you might lose export benefits.
👉 Real-life mess: A small Surat exporter once slapped GST on his export invoice thinking it was mandatory. The foreign buyer flat-out refused to pay extra. He had to redo paperwork, apply for a refund, and wait months for his money.
Why the Rules Look This Way
It isn’t random. Imports are taxed so that foreign suppliers don’t get an unfair edge over local sellers. Exports are zero-rated so Indian businesses don’t lose ground in global trade. Services are pulled under RCM because otherwise foreign companies would never bother registering here, and India would lose tax revenue.
It’s all about keeping the system balanced.
Everyday Scenarios to Make It Click
- An IT company in Hyderabad imports software licenses from the US → IGST under RCM, place of supply = India.
- A Tirupur textile exporter ships garments to Dubai → zero-rated, no GST, place of supply = Dubai.
- A Delhi restaurant chain hires a UK consultancy → import of services, GST paid under RCM.
- A Mumbai electronics trader imports phones from China → IGST at customs, place of supply = Maharashtra.
- A Pune software developer builds an app for a Canadian client → export of services, zero-rated, refund claimable.
Pattern? Imports = you pay GST here. Exports = you don’t pay GST, but you keep your paperwork sharp.
Wrapping It Up
Imports and exports under GST aren’t as terrifying as they first sound. The simple formula is:
- Imports = tax in India. Goods → IGST at customs. Services → RCM.
- Exports = zero-rated. Goods and services both. No GST on invoice, but you get refunds.
The devil is in the details — invoices, currency, reverse charge. Miss a step, and you’ll have notices piling up. Nail it, and you stay compliant without bleeding cash.
So, the next time someone asks “Do I charge GST on exports?” you can confidently laugh and say, “Nope, but you better not forget RCM on imports.”
