Indirect Tax Laws and Practice · Zero Rated Supplies and Deemed Exports

Deemed Exports under Section 147 of the CGST Act

Updated 11 October 2026 · Fact-checked

Deemed exports are supplies of goods that never leave India but are treated like exports for refund. Section 147 lets the Government, on the Council's recommendation, notify them. The goods must be made in India and paid for in rupees or convertible foreign exchange. Check the notified category, then the refund claimant and documents.

Understand Deemed Exports under Section 147 of CGST Act

Normal exports leave India. A deemed export does not. The goods are supplied inside India, usually to a buyer that is itself working for export, such as an export oriented unit. The law treats the supply as an export-linked one so the buyer's export chain is not burdened with tax.

Section 147 is only an enabling section. It says the Government may, on the recommendations of the Council, notify certain supplies of goods as deemed exports. It sets three conditions in the section itself: the goods supplied do not leave India, payment is received either in Indian rupees or in convertible foreign exchange, and the goods are manufactured in India. It does not list the categories. The list comes from the notification issued under it (Notification No. 48/2017-Central Tax).

The notified categories are: supply of goods by a registered person against an Advance Authorisation; supply of capital goods by a registered person against an EPCG Authorisation; supply of goods by a registered person to an Export Oriented Unit (EOU); and supply of gold by a notified bank or public sector undertaking against an Advance Authorisation. Confirm the exact list in Notification 48/2017-Central Tax before writing it in the exam.

Deemed exports are not zero rated supplies under Section 16 of the IGST Act. That section covers exports and supplies to an SEZ. A deemed export is a taxable supply. Tax is charged on it, and a refund route is then given. Only goods are covered, never services.

Who may claim the refund depends on the category:

For supply of goods against an Advance Authorisation and supply of goods to an EOU, either the supplier or the recipient may claim the refund of tax, but not both for the same supply.
For supply of capital goods against an EPCG Authorisation and supply of gold by a notified bank or PSU, the recipient cannot claim. Only the specified claimant, the supplier, applies.

The claimant rules come from Notification No. 47/2017-Central Tax, read with Rule 89 of the CGST Rules. The category list comes from Notification 48/2017-Central Tax. Check the claimant in Notification 47/2017 for the category in the question.

Where the recipient claims, the supplier gives an undertaking that it will not claim, the recipient must not avail ITC on that tax, and evidence of receipt of the goods is needed. The claim is filed under Rule 89 with the documents that Rule 89(2) requires for deemed exports.

Key rules to remember

Section 147 conditions: Notified supply of goods + goods do not leave India + payment in INR or convertible foreign exchange + goods manufactured in India; All the conditions in the section must be met. The section covers goods only.
Notified categories: Advance Authorisation goods | EPCG capital goods | Supply to EOU | Gold by notified bank or PSU against Advance Authorisation; The list comes from Notification 48/2017-Central Tax, not from Section 147 itself.
Who claims refund: Advance Authorisation goods and supply to EOU: supplier OR recipient (never both for the same supply) | EPCG capital goods and gold by notified bank or PSU: supplier only; The claimant rules are in Notification 47/2017-Central Tax read with Rule 89. Where the recipient claims, the supplier gives an undertaking not to claim, the recipient must not take ITC on that tax, and evidence of receipt of goods is needed.
Nature of supply: Deemed export = taxable supply with refund of tax paid; It is not a zero rated supply under Section 16 of the IGST Act.

How to solve Deemed Exports under Section 147 of CGST Act questions

Use this order for any deemed export question, whether it is a theory answer or a case scenario.

1Check that the supply is of goods. If it is a service, it is not a deemed export under Section 147.
2Check that the goods do not leave India and were manufactured in India.
3Check how payment is received: Indian rupees or convertible foreign exchange.
4Match the supply with a notified category in Notification 48/2017-Central Tax: Advance Authorisation, EPCG capital goods, EOU, or gold by a notified bank or PSU.
5Identify the claimant under Notification 47/2017-Central Tax. For Advance Authorisation goods and supply to an EOU, the supplier or the recipient may claim, but only one of them, and the other gives an undertaking. For EPCG capital goods and gold, only the supplier claims.
6List the documents needed under Rule 89(2): the refund application, invoices, and the evidence or endorsement showing the supply was received by the authorisation holder or the EOU.
7State the result: the amount of tax refundable, who gets it, and that a recipient who claims cannot also take ITC on that tax.

Quickest way: Four-gate test for a deemed export

When to use it: Use it for MCQs and short case scenarios where you must decide quickly whether a supply is a deemed export.

Gate 1: Is it goods? If not, stop.
Gate 2: Is it one of the four notified categories? If not, stop.
Gate 3: Are the goods Indian-made, not leaving India, and paid in rupees or convertible foreign exchange?
Gate 4: Who claims the refund? For Advance Authorisation and EOU supplies, one of supplier or recipient, with an undertaking from the other. For EPCG and gold, the supplier only.

