Section 147 of the Central Goods and Services Tax Act, 2017 deals with deemed exports under the GST law. It gives the Government the power, on the recommendations of the GST Council, to notify certain supplies of goods as deemed exports even though the goods do not physically leave India.
Deemed exports are an important concept because they are different from ordinary exports of goods. In a normal export, goods physically leave India. In a deemed export transaction, the goods remain within India, but certain specified domestic supplies are given the status of deemed exports under the GST framework.
Section 147 itself does not declare every domestic supply as a deemed export. Instead, it authorises the Government to notify specific categories of supplies that satisfy the conditions prescribed by the law. The section specifically refers to supplies of goods manufactured in India, where the goods do not leave India and payment is received either in Indian rupees or in convertible foreign exchange.
The categories currently notified under Notification No. 48/2017-Central Tax include supplies against Advance Authorisation, certain supplies of capital goods against Export Promotion Capital Goods Authorisation, supplies to Export Oriented Units, and specified supplies of gold by banks or Public Sector Undertakings against Advance Authorisation.
What Is Section 147 of the CGST Act?
Section 147 is titled “Deemed exports.”
The provision states that the Government may, on the recommendations of the GST Council, notify certain supplies of goods as deemed exports where:
- the goods supplied do not leave India;
- payment for the supplies is received either in Indian rupees or in convertible foreign exchange; and
- the goods are manufactured in India.
Therefore, Section 147 creates an enabling framework rather than automatically treating all domestic supplies meeting these general characteristics as deemed exports.
A supply becomes a deemed export under GST only when it falls within a category notified under Section 147.
Meaning of Deemed Exports Under GST
The term “deemed exports” is also defined in Section 2(39) of the CGST Act.
Section 2(39) defines deemed exports as such supplies of goods as may be notified under Section 147.
This definition is important because it establishes a direct connection between the definition and the notification-making power under Section 147.
In simple terms:
Section 2(39) → Defines deemed exports
Section 147 → Gives power to notify deemed exports
Notification No. 48/2017-Central Tax → Notifies specified categories of supplies
Thus, a taxpayer should not classify a transaction as a deemed export merely because the buyer is involved in export-related business or because the goods are ultimately connected with exports. The transaction must fall within the notified framework.
Key Conditions Under Section 147
Section 147 identifies certain basic characteristics for supplies that may be notified as deemed exports.
1. The Supply Must Be of Goods
Section 147 specifically refers to supplies of goods.
Therefore, deemed exports under Section 147 are not a general category for services.
This is different from the concept of export of services under the IGST Act, which has its own statutory conditions.
2. Goods Must Not Leave India
One of the defining characteristics is that the goods supplied do not leave India.
This is the major difference between a normal physical export and a deemed export.
In a physical export, the goods cross India’s borders.
In a deemed export, the goods remain within India even though the law gives the specified domestic supply a special status.
3. Goods Must Be Manufactured in India
Section 147 refers to goods manufactured in India.
The provision therefore connects the deemed-export framework with specified supplies involving domestically manufactured goods.
4. Payment Must Be Received in Indian Rupees or Convertible Foreign Exchange
Section 147 states that payment for the supply may be received in:
- Indian rupees; or
- convertible foreign exchange.
The payment condition is therefore part of the statutory framework.
5. The Supply Must Be Specifically Notified
This is one of the most important conditions.
Even where a domestic transaction has characteristics similar to an export-related transaction, it does not automatically become a deemed export.
The Government must notify the relevant category under Section 147 on the recommendation of the GST Council.
Notification No. 48/2017-Central Tax
The Central Government issued Notification No. 48/2017-Central Tax dated 18 October 2017 under Section 147.
This notification identifies specific supplies of goods as deemed exports. CBIC’s official notification index identifies Notification No. 48/2017-Central Tax as the notification notifying certain supplies as deemed exports under Section 147.
The notified categories include:
| Sl. No. | Notified supply |
|---|---|
| 1 | Supply of goods by a registered person against Advance Authorisation |
| 2 | Supply of capital goods by a registered person against Export Promotion Capital Goods Authorisation |
| 3 | Supply of goods by a registered person to an Export Oriented Unit |
| 4 | Supply of gold by a specified bank or Public Sector Undertaking against Advance Authorisation |
These categories arise from Notification No. 48/2017-Central Tax, as amended.
