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Home» Circulars» Gst: Lut Bond Cbec Clarification On Rcmc In Lieu Of Bg Eligibility Of Lut On Inr Receipts Others

GST: LUT/ BOND- CBEC Clarification on RCMC in lieu of BG/ Eligibility of LUT on INR Receipts/ Others

Basic Chemicals, Cosmetics & Dyes Export Promotion Council
(Set-up by Ministry of Commerce and Industry, Govt of India)

Jhansi Castle, 4th Floor, 7 Cooperage Road, Mumbai - 400 001.India.

Tel : +91 22 22021288 / * Fax : +91 22 22026684

* E-mail : Web :



  14th August  2017






LUT/ BOND-    CBEC Clarification on RCMC in lieu of BG/


Eligibility of LUT on INR Receipts/ Others



Dear Members,


As you are aware, on 7th July 2017 CBEC has provided clarifications on LUT, Bond applicability and criteria.


However, there have been several requests from member-exporters to request government to allow RCMC in lieu of Bank Guarantee with Bond.  In this regard, council had already sent representation to CBEC/GST for allowing RCMC in lieu of BG in  the interest of  MSME exporters.


Taking cognizance of the queries from the trade/industry,  CBEC (GST Policy Wing)  has issued Circular No. 5/5/2017 – GST on the issues related to RCMC instead of Bank Guarantee, Documents for LUT, INR receipts etc.


For the sake of your convenience, the major points from the Circular are reproduced/ highlighted as follows:

a. Eligibility to export under LUT:

It is hereby clarified that any registered person who has received a minimum foreign inward remittance of 10% of export turnover in the preceding financial year is eligible for availing the facility of LUT provided that the amount received as foreign inward remittance is not less than Rs. one crore. This means that only such exporters are eligible to LUT facilities who have received a remittance of Rs. one crore or 10% of export turnover, whichever is a higher amount, in the previous financial year. It may however be noted that a status holder as specified in paragraphs 3.20 and 3.21 of the Foreign Trade Policy 2015-2020 is eligible for LUT facility regardless of whether he satisfies the above conditions.


b. Form for LUT:

Bonds are furnished on non-judicial stamp paper, while LUTs are generally submitted on the letterhead containing signature and seal of the person or the person authorized in this behalf as provided in said Notification.


c. Time for acceