Clarification on issues related to furnishing of Bond/Letter of Undertaking for exports without payment of GST

In view of the dif­fi­cul­ties being faced by the exporters in sub­mis­sion of bonds/Letter of Under­tak­ing (LUT for short) for export­ing goods or ser­vices or both with­out pay­ment of inte­grat­ed tax, Noti­fi­ca­tion No. 37/2017 – Cen­tral Tax dat­ed 4th Octo­ber, 2017 has been issued which extends the facil­i­ty of LUT to all exporters under rule 96A of the Cen­tral Goods and Ser­vices Tax Rules, 2017 (here­after referred to as “the CGST Rules”) sub­ject to cer­tain con­di­tions and safe­guards. This noti­fi­ca­tion has been issued in super­s­es­sion of Noti­fi­ca­tion No. 16/2017 – Cen­tral Tax dat­ed 7th July, 2017 except as respects things done or omit­ted to be done before such super­s­es­sion.

  1. In the light of the new noti­fi­ca­tion, three cir­cu­lars in this mat­ter, name­ly Cir­cu­lar 2/2/2017 – GST dat­ed 5th July, 2017, Cir­cu­lar No. 4/4/2017 – GST dat­ed 7thJuly, 2017 and Cir­cu­lar No. 5/5/2017 – GST dat­ed 11th August, 2017, which were issued for pro­vid­ing clar­i­ty on the pro­ce­dure to be fol­lowed for export under bond/LUT, now require revi­sion and a con­sol­i­dat­ed  cir­cu­lar on  this  mat­ter  is  war­rant­ed.  Accord­ing­ly,  to  ensure  uni­for­mi­ty in  the pro­ce­dure in this regard, the Board, in exer­cise of its pow­ers con­ferred under sec­tion 168 (1) of the Cen­tral Goods and Ser­vices Tax Act, 2017 clar­i­fies the fol­low­ing issues:
  • Eli­gi­bil­i­ty to export under LUT: The facil­i­ty of export under LUT has been now extend­ed to all reg­is­tered per­sons who intend to sup­ply goods or ser­vices for export with­out pay­ment of inte­grat­ed tax except those who have been pros­e­cut­ed for any offence under the CGST Act or the Inte­grat­ed Goods and Ser­vices Tax Act, 2017 or any of the exist­ing laws and the amount of tax evad­ed in such cas­es exceeds two hun­dred and fifty lakh rupees unlike Noti­fi­ca­tion 16/2017-Cen­tral Tax dat­ed 7th July, 2017 which extend­ed the facil­i­ty of export under LUT to sta­tus hold­er as spec­i­fied in para­graph 5 of the For­eign Trade Pol­i­cy 2015–2020 and to per­sons receiv­ing a min­i­mum for­eign inward remit­tance of 10% of the export turnover in the pre­ced­ing finan­cial year which was not less than Rs. one crore.
  • Valid­i­ty of LUT: The LUT shall be valid for the whole finan­cial year in which it is How­ev­er, in case the goods are not export­ed with­in the time spec­i­fied in sub- rule (1) of rule 96A of the CGST Rules and the reg­is­tered per­son fails to pay the amount men­tioned in the said sub-rule, the facil­i­ty of export under LUT will be deemed to have been with­drawn. If the amount men­tioned in the said sub-rule is paid sub­se­quent­ly, the facil­i­ty of export under LUT shall be restored. As a result, exports, dur­ing the peri­od from when the facil­i­ty to export under LUT is with­drawn till the time the same is restored, shall be either on pay­ment of the applic­a­ble inte­grat­ed tax or under bond with bank guar­an­tee.
  • Form for bond/LUT: Till the time FORM GST RFD-11 is avail­able on the com­mon por­tal, the reg­is­tered per­son (exporters) may down­load the FORM GST RFD-11 from the web­site of the Cen­tral Board of Excise and Cus­toms (www.cbec.gov.in) and fur­nish the duly filled form to the juris­dic­tion­al Deputy/Assistant Com­mis­sion­er hav­ing juris­dic­tion over their prin­ci­pal place of The LUT shall be fur­nished on the let­ter head of the reg­is­tered per­son, in dupli­cate, and it shall be exe­cut­ed by the work­ing part­ner, the Man­ag­ing Direc­tor or the Com­pa­ny Sec­re­tary or the pro­pri­etor or by a per­son duly autho­rised by such work­ing part­ner or Board of Direc­tors of such com­pa­ny or pro­pri­etor. The bond, wher­ev­er required, shall be fur­nished on non-judi­cial stamp paper of the val­ue as applic­a­ble in the State in which the bond is being fur­nished.