1. Supply of Goods Against Advance Authorisation
The first notified category covers the supply of goods by a registered person against Advance Authorisation.
Advance Authorisation is an authorisation issued under the Foreign Trade Policy framework for specified procurement of inputs for physical exports.
The notification defines Advance Authorisation by reference to the relevant Foreign Trade Policy framework. The notification was subsequently amended, including by Notification No. 01/2019-Central Tax.
Example
Suppose a manufacturer in India supplies specified inputs to an Advance Authorisation holder.
The goods are supplied within India and do not physically cross the Indian border.
If the transaction satisfies the conditions of the applicable notification, it can qualify as a deemed export under Section 147.
The supplier must still comply with the applicable GST requirements for the supply.
2. Supply of Capital Goods Against EPCG Authorisation
The second category covers the supply of capital goods by a registered person against Export Promotion Capital Goods Authorisation.
EPCG stands for Export Promotion Capital Goods.
The purpose of the EPCG framework is connected with the import or domestic procurement of capital goods for specified export obligations.
Under Notification No. 48/2017-Central Tax, qualifying domestic supplies of capital goods against EPCG Authorisation are included in the deemed-export category.
Example
Suppose an Indian manufacturer supplies qualifying machinery to an EPCG authorisation holder.
The machinery remains in India and is used in the recipient’s business.
Where the transaction satisfies the applicable notification and EPCG requirements, the supply can qualify as a deemed export under Section 147.
3. Supply of Goods to an Export Oriented Unit
The third notified category covers supply of goods by a registered person to an Export Oriented Unit (EOU).
The notification’s definition of Export Oriented Unit also covers specified units such as:
- Export Oriented Units;
- Electronic Hardware Technology Park Units;
- Software Technology Park Units; and
- Bio-Technology Park Units,
subject to the applicable Foreign Trade Policy framework and approval requirements.
Example
Suppose a registered manufacturer supplies qualifying raw materials to an eligible EOU located in India.
The goods are delivered to the EOU within India.
The supply does not become an ordinary export merely because the recipient is an EOU. Instead, it can fall within the deemed-export category because the supply has been specifically notified under Section 147.
CBIC’s circular on the procedure for procurement by EOUs and related units confirms that supplies covered by Notification No. 48/2017-Central Tax are treated as deemed exports under Section 147.
4. Supply of Gold Against Advance Authorisation
The fourth category covers the supply of gold by a specified bank or Public Sector Undertaking against Advance Authorisation.
The notification links this category to the relevant Customs notification concerning specified banks or Public Sector Undertakings.
Therefore, this category is narrower than a general supply of gold and applies only where the specific statutory and notification conditions are satisfied.
Deemed Exports Are Not the Same as Physical Exports
One of the most common sources of confusion is treating deemed exports and physical exports as the same thing.
They are not the same.
Physical Export
In a normal export of goods:
- goods leave India;
- the transaction qualifies as an export under the applicable GST/IGST provisions;
- zero-rating provisions under the IGST Act may become relevant, subject to the statutory conditions.
Deemed Export
In a deemed export:
- goods do not leave India;
- the supply takes place within India;
- the supply is specifically notified under Section 147;
- GST is generally charged and paid on the supply; and
- a separate refund mechanism may be available subject to Section 54 and the applicable rules.
CBIC’s GST FAQ specifically distinguishes deemed exports from ordinary exports and states that deemed exports are supplies of goods notified under Section 147.
Deemed Exports Are Not Zero-Rated Supplies
This distinction is particularly important.
A deemed export is not automatically a zero-rated supply merely because it contains the word “export.”
Zero-rated supply is governed primarily by Section 16 of the IGST Act.
Deemed exports under Section 147 are a separate statutory category.
Therefore, a supplier should not automatically assume that a deemed export can be made under a Letter of Undertaking (LUT) without payment of tax in the same manner as an eligible zero-rated export.
The GST treatment of a deemed export is based on the specific provisions applicable to deemed exports and the refund mechanism under Section 54 and Rule 89.
GST Is Payable on Deemed Export Supplies
Deemed exports are treated as supplies under GST.
