Section 147 at a Glance
Contents
1. Statutory Text of Section 147
The Government may, on the recommendations of the Council, notify certain supplies of goods as deemed exports, where the goods supplied do not leave India, and payment for such supplies is received either in Indian rupees or in convertible foreign exchange, if such goods are manufactured in India.
2. Section 147 Explained in Simple Language
The word “export” normally makes people think of goods physically leaving India. Section 147 creates a special statutory concept called deemed exports.
Under this concept, certain supplies of goods can be treated as deemed exports even though the goods remain within India. The Government must notify the particular category on the recommendation of the GST Council.
Why was this concept introduced?
The GST framework recognises that some domestic supplies are closely connected with export-oriented or specified economic activities. Instead of requiring physical movement of those goods outside India, the law can provide a special deemed-export treatment for notified transactions.
This can be particularly relevant to suppliers dealing with Advance Authorisation holders, EPCG Authorisation holders and Export Oriented Units, subject to the exact conditions of the applicable notification and other law.
3. Core Conditions Under Section 147
| Condition | What it means |
|---|---|
| Government notification | The particular supply must be notified under Section 147. |
| Recommendation of GST Council | The notification power operates on the Council's recommendations. |
| Goods | Section 147 refers specifically to supplies of goods, not services. |
| Goods do not leave India | The goods remain within India; physical export is not required for deemed-export status. |
| Payment | Payment must be received in Indian rupees or convertible foreign exchange within the statutory framework. |
| Manufactured in India | The statutory text refers to goods manufactured in India. |
| Notification conditions | The specific notified category may impose additional requirements that must also be satisfied. |
4. Supplies Notified as Deemed Exports
Notification No. 48/2017-Central Tax, dated 18 October 2017, notified certain supplies as deemed exports under Section 147. CBIC's official notification index identifies the notification as the instrument notifying certain supplies as deemed exports.
The principal categories notified include:
| No. | Notified category | Simple explanation |
|---|---|---|
| 1 | Supply of goods by a registered person against Advance Authorisation | A registered domestic supplier supplies goods to an Advance Authorisation holder, subject to the notification's conditions. |
| 2 | Supply of capital goods by a registered person against Export Promotion Capital Goods Authorisation | Specified capital goods supplied to an EPCG Authorisation holder can qualify, subject to the notification. |
| 3 | Supply of goods by a registered person to an Export Oriented Unit | Specified supplies to an EOU can qualify as deemed exports, subject to the notification and applicable procedures. |
5. Advance Authorisation and Deemed Exports
Advance Authorisation is a trade-policy mechanism associated with duty-free import of inputs for manufacture of export products, subject to the applicable foreign trade framework.
Under the GST deemed-export notification, specified supplies of goods by a registered person against Advance Authorisation are included in the notified category.
Manufacturer A in India supplies specified raw materials to Company B, which holds a valid Advance Authorisation. The transaction is made for the notified purpose and all applicable conditions are satisfied. The supply can fall within the deemed-export category notified under Section 147.
What should the supplier verify?
- Recipient's GST registration details.
- Advance Authorisation details and validity.
- Whether the goods supplied fall within the applicable authorisation/notification conditions.
- Invoice and supply documentation.
- Payment trail.
- Evidence required for any refund claim.
6. EPCG Authorisation and Deemed Exports
EPCG stands for Export Promotion Capital Goods. The relevant trade-policy framework facilitates import or procurement of capital goods for specified export obligations.
Section 147's notified deemed-export framework includes specified supply of capital goods by a registered person against EPCG Authorisation.
An Indian machinery manufacturer supplies qualifying capital equipment to a registered customer holding an EPCG Authorisation. If the transaction satisfies the notified conditions, the domestic supply can receive deemed-export treatment.
7. Supplies to an Export Oriented Unit (EOU)
Specified supplies of goods by a registered person to an EOU are included in the notified deemed-export framework.
An EOU is still subject to GST law as applicable to registered persons. The special deemed-export treatment does not mean that the supplier should simply treat the invoice as a normal zero-rated export invoice.
A registered supplier supplies qualifying goods to a registered EOU. The goods are delivered within India and do not cross the customs frontier. If the transaction satisfies Notification No. 48/2017 and other applicable conditions, it can qualify as a deemed export.
CBIC materials have also clarified that EOUs continue to operate under the GST framework and that GST is payable on supplies made to them, subject to the applicable provisions.
