CBEC issues Clarification on furnishing of Bond/LUT for exports

Ankita Khetan | Oct 4, 2017 |

CBEC issues Clarification on furnishing of Bond/LUT for exports

CBEC issues Clarification on furnishing of Bond/LUT for exports

Circular no. 8/8/17 -GST dated 04.10.17 has been issued by CBEC for clarification for exporters relating to furnishing bond/LUT bond

Circular No. 8/8/2017-GST

F. No. 349/74/2017-GST (Pt.) Vol.-II
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Customs
GST Policy Wing

New Delhi, Dated the 4th October, 2017

To,

The Principal Chief Commissioners/Chief Commissioners/Principal Commissioners/ Commissioners of Central Tax (All)
The Principal Director Generals/Director Generals (All)

Madam/Sir,
Subject: Clarification on issues related to furnishing of Bond/Letter of Undertaking forexports
1. 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 ofintegrated tax, Notification No. 37/2017 Central Tax dated 4th October, 2017 has been issuedwhich extends the facility of LUT to all exporters under rule 96A of the Central Goods andServices 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 donebefore such supersession.
2. In the light of the new notification, three circulars in this matter, namely Circular No.2/2/2017 GST dated 5th July, 2017, Circular No. 4/4/2017 GST dated 7th July, 2017 andCircular No. 5/5/2017 GST dated 11th August, 2017, which were issued for providing clarityon the procedure to be followed for export under bond/LUT, now require revision and aconsolidated circular on this matter is warranted. Accordingly, to ensure uniformity in theprocedure in this regard, the Board, in exercise of its powers conferred under section 168 (1) ofthe Central Goods and Services Tax Act, 2017 clarifies the following issues:

a) Eligibility to export under LUT: The facility of export under LUT has been nowextended to all registered persons who intend to supply goods or services for exportwithout payment of integrated tax except those who have been prosecuted for any offenceunder the CGST Act or the Integrated Goods and Services Tax Act, 2017 or any of theexisting laws and the amount of tax evaded in such cases exceeds two hundred and fiftylakh rupees unlike Notification No. 16/2017-Central Tax dated 7th July, 2017 whichextended the facility of export under LUT to status holder as specified in paragraph 5 ofthe Foreign Trade Policy 2015-2020 and to persons receiving a minimum foreign inwardremittance of 10% of the export turnover in the preceding financial year which was not less than Rs. one crore.

b) Validity of LUT: The LUT shall be valid for the whole financial year in which it istendered. However, in case the goods are not exported within the time specified in subrule(1) of rule 96A of the CGST Rules and the registered person fails to pay the amountmentioned in the said sub-rule, the facility of export under LUT will be deemed to havebeen withdrawn. If the amount mentioned in the said sub-rule is paid subsequently, thefacility of export under LUT shall be restored. As a result, exports, during the periodfrom when the facility to export under LUT is withdrawn till the time the same isrestored, shall be either on payment of the applicable integrated tax or under bond with bank guarantee.

c) Form for bond/LUT: Till the time FORM GST RFD-11 is available on the commonportal, the registered person (exporters) may download the FORM GST RFD-11 fromthe website of the Central Board of Excise and Customs (www.cbec.gov.in) and furnishthe duly filled form to the jurisdictional Deputy/Assistant Commissioner havingjurisdiction over their principal place of business. The LUT shall be furnished on theletter head of the registered person, in duplicate, and it shall be executed by the workingpartner, the Managing Director or the Company Secretary or the proprietor or by a personduly 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 paperof the value as applicable in the State in which the bond is being furnished.

d) Documents for LUT: Self-declaration to the effect that the conditions of LUT have been fulfilled shall be accepted unless there is specific information otherwise. That is, self declaration by the exporter to the effect that he has not been prosecuted should suffice forthe purposes of Notification No. 37/2017- Central Tax dated 4th October, 2017. Verification, if any, may be done on post-facto basis.

e) Time for acceptance of LUT/Bond: As LUT/Bond is a prior requirement for export, including exports to a SEZ developer or a SEZ unit, the LUT/bond should be processedon top most priority. It is clarified that LUT/bond should be accepted within a period ofthree 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 workingdays from the date of submission, it shall deemed to be accepted.

f) Bank guarantee: Since the facility of export under LUT has been extended to allregistered persons, bond will be required to be furnished by those persons who have beenprosecuted for cases involving an amount exceeding Rupees two hundred and fifty lakhs.A bond, in all cases, shall be accompanied by a bank guarantee of 15% of the bondamount.

g) Clarification regarding running bond: The exporters shall furnish a running bondwhere the bond amount would cover the amount of self-assessed estimated tax liabilityon the export. The exporter shall ensure that the outstanding integrated tax liability onexports is within the bond amount. In case the bond amount is insufficient to cover thesaid liability in yet to be completed exports, the exporter shall furnish a fresh bond tocover such liability. The onus of maintaining the debit / credit entries of integrated tax inthe running bond will lie with the exporter. The record of such entries shall be furnishedto the Central tax officer as and when required.

h) 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 doneunder the supervision of the central excise officer having jurisdiction over the place ofbusiness where the sealing is required to be done. A copy of the sealing report would beforwarded to the Deputy /Assistant Commissioner having jurisdiction over the principalplace of business.

i) Purchases from manufacturer and Form CT-1: It is clarified that there is no provisionfor issuance of CT-1 form which enables merchant exporters to purchase goods from amanufacturer without payment of tax under the GST regime. The transaction between amanufacturer and a merchant exporter is in the nature of supply and the same would besubject to GST.

j) Transactions with EOUs: Zero rating is not applicable to supplies to EOUs and there isno special dispensation for them under GST regime. Therefore, supplies to EOUs aretaxable like any other taxable supplies. EOUs, to the extent of exports, are eligible forzero rating like any other exporter.

k) Realization of export proceeds in Indian Rupee: Attention is invited to para A (v) Part I of RBI Master Circular No. 14/2015-16 dated 1st July, 2015 (updated as on 05thNovember, 2015), which states that there is no restriction on invoicing of exportcontracts in Indian Rupees in terms of the Rules, Regulations, Notifications andDirections framed under the Foreign Exchange Management Act, 1999. Further, in termsof Para 2.52 of the Foreign Trade Policy (2015-2020), all export contracts and invoicesshall be denominated either in freely convertible currency or Indian rupees but exportproceeds shall be realized in freely convertible currency. However, export proceedsagainst 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 amember 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 orBhutan or SEZ developer or SEZ unit will be permissible irrespective of whether thepayments are made in Indian currency or convertible foreign exchange as long as they arein accordance with the applicable RBI guidelines. It may also be noted that the supply ofservices to SEZ developer or SEZ unit under LUT will also be permissible on the samelines. 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 convertibleforeign exchange.

l) Jurisdictional officer: In exercise of the powers conferred by sub-section (3) of section5 of the CGST Act, it is hereby stated that the LUT/Bond shall be accepted by thejurisdictional Deputy/ Assistant Commissioner having jurisdiction over the principal placeof business of the exporter. The exporter is at liberty to furnish the LUT/bond beforeeither the Central Tax Authority or the State Tax Authority till the administrativemechanism for assigning of taxpayers to the respective authority is implemented.

3. Circular No. 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 are hereby rescindedexcept as respects things already done or omitted to be done.
4. It is requested that suitable trade notices may be issued to publicize the contents of thiscircular.
5. Difficulty, if any, in implementation of the above instructions may please be brought tothe notice of the Board. Hindi version would follow.

(Upender Gupta)
Commissioner (GST)


Download the official circular 8/8/17 -GST dated 04.10.17

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