They are not exempt merely because they are called deemed exports.
Accordingly, GST is generally charged on the taxable supply in accordance with the applicable rate and tax provisions.
The special benefit associated with deemed exports is primarily connected with the refund mechanism prescribed for tax paid on qualifying deemed-export supplies.
CBIC’s circular concerning supplies to EOUs specifically states that these supplies are not treated as exempt supplies and addresses refund of tax paid on such deemed-export supplies.
Refund of Tax on Deemed Exports
A major practical feature associated with Section 147 is the refund mechanism.
Section 54 of the CGST Act and Rule 89 of the CGST Rules provide the framework for refund claims relating to deemed exports.
The current CBIC-published Rule 89 states that, in respect of supplies regarded as deemed exports, the refund application is to be filed by the recipient of deemed export supplies. It also requires the prescribed invoice statement and other notified evidence.
However, the historical rule position is important because Rule 89 was amended after GST was introduced. Earlier versions permitted the recipient or, in specified circumstances, the supplier to claim the refund. The amended rule structure should therefore be followed for the period and transaction concerned.
Recipient’s Refund Claim
Under the current CBIC-published Rule 89 text, the recipient files the refund application for deemed-export supplies.
The application is filed electronically in FORM GST RFD-01.
The application must be supported by the documents and evidence prescribed under Rule 89.
The rule specifically requires a statement containing the number and date of invoices along with such other evidence as may be notified for a refund claim relating to deemed exports.
Special Treatment of ITC for Deemed Export Refund
A specific issue arises because the recipient may need to claim refund of the tax paid on the deemed-export supply.
CBIC Circular No. 172/04/2022-GST clarified that the ITC of tax paid on deemed-export supplies, where availed by recipients for claiming the refund, is not ITC in terms of Chapter V of the CGST Act for the purpose discussed in the circular.
The circular further clarifies that such amount is not to be included in Net ITC for calculating refund of unutilised ITC under Rule 89(4) or Rule 89(5).
This distinction is important because the refund of tax paid on deemed-export supplies should not be confused with a normal refund of accumulated ITC arising from zero-rated supplies or inverted duty structure.
Deemed Export and Zero-Rated Export – Difference
| Basis | Deemed Export | Zero-Rated Export |
|---|---|---|
| Goods leave India | No | Generally yes for export of goods |
| Legal basis | Section 147, CGST Act | Section 16, IGST Act |
| Supply type | Specifically notified domestic supply | Export/SEZ supply meeting statutory conditions |
| Goods | Notified goods supplies | Exported goods |
| GST payment | Tax is generally paid | May be with payment of IGST or without payment under applicable provisions |
| Refund | Subject to Section 54 and Rule 89 | Subject to applicable zero-rated refund provisions |
| Services | Section 147 does not cover services | Export of services can qualify separately under IGST Act |
The table shows why the word “export” should not by itself determine the GST treatment.
Deemed Exports and Export Oriented Units
EOUs are an important part of the deemed-export framework.
A supply from a domestic registered supplier to a qualifying EOU can be treated as a deemed export where it satisfies the notification requirements.
CBIC’s Circular No. 14/14/2017-GST specifically addressed the procedure for procurement of goods from the Domestic Tariff Area by EOUs, EHTPs, STPs and BTPs under the deemed-export framework.
The procedure includes documentary and verification requirements designed to establish that the supply satisfies the conditions of the notification.
Prior Intimation and Documentation for EOU Supplies
For supplies covered by the EOU-related deemed-export procedure, CBIC’s circular prescribed safeguards including prior intimation by the recipient unit and details relating to the goods and supplier.
The purpose of such documentation is to establish that the goods being procured fall within the approved procurement framework and that the deemed-export conditions are satisfied.
Therefore, an EOU-related transaction should not be treated as a deemed export merely because the recipient describes itself as an EOU. The applicable approval, documentation and notification requirements should be checked.
Evidence Required for Deemed Export Refund
Notification No. 49/2017-Central Tax was issued to notify the evidence required from a supplier of deemed-export supplies for claiming refund under Rule 89.
CBIC’s notification index identifies Notification No. 49/2017-Central Tax as the notification concerning evidence required for deemed-export refund claims.