8. Are Deemed Exports Zero-Rated?
No. This is one of the most important points for taxpayers.
Physical exports and supplies to SEZs are dealt with under the zero-rated supply framework of the IGST Act. Deemed exports under Section 147 are a separate CGST Act concept.
| Point | Physical export | Deemed export |
|---|---|---|
| Goods leave India? | Yes. | No. |
| Zero-rated supply? | Generally yes, subject to the IGST Act. | No, deemed export is not itself a zero-rated supply. |
| GST on domestic invoice? | Export may be made with or without payment of IGST under the applicable route. | GST is generally charged on the deemed-export supply. |
| Refund mechanism | Zero-rated refund routes under the IGST Act/CGST Rules may apply. | Separate deemed-export refund provisions under the CGST Rules apply subject to conditions. |
9. Refund of GST on Deemed Exports
Because deemed exports are taxable domestic supplies, GST may first be paid on the supply. The GST Rules provide a separate refund mechanism for tax paid on notified deemed-export supplies.
CBIC's refund rules identify deemed exports as a specific refund category and require invoice-level details and other documentary evidence.
Typical refund concept
- Supplier makes a qualifying deemed-export supply.
- GST is charged and paid in accordance with the applicable law.
- The transaction is reported in the GST returns.
- The eligible claimant applies for refund using the prescribed mechanism.
- Required invoice-level and other evidence is furnished.
- The refund is processed subject to the applicable rules and verification.
10. Supplier vs Recipient Refund
The refund mechanism for deemed exports has had specific procedural clarifications because both the supplier and recipient can be involved in the refund process under the applicable rules and circulars.
CBIC Circular No. 147/03/2021-GST clarified the position for recipients claiming refund of tax paid on deemed-export supplies and addressed the portal requirement for debiting the relevant amount from the electronic credit ledger. It also modified earlier guidance regarding ITC availment by recipients for this limited refund mechanism.
| Issue | Practical control |
|---|---|
| Who claims refund? | Identify the claimant under the applicable Rule 89 route and current procedure. |
| Duplicate claim | Ensure supplier and recipient do not both claim refund for the same tax amount contrary to the applicable conditions. |
| Invoice mapping | Maintain invoice number, date, value and tax amount exactly as reported. |
| ITC position | Follow the current circular/rule treatment applicable to the recipient's refund claim. |
| Undertaking | Where required, obtain the prescribed undertaking from the other party. |
11. Invoice and Documentation for Deemed Exports
A deemed-export transaction should be supported by a complete evidence trail. The supplier should not rely only on the recipient's statement that the purchase is for export purposes.
Suggested document checklist
- Tax invoice with correct GSTINs.
- Purchase order/work order.
- Advance Authorisation, EPCG Authorisation or EOU evidence, as applicable.
- Delivery challan/transport documents where relevant.
- E-way bill where applicable.
- Proof of receipt of goods.
- Proof of payment.
- GST return reporting.
- Refund application and supporting statements, if refund is claimed.
- Undertakings/certificates required under the applicable refund procedure.
12. Detailed Practical Examples
A registered manufacturer supplies qualifying goods against a valid Advance Authorisation. The goods remain in India. If the notification conditions are satisfied, the supply may be a deemed export.
A machinery manufacturer supplies qualifying capital goods against a customer's EPCG Authorisation. The goods are delivered domestically. The transaction can qualify under the notified deemed-export category.
A registered supplier sells qualifying raw materials to an EOU. The goods do not leave India. Subject to the notification and documentation, the supply can be treated as deemed export.
A supplier sells ordinary goods to a company that later exports finished products. Unless the transaction independently falls within a notified deemed-export category, it is simply a normal domestic taxable supply.
A supplier makes a qualifying deemed-export supply and charges GST. The supplier should not automatically issue an export-without-IGST invoice merely because the transaction is a deemed export.
The eligible claimant pays/has tax paid on the deemed-export supply and subsequently applies for refund under the applicable Rule 89 mechanism with invoice-level evidence.
Supplier and recipient both prepare refund claims for the same invoice. The finance teams must coordinate and follow the applicable undertaking/claimant rules to avoid duplicate benefit.
A purchase order refers to an Advance Authorisation that has expired or does not cover the goods. The supplier should not automatically treat the transaction as deemed export.
