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CLARIFICATION ON ISSUES RELATING TO FURNISHING OF BOND/LETTER OF UNDERTAKING FOR EXPORTS

October 6, 2017

In a move to simplify the procedure of exports for small exporters, Ministry of Finance, Central Board of Excise and Customs, GST Policy Wing has issued a circular dated 4th October, 2017 vide Circular No. 8/8/2017-GST, clarifying issues relating to Bond/LUT in case of export of goods and services without payment of IGST.

Further to the circular, the facility of LUT has been extended to all registered exporters under rule 96A of the Central Goods and Services Tax Rules, 2017, subject to certain conditions and safeguards.

The following points have been clarified in today’s circular:

Eligibility to export under LUT

  1.  The LUT facility has been extended to all registered persons who intend to export goods or services without payment of IGST.
  2. The LUT facility will not be available only for those registered persons who have been prosecuted for any offence under the CGST Act or IGST Act, 2017 or under any of the existing laws in force. The amount of tax evaded in such cases should be greater than Rs.2,50,000/-.

Validity of LUT

  1. The LUT shall be valid for the whole financial year in which it is tendered.
  2. 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fails to pay the amount mentioned in the said sub-rule, the facility of export under LUT will be deemed to have been withdrawn.
  3. If the amount mentioned in the said sub-rule is paid subsequently, the facility of export under LUT shall be restored.
  4. Exports happening in the interim period ( withdrawn and restored as mentioned under points b and c) shall be made either on payment of IGST or under bond with bank guarantee.

Form for bond/LUT

  1. Form GST RFD-11 shall be filled up and duly furnished to the jurisdictional Deputy/Assistant Commissioner having jurisdiction over their principal place of business.
  2. LUT shall be furnished on the letter head of the registered person in duplicate.
  3. The LUT shall be executed by the working partner, the Managing Director or the Company Secretary or the proprietor or by a person duly authorized by such working partner or Board of Directors of such company or the proprietor.
  4. The bond, wherever required, shall be furnished on a non-judicial stamp paper of the value as applicable in the State in which the bond is being furnished.

Documents for LUT

  1. A self-declaration has to be given confirming that the conditions of LUT have been fulfilled.
  2. The self-declaration shall be accepted unless there is any specific information otherwise.
  3. In case of LUT, a declaration by the exporter to the effect that he has not been prosecuted under any offence should suffice as per the above notification.

Time for acceptance of LUT/Bond

  1. A LUT/Bond is a pre-requisite document for export, hence it should be processed on top most priority.
  2. It has been clarified that a LUT/Bond should be accepted within 3 working days of its receipt along with self-declaration as mentioned in the above paragraph.
  3. 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

  1. Bank guarantee will be required only in case of bonds.
  2. Bond will be required to be furnished by those persons who have been prosecuted for cases involving an amount exceeding Rs.2,50,000/-.
  3. A bond, in all cases, shall be accompanied by a bank guarantee of 15% of the bond amount.

Clarification regarding running bond

  1. The exporters shall furnish a running bond where the bond amount would cover the amount of self-assessed estimated tax liability on the export
  2. The amount of Integrated tax liability must be within the bond amount.
  3. 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.
  4. The onus of maintaining the debit / credit entries of integrated tax in the running bond will lie with the exporter
  5. The record of such entries shall be furnished to the Central tax officer as and when required.

Jurisdictional officer

  1. The LUT/Bond shall be accepted by the jurisdictional Deputy/Assistant Commissioner having jurisdiction over the principal place of business of the exporter.
  2. 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. 

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