  • Doc­u­ments for LUT: Self-dec­la­ra­tion to the effect that the con­di­tions of LUT have been ful­filled shall be accept­ed unless there is spe­cif­ic infor­ma­tion That is, self- dec­la­ra­tion by the exporter to the effect that he has not been pros­e­cut­ed should suf­fice for the pur­pos­es of Noti­fi­ca­tion No. 37/2017- Cen­tral Tax dat­ed 4thOctober, 2017. Ver­i­fi­ca­tion, if any, may be done on post-fac­to basis.
  • Time for accep­tance of LUT/Bond: As LUT/Bond is a pri­ori require­ment for export, includ­ing exports to a SEZ devel­op­er or a SEZ unit, the LUT/bond should be processed on top most It is clar­i­fied that LUT/bond should be accept­ed with­in a peri­od of three work­ing days of its receipt along with the self-dec­la­ra­tion as stat­ed in para 2(d) above by the exporter. If the LUT / bond is not accept­ed with­in a peri­od of three work­ing days from the date of sub­mis­sion, it shall deemed to be accept­ed.
  • Bank guar­an­tee: Since the facil­i­ty of export under LUT has been extend­ed to all reg­is­tered per­sons, bond will be required to be fur­nished by those per­sons who have been pros­e­cut­ed for cas­es involv­ing an amount exceed­ing Rupees two hun­dred and fifty A bond, in all cas­es, shall be accom­pa­nied by a bank guar­an­tee of 15% of the bond amount.
  • Clar­i­fi­ca­tion regard­ing run­ning bond: The exporters shall fur­nish a run­ning bond where the bond amount would cov­er the amount of self-assessed esti­mat­ed tax lia­bil­i­ty on the The exporter shall ensure that the out­stand­ing inte­grat­ed tax lia­bil­i­ty on exports is with­in the bond amount. In case the bond amount is insuf­fi­cient to cov­er the said lia­bil­i­ty in yet to be com­plet­ed exports, the exporter shall fur­nish a fresh bond to cov­er such lia­bil­i­ty. The onus of main­tain­ing the deb­it / cred­it entries of inte­grat­ed tax in the run­ning bond will lie with the exporter. The record of such entries shall be fur­nished to the Cen­tral tax offi­cer as and when required.
  • Seal­ing by offi­cers: Till manda­to­ry self-seal­ing is oper­a­tional­ized, seal­ing of con­tain­ers, wher­ev­er required to be car­ried out under the super­vi­sion of the offi­cer, shall be done under the super­vi­sion of the cen­tral excise offi­cer hav­ing juris­dic­tion over the place of busi­ness where the seal­ing is required to be A copy of the seal­ing report would be for­ward­ed to the Deputy/Assistant Com­mis­sion­er hav­ing juris­dic­tion over the prin­ci­pal place of busi­ness.
  • Pur­chas­es from man­u­fac­tur­er and Form CT-1: It is clar­i­fied that there is no pro­vi­sion for issuance of CT-1 form which enables mer­chant exporters to pur­chase goods from a man­u­fac­tur­er with­out pay­ment of tax under the GST The trans­ac­tion between a man­u­fac­tur­er and a mer­chant exporter is in the nature of sup­ply and the same would be sub­ject to GST.
  • Trans­ac­tions with EOUs: Zero rat­ing is not applic­a­ble to sup­plies to EOUs and there is no spe­cial dis­pen­sa­tion for them under GST There­fore, sup­plies to EOUs are tax­able like any oth­er tax­able sup­plies. EOUs, to the extent of exports, are eli­gi­ble for zero rat­ing like any oth­er exporter.
  • Real­iza­tion of export pro­ceeds in Indi­an Rupee: Atten­tion is invit­ed to para A (v) Part- I of RBI Mas­ter Cir­cu­lar 14/2015–16 dat­ed 01stJuly, 2015 (updat­ed as on 05th Novem­ber, 2015), which states that “there is no restric­tion on invoic­ing of export con­tracts in Indi­an Rupees in terms of the Rules, Reg­u­la­tions, Noti­fi­ca­tions and Direc­tions framed under the For­eign Exchange Man­age­ment Act, 1999. Fur­ther, in terms of Para 2.52 of the For­eign Trade Pol­i­cy (2015–2020), all export con­tracts and invoic­es shall be denom­i­nat­ed either in freely con­vert­ible cur­ren­cy or Indi­an rupees but export pro­ceeds shall be real­ized in freely con­vert­ible cur­ren­cy. How­ev­er, export pro­ceeds against spe­cif­ic exports may also be real­ized in rupees, pro­vid­ed it is through a freely con­vert­ible Vostro account of a non-res­i­dent bank sit­u­at­ed in any coun­try oth­er than a mem­ber coun­try of Asian Clear­ing Union (ACU) or Nepal or Bhutan”.