The exact documentation required depends on the applicable refund procedure and the person filing the claim.
Businesses should therefore maintain:
- tax invoices;
- proof of receipt of goods;
- payment records;
- relevant authorisation;
- recipient declarations or undertakings where applicable;
- EOU-related documentation where applicable; and
- other evidence prescribed under the relevant notification and rules.
Deemed Exports and Tax Invoice
A deemed export is still a taxable supply.
Therefore, the supplier should comply with the normal GST invoicing requirements applicable to the transaction.
The invoice should correctly identify:
- supplier details;
- recipient details;
- GSTINs where applicable;
- description of goods;
- quantity;
- taxable value;
- applicable GST rate;
- tax amount; and
- other particulars required under Section 31 and Rule 46.
The special deemed-export status does not eliminate ordinary GST documentation requirements.
Deemed Exports and GST Returns
A deemed-export transaction is a supply and therefore needs to be appropriately reported in the GST return system.
The supplier should ensure that:
- the invoice is correctly issued;
- outward supply details are correctly reported;
- tax liability is correctly discharged;
- recipient details are accurate; and
- supporting records are preserved.
Incorrect reporting can create difficulties when the recipient later seeks a refund.
Deemed Exports and Input Tax Credit
The supplier making a deemed-export supply may be eligible for input tax credit subject to the normal conditions of Chapter V of the CGST Act.
The fact that a supply is a deemed export does not itself create unrestricted ITC entitlement.
The normal ITC conditions and restrictions continue to be relevant.
At the recipient’s end, the treatment of tax paid on a deemed-export supply for refund purposes needs to be distinguished from ordinary ITC available under Chapter V. CBIC Circular No. 172/04/2022-GST specifically addresses this distinction.
Deemed Export Under GST vs Deemed Export Under Foreign Trade Policy
Another important distinction is between:
Deemed exports under GST law, and
Deemed exports under the Foreign Trade Policy.
The two concepts should not automatically be treated as identical.
Section 147 creates a specific GST mechanism for notified supplies of goods.
The Foreign Trade Policy has its own definition and framework for deemed exports and may provide different benefits.
Therefore, a transaction described as a deemed export under the Foreign Trade Policy should separately be examined under GST law to determine whether it qualifies as a deemed export under Section 147.
Example – Supply to an EOU
Suppose a registered manufacturer in Haryana supplies eligible raw materials to a qualifying EOU in Haryana.
The goods remain within India.
If the transaction satisfies Notification No. 48/2017-Central Tax and the applicable procedural requirements, the supply can qualify as a deemed export.
GST is charged on the taxable supply according to the applicable provisions.
The recipient can then pursue the refund mechanism applicable to deemed exports under Section 54 and Rule 89, subject to the prescribed conditions and documentation.
Example – EPCG Capital Goods
Suppose an Indian manufacturer supplies qualifying machinery to an EPCG authorisation holder.
The machinery is supplied within India and does not physically leave the country.
Where the supply falls within the notified EPCG category and all applicable conditions are satisfied, it can qualify as a deemed export under Section 147.
The transaction should be supported by the relevant EPCG authorisation and other required records.
Example – Advance Authorisation
Suppose a registered supplier provides eligible inputs against a valid Advance Authorisation.
The goods remain in India and are supplied to the authorised recipient.
Where the transaction satisfies Notification No. 48/2017-Central Tax, the supply can be treated as a deemed export.
The supplier and recipient should maintain the authorisation and transaction records supporting the claim.
Example – Ordinary Domestic Sale
Suppose Company A sells goods to Company B in India.
Company B later exports those goods outside India.
Company A’s original sale to Company B does not automatically become a deemed export merely because Company B subsequently exports the goods.
The transaction must independently satisfy the notified conditions under Section 147.
This distinction is essential because the subsequent export by another person does not automatically convert every preceding domestic supply into a deemed export.
Deemed Export Does Not Mean Goods Are Physically Exported
The word “export” in deemed export can sometimes create confusion.
The goods remain in India.
The special status arises because the Government has notified the particular category of domestic supply under Section 147.
Therefore, businesses should look at the statutory definition and applicable notification rather than relying on the commercial description of the transaction.