Common mistakes in Deemed Exports under Section 147 of CGST Act

Calling a deemed export a zero rated supply under Section 16 of the IGST Act.
Both lead to a refund, so they look the same.
Fix: Remember that zero rated means exports and SEZ supplies. A deemed export is a taxable supply with a refund route.
Saying Section 147 lists the categories of deemed exports.
Students link the topic to the section only.
Fix: Say that Section 147 empowers the Government to notify them. The list is in Notification 48/2017-Central Tax.
Including services as deemed exports.
The word export is usually linked with services too.
Fix: Section 147 speaks of supplies of goods only.
Letting both supplier and recipient claim the refund.
Students forget the one-claimant rule.
Fix: Write that only one may claim, and the other gives an undertaking not to claim.
Saying the recipient can claim the refund in every notified category.
Students remember supplier-or-recipient as one rule for all four categories.
Fix: Recipient claim is available for supplies against Advance Authorisation and to EOU. For EPCG capital goods and gold, only the supplier claims. Check Notification 47/2017-Central Tax.
Forgetting the payment and manufacture conditions.
Students focus on the categories and skip the section's wording.
Fix: Quote all three conditions: goods do not leave India, payment in rupees or convertible foreign exchange, and the goods are manufactured in India.
Letting the recipient claim ITC and the refund on the same tax.
Students treat the refund and the credit as separate benefits.
Fix: State that where the recipient claims the refund, it must not avail ITC on that tax.

Worked examples

Example 1

Sharma Components Pvt Ltd, Pune, manufactures machine parts in India. It supplies the parts to Kaveri Exports EOU, Pune, and receives payment in Indian rupees. Is it a deemed export under Section 147? Who may claim the refund?

Show the solution

The supply is of goods, so Section 147 can apply.
The parts are manufactured in India and are used inside India, so they do not leave India.
Payment is in Indian rupees, which satisfies the payment condition.
Supply of goods by a registered person to an EOU is a notified category.
So the supply is a deemed export. Tax is charged on it, and it is not a zero rated supply under Section 16 of the IGST Act.
For supply to an EOU, the refund of tax may be claimed by Sharma Components or by Kaveri Exports, but only one of them. The other gives an undertaking not to claim.

Answer: Yes, it is a deemed export. Either the supplier or the EOU recipient may claim the refund of tax, not both.

Example 2

Mehta Engineering Ltd supplies goods worth ₹10,00,000 to Rao Industries, an Advance Authorisation holder, within the same State. For illustration, assume the goods attract CGST at 9% and SGST at 9%; the actual rate depends on the goods. Rao claims the refund of the tax and Mehta gives an undertaking not to claim. Compute the refund and state the conditions to check.

Show the solution

Check the category: supply of goods against an Advance Authorisation is a notified category, and for it the recipient may claim in place of the supplier.
CGST = 9% × ₹10,00,000 = ₹90,000.
SGST = 9% × ₹10,00,000 = ₹90,000.
Total tax charged on the invoice = ₹90,000 + ₹90,000 = ₹1,80,000.
Conditions for Rao's claim: Mehta gives an undertaking that it will not claim the refund, Rao does not avail ITC on this tax, and Rao holds evidence of receipt of the goods.
If these conditions are met, Rao claims a refund of ₹1,80,000, the tax charged on the invoice, on the Rule 89 application with the documents required under Rule 89(2).

Answer: On the assumed 9% + 9% rates, the refund claimable by Rao Industries is ₹1,80,000, subject to Mehta's undertaking, no ITC by Rao and evidence of receipt of goods. Mehta cannot claim it.

Exam tips

In theory answers, quote the three conditions of Section 147 first, then the notified categories.
Write that the categories come from the notification, not from the section.
In case scenarios, check goods or services first. A service supply is never a deemed export.
In MCQs, watch for the trap of calling a deemed export zero rated, or letting both parties claim the refund.
In refund workings, show the tax split (CGST, SGST or IGST) and name who claims.

Practice questions from Zero Rated Supplies and Deemed Exports

Deemed Exports under Section 147 of CGST Act in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Deemed Exports under Section 147 of CGST Act: frequently asked questions

What is a deemed export under GST?

It is a notified supply of goods that does not leave India but is treated as export-linked for refund. The goods must be made in India and payment must be in rupees or convertible foreign exchange.

Which supplies are notified as deemed exports?

Notification 48/2017-Central Tax lists supply of goods against an Advance Authorisation, supply of capital goods against an EPCG Authorisation, supply of goods to an EOU, and supply of gold by a notified bank or PSU against an Advance Authorisation. Check the notification for the exact wording.

Who can claim the refund of tax on a deemed export?

For supplies against an Advance Authorisation and supplies to an EOU, either the supplier or the recipient can claim, but not both for the same supply. For EPCG capital goods and gold, only the supplier claims. A recipient who claims must not take ITC on that tax, and the supplier gives an undertaking not to claim.

Are deemed exports zero rated supplies?

No. Zero rated supplies under Section 16 of the IGST Act are exports and supplies to an SEZ. A deemed export is taxable, and the tax paid is refunded under the refund rules.