Accord­ing­ly, it is clar­i­fied that the accep­tance of LUT for sup­plies of goods to Nepal or Bhutan or SEZ devel­op­er or SEZ unit will be per­mis­si­ble irre­spec­tive of whether the pay­ments are made in Indi­an cur­ren­cy or con­vert­ible for­eign exchange as long as they are in accor­dance with the applic­a­ble RBI guide­lines. It may also be not­ed that the sup­ply of ser­vices to SEZ devel­op­er or SEZ unit under LUT will also be per­mis­si­ble on the same lines. The sup­ply of ser­vices, how­ev­er, to Nepal or Bhutan will be deemed to be export of ser­vices only if the pay­ment for such ser­vices is received by the sup­pli­er in con­vert­ible for­eign exchange.

  1. Juris­dic­tion­al offi­cer: In exer­cise of the pow­ers con­ferred by sub-sec­tion (3) of sec­tion 5 of the CGST Act, it is here­by stat­ed that the LUT/Bond shall be accept­ed by the juris­dic­tion­al Deputy/Assistant Com­mis­sion­er hav­ing juris­dic­tion over the prin­ci­pal place of busi­ness of the exporter. The exporter is at lib­er­ty to fur­nish the LUT/bond before either the Cen­tral Tax Author­i­ty or the State Tax Author­i­ty till the admin­is­tra­tive mech­a­nism for assign­ing of tax­pay­ers to the respec­tive author­i­ty is imple­ment­ed.
  1. Cir­cu­lar 2/2/2017 – GST dat­ed 5thJuly, 2017, Cir­cu­lar No. 4/4/2017 – GST dat­ed 7th July, 2017 and Cir­cu­lar No. 5/5/2017 – GST dat­ed 11th August, 2017 are here­by rescind­ed except as respects things already done or omit­ted to be done.
  2. It is request­ed that suit­able trade notices may be issued to pub­li­cize the con­tents of this

Dif­fi­cul­ty, if any, in imple­men­ta­tion of the above instruc­tions may please be brought to the notice of the Board. Hin­di ver­sion would fol­low.

As per Cir­cu­lar No. 8/8/2017-GST

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