Important Compliance Points for Suppliers
A supplier making a potential deemed-export supply should verify:
1. GST Registration
Confirm that the supplier satisfies the registration requirement applicable to the notified category.
2. Recipient Eligibility
Check whether the recipient holds the required authorisation or status.
3. Notification Coverage
Confirm that the exact goods and transaction are covered by Notification No. 48/2017-Central Tax as amended.
4. Authorisation
Verify Advance Authorisation, EPCG Authorisation or relevant EOU documentation, as applicable.
5. Tax Invoice
Issue a correct GST tax invoice.
6. Tax Payment
Discharge the applicable GST liability.
7. Return Reporting
Report the supply correctly in GST returns.
8. Refund Documentation
Maintain all documents necessary for the applicable refund claim.
9. Payment Evidence
Preserve evidence of payment received for the supply.
10. Supporting Records
Maintain contracts, authorisations, invoices, delivery records and other relevant documents.
Important Compliance Points for Recipients
Recipients should also ensure that:
- the goods are eligible under the relevant notification;
- the authorisation is valid;
- supplier invoices are accurate;
- goods have actually been received;
- payment records are maintained;
- refund documentation is complete;
- the same tax amount is not claimed twice; and
- ITC/refund treatment is correctly followed under the applicable rules.
Section 147 and Section 54
Section 147 identifies the deemed-export framework.
Section 54 provides the general statutory framework for refunds.
The CGST Rules, particularly Rule 89, provide the procedural mechanism for filing the refund claim.
Therefore, a deemed-export transaction should generally be understood through the combined framework of:
Section 147 → Notification → Section 54 → Rule 89
Each provision has a different role.
Section 147 and Section 16 of the IGST Act
Section 147 of the CGST Act should not be confused with Section 16 of the IGST Act.
Section 16 deals with zero-rated supply.
Section 147 deals with deemed exports.
The two concepts have different statutory foundations and different tax consequences.
A deemed export is not automatically a zero-rated supply simply because it is described as an export.
Section 147 and Section 2(39)
Section 2(39) and Section 147 are directly connected.
Section 2(39) defines deemed exports by referring to supplies of goods notified under Section 147.
Therefore, to determine whether a supply is a deemed export, the taxpayer must examine the notification issued under Section 147.
This makes the notification an important part of determining the practical scope of the statutory definition.
Section 147 and Notification No. 48/2017-Central Tax
The relationship can be understood as follows:
| Provision | Function |
|---|---|
| Section 2(39) | Defines deemed exports |
| Section 147 | Gives Government power to notify deemed exports |
| Notification No. 48/2017-CT | Notifies specified supplies |
| Section 54 | Provides statutory refund framework |
| Rule 89 | Provides refund application procedure and documentation |
This structure makes it clear that Section 147 should not be read in isolation when dealing with an actual deemed-export transaction.
Key Differences Between Export, Deemed Export and Domestic Supply
| Feature | Normal Domestic Supply | Deemed Export | Physical Export |
|---|---|---|---|
| Goods remain in India | Yes | Yes | No |
| Goods leave India | No | No | Yes |
| Special notification required | No | Yes | No, but export conditions apply |
| Section 147 applicable | No | Yes | No |
| Zero-rated automatically | No | No | Export may be zero-rated under IGST law |
| GST treatment | Normal GST | GST under applicable provisions | Export/zero-rated framework |
| Refund possibility | Subject to normal refund provisions | Subject to applicable deemed-export refund provisions | Subject to zero-rated refund provisions |
Common Mistakes Regarding Section 147
Mistake 1: Treating Every Domestic Supply to an Exporter as Deemed Export
A domestic supply does not become a deemed export simply because the recipient exports the goods later.
Mistake 2: Treating Deemed Export as Zero-Rated
Deemed exports and zero-rated supplies are separate concepts.
Mistake 3: Assuming Services Can Be Deemed Exports Under Section 147
Section 147 specifically concerns notified supplies of goods.
Mistake 4: Ignoring Notification No. 48/2017-Central Tax
The notification determines the specific categories covered by the deemed-export framework.
Mistake 5: Ignoring Refund Conditions
A deemed-export transaction does not mean that refund is automatic. The applicable conditions, evidence and procedures under Section 54 and Rule 89 must be followed.
Mistake 6: Ignoring Changes in the Rules
The refund mechanism has changed over time. Therefore, the law and rules applicable to the relevant period should be checked rather than relying on an old procedure. The current CBIC-published Rule 89 text provides a specific mechanism for deemed-export refunds.
👉 Read More → Section 149 – Goods and services tax compliance rating
Key Takeaways of Section 147
Section 147 can be summarised through the following points:
- Section 147 deals with deemed exports under GST.
- It is titled “Deemed exports.”
- It empowers the Government to notify certain supplies as deemed exports.
- Such notification is made on the recommendations of the GST Council.
- Section 147 covers supplies of goods.
- The goods do not leave India.
- The section refers to goods manufactured in India.
- Payment may be received in Indian rupees or convertible foreign exchange.
- Not every domestic supply becomes a deemed export.
- The particular supply must fall within a notified category.
- Section 2(39) defines deemed exports by reference to Section 147.
- Notification No. 48/2017-Central Tax notified specified categories of deemed exports.
- These include supplies against Advance Authorisation.
- They include qualifying capital goods supplied against EPCG Authorisation.
- They include qualifying supplies to Export Oriented Units.
- They include specified gold supplies by banks or Public Sector Undertakings against Advance Authorisation.
- Deemed exports are different from physical exports.
- Deemed exports are also different from zero-rated supplies.
- Deemed exports are not automatically exempt from GST.
- GST is generally paid on the qualifying supply.
- A refund mechanism is available subject to the applicable statutory and procedural requirements.
- Rule 89 is important for the refund procedure.
- The current CBIC-published Rule 89 provides that the refund application for deemed exports is filed by the recipient of deemed-export supplies.
- Earlier versions of Rule 89 had different provisions concerning supplier claims, so the law applicable to the relevant period should be checked.
- Notification No. 49/2017-Central Tax deals with evidence for deemed-export refund claims.
- CBIC Circular No. 14/14/2017-GST provides procedure and safeguards for specified supplies to EOUs and related units.
- CBIC Circular No. 172/04/2022-GST clarifies the treatment of ITC relating to deemed-export refund claims.
- The Foreign Trade Policy concept of deemed exports should not automatically be treated as identical to deemed exports under GST.
- Proper authorisation and documentation are important for claiming deemed-export treatment.
- Section 147 should be read with Section 2(39), Section 54, Rule 89 and the applicable notifications.
Conclusion
Section 147 of the CGST Act provides the statutory foundation for deemed exports under GST. It allows the Government, on the recommendations of the GST Council, to notify specified supplies of goods as deemed exports even though the goods do not leave India. The section refers to goods manufactured in India and payment received in Indian rupees or convertible foreign exchange.
The practical scope of deemed exports is determined by the notifications issued under Section 147. Notification No. 48/2017-Central Tax is particularly important because it identifies specified categories including supplies against Advance Authorisation, qualifying capital goods against EPCG Authorisation, supplies to Export Oriented Units and specified gold supplies against Advance Authorisation.
Deemed exports should not be confused with ordinary exports or zero-rated supplies. The goods in a deemed-export transaction remain in India, and the supply is not automatically zero-rated merely because it is called a deemed export. GST is generally paid on the qualifying supply, with the refund mechanism operating subject to Section 54, Rule 89 and the applicable notifications and conditions.
For businesses, accurate documentation is extremely important. The supplier and recipient should verify the relevant authorisation, ensure that the transaction falls within the notified category, issue proper invoices, correctly report the supply and preserve the documents required for any refund claim.
The refund procedure has also changed over the life of the GST law. The current CBIC-published Rule 89 provides a specific mechanism for deemed-export refunds and states that the application is filed by the recipient of deemed-export supplies. Businesses dealing with older transactions should therefore check the rules applicable to the relevant period rather than applying a current procedure retrospectively.
In short, Section 147 does not turn every domestic supply connected with exports into a deemed export. It creates a notification-based framework under which only specified supplies meeting the applicable legal conditions receive deemed-export treatment. Understanding Section 147 together with Section 2(39), Notification No. 48/2017-Central Tax, Section 54 and Rule 89 is essential for correct GST compliance.
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