Facility to export under LUT extended to all exporters and other points of clarification – Master Circular on exports

The GST Policy Wing of the Central Board of Excise and Customs vide Master Circular No. 8/8/2017-GST dated October 4, 2017, has issued a clarification on issues related to furnishing of Bond/Letter of Undertaking (“LUT”) for exports. Gist of the Master Circular is given as under for your easy digests:

1.  Facility to export under LUT has been extended to all registered persons intending to supply goods/services for export without IGST: 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 IGST except those who have been prosecuted for any offence under the CGST Act or IGST Act or any of the existing laws and the amount of tax evaded in such cases exceeds Rs. 250 Lakhs. Thus, earlier requirement of being a status holder and receiving a minimum foreign inward remittance of 10% of the export turnover in the preceding financial year which was not less than Rs. 1 crore has been dispensed with.
2.  Validity of LUT: In case the goods are not exported within the time limit under Rule 96A(1) of the CGST Rules, 2017, 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fails to pay the amount mentioned in the said sub-rule, the facility of export under LUT will be deemed to have been withdrawn.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. Exports during the period from when the facility to export under LUT is withdrawn till the time the same is restored, shall be either on payment of the applicable IGST or under bond with bank guarantee.
3.  Form for bond/LUT: Furnish the duly filled form GST RFD-11 to the jurisdictional Deputy/Assistant Commissioner having jurisdiction over their principal place of business. 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.
4.  Documents for LUT: Self-declaration to the effect that the conditions of LUT (i.e. have been he has not been prosecuted) fulfilled shall be accepted unless there is specific information otherwise.
5.  Time for acceptance of LUT/Bond: It is clarified that LUT/bond should be accepted within a period of 3 working days of its receipt along with the self-declaration by the exporter. If the LUT/bond is not accepted within a period of 3 working days from the date of submission, it shall deemed to be accepted.
6.  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 Rs. 250 Lakhs. A bond, in all cases, shall be accompanied by a bank guarantee of 15% of the bond amount.
7.  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 export. The exporter shall ensure that the outstanding IGST 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 IGST in the running bond will lie with the exporter.
8.  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 done
9.  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 regime. The transaction between a manufacturer and a merchant exporter is in the nature of supply and the same would be subject to GST.
10.  Transactions with EOUs: Zero rating is not applicable to supplies to EOUs and there is no special dispensation for them under GST regime. 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.
11.  Realization of export proceeds in Indian Rupee: 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.
12.  Jurisdictional officer: 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.

Note: The earlier Circular No. 2/2/2017 – GST dated 5th July, 2017, Circular No. 4/4/2017 – GST dated 7th July, 2017 and Circular No. 5/5/2017 – GST dated 11th August, 2017, are rescinded.

 Read More at: https://www.cbec.gov.in/resources//htdocs-cbec/gst/Final_Master_circular_LUT_Bond_04102017.pdf

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