The supplier uses an incorrect recipient GSTIN on the invoice. Even where the underlying transaction is eligible, the documentation error can create refund and reconciliation problems.
A customer says it is an EOU, but the supplier has no supporting documentation. The accounts team should obtain and verify the relevant evidence before applying deemed-export treatment.
The invoice is for ₹50 lakh but the payment trail relates to a different amount and different invoice. The refund file should be reconciled before submission.
A customer has 100 deemed-export invoices. Prepare an invoice-level schedule matching invoice number, date, taxable value, GST, authorisation reference and payment.
13. Finance & GST Workflow for Deemed Exports
- Identify the transaction: determine whether the supply is goods and whether the proposed category is one notified under Section 147.
- Verify recipient: check GSTIN and relevant authorisation/status.
- Verify goods: ensure the goods and quantity/value satisfy the applicable notification/authorisation.
- Issue tax invoice: apply the correct domestic GST treatment.
- Record accounting: book taxable value and GST separately.
- Report in returns: disclose the transaction in the appropriate return tables.
- Track payment: reconcile bank receipt with invoice and recipient records.
- Prepare refund file: identify the eligible claimant and compile prescribed evidence.
- Reconcile refund: match application, invoice schedule, return and electronic ledger data.
- Archive: retain approval, authorisation, invoice, transport, payment and refund records.
14. Deemed Export Reconciliation Format
A practical register can contain the following columns:
| Field | Purpose |
|---|---|
| Serial No. | Internal reference. |
| Supplier GSTIN | Identifies supplier registration. |
| Recipient GSTIN | Identifies recipient. |
| Recipient category | Advance Authorisation / EPCG / EOU, as applicable. |
| Authorisation No. | Links invoice to authorisation. |
| Invoice No. & Date | Primary transaction reference. |
| Taxable Value | Value used for GST calculation. |
| CGST / SGST / IGST | Tax charged. |
| Payment Date | Bank realisation tracking. |
| Return Period | GST return reporting period. |
| Refund Claimant | Supplier/recipient according to applicable route. |
| Refund ARN | Application tracking. |
| Refund Sanctioned | Final status. |
| Remarks | Exceptions and follow-up. |
15. Common Mistakes in Deemed Export Transactions
“Deemed export means zero-rated export.”
Incorrect. Deemed exports are a separate category and are not automatically zero-rated.
“Any supply to an EOU is automatically deemed export.”
The supply must satisfy the applicable notified category and conditions.
“Any sale to an exporter is deemed export.”
No. The transaction must fall within the notified framework.
“No GST should be charged.”
Deemed-export supplies are generally taxable domestic supplies, with a separate refund mechanism subject to conditions.
“The customer's authorisation need not be checked.”
Authorisation and transaction-specific evidence can be critical to establishing eligibility.
“Supplier and recipient can both freely claim the same refund.”
The refund framework contains safeguards against duplicate benefit. Coordinate the claim and undertakings as applicable.
“Section 147 itself lists all eligible transactions.”
No. Section 147 empowers notification; the specific notified categories must also be examined.
“A deemed-export refund is the same as an export refund.”
No. The legal basis and procedural route are different.
16. Deemed Export vs Physical Export vs SEZ Supply
| Feature | Physical export | Deemed export | SEZ supply |
|---|---|---|---|
| Goods leave India? | Yes. | No. | Goods/services supplied to SEZ unit/developer under the applicable framework. |
| Legal concept | Export under the IGST Act. | Notified supply under CGST Act Section 147. | Zero-rated supply under the IGST Act, subject to conditions. |
| Zero-rated? | Yes, subject to law. | No. | Yes, subject to law. |
| GST invoice treatment | Export invoice/appropriate zero-rated route. | Domestic taxable invoice with GST, subject to applicable treatment. | Applicable SEZ zero-rated documentation. |
| Refund | Zero-rated refund routes may apply. | Specific deemed-export refund route. | Specific zero-rated refund route. |
17. Questions People Commonly Search
- What is Section 147 of the CGST Act?
- What is deemed export under GST?
- Are deemed exports zero-rated?
- What is the difference between export and deemed export?
- Which supplies are deemed exports under GST?
- Is supply to EOU a deemed export?
- Is supply against Advance Authorisation deemed export?
- Is supply of capital goods against EPCG deemed export?
- How is GST charged on deemed exports?
- Who can claim refund on deemed exports?
- What documents are required for deemed export refund?
- Can recipient claim refund of GST on deemed exports?
- Can supplier claim refund on deemed export supply?
- What is Notification 48/2017-Central Tax?
- Section 147 CGST Act explained in simple language
18. Frequently Asked Questions
1. What is Section 147 of the CGST Act?
It empowers the Government, on the recommendations of the GST Council, to notify certain supplies of goods as deemed exports where the goods do not leave India and the statutory payment/manufacturing conditions are satisfied.
2. What is deemed export in GST?
It is a statutory category of specified domestic supplies of goods that are treated as deemed exports even though the goods remain within India.
3. Are deemed exports zero-rated?
No. Deemed exports are not zero-rated merely because they are called deemed exports. GST is generally charged and a separate refund mechanism may apply.
4. Which supplies are notified as deemed exports?
Notification No. 48/2017-Central Tax notified specified categories, principally supplies against Advance Authorisation, qualifying capital goods against EPCG Authorisation and specified supplies to EOUs, subject to the notification's conditions.
5. Is supply to an EOU a deemed export?
Specified supplies to an EOU can qualify under the notified category, subject to the applicable conditions and documentation.
6. Is supply against Advance Authorisation deemed export?
Specified supply of goods by a registered person against Advance Authorisation is included in the notified deemed-export category, subject to conditions.
7. Is supply of capital goods against EPCG deemed export?
Specified supply of capital goods by a registered person against EPCG Authorisation is included in the notified category, subject to conditions.
8. Does the goods have to leave India?
No. The fact that goods do not leave India is one of the defining features of Section 147 deemed exports.
9. Is GST payable on deemed exports?
Generally, yes. Deemed-export supplies are domestic taxable supplies, and a separate refund mechanism may be available subject to the applicable rules.
10. Can GST paid on deemed exports be refunded?
Yes, the CGST Rules contain a specific refund mechanism for tax paid on deemed-export supplies, subject to eligibility and documentary requirements.
11. Can the recipient claim refund?
The refund framework and CBIC clarifications provide for a recipient route subject to prescribed conditions. Circular No. 147/03/2021-GST addressed recipient refund and the related electronic-credit-ledger procedure.
12. Can the supplier claim refund?
A supplier route has also been provided in the deemed-export refund framework subject to the applicable conditions, evidence and undertakings. The claimant should verify the current Rule 89 procedure before filing.
13. Is deemed export the same as SEZ supply?
No. SEZ supplies fall under the zero-rated framework, while deemed exports are a separate Section 147 category.
14. Is deemed export available for services?
Section 147 specifically refers to supplies of goods. It does not create a deemed-export category for services.
15. What payment condition appears in Section 147?
The statutory text refers to payment being received either in Indian rupees or in convertible foreign exchange.
16. What does “manufactured in India” mean in Section 147?
The statutory provision includes a condition concerning goods manufactured in India. Eligibility should be assessed against the actual goods and the applicable notified category.
17. What is Notification No. 48/2017-Central Tax?
It is the principal Central Tax notification issued under Section 147 to notify certain supplies as deemed exports.
18. What documents should be retained?
Keep the invoice, recipient GSTIN, relevant authorisation/status documents, purchase order, transport/receipt evidence, payment proof, return reporting and refund documentation.
19. Quick Revision – Section 147
- Section 147 = Deemed Exports.
- Government may notify certain supplies on GST Council recommendations.
- Section 147 applies to supplies of goods.
- The goods do not leave India.
- Payment is received in Indian rupees or convertible foreign exchange.
- The statutory text refers to goods manufactured in India.
- Specific supplies must be notified; Section 147 is not a blanket deeming provision.
- Notification No. 48/2017-Central Tax notified specified categories including Advance Authorisation, EPCG capital goods and EOU supplies.
- Deemed exports are not zero-rated.
- GST is generally charged on the domestic supply.
- A separate refund mechanism is available subject to the CGST Rules and prescribed evidence.
- Maintain invoice-level documentation and coordinate supplier/recipient refund claims to avoid duplicate benefit.
20. Legal Disclaimer
This page is provided for general educational and compliance-workflow purposes. Deemed-export eligibility depends on the statutory provision, the applicable notification, GST Rules, foreign-trade authorisation and other conditions relevant to the transaction. Refund procedures and portal requirements may change. Verify the law, notifications, circulars and procedures applicable to the relevant date before acting. This page is not a substitute for professional legal or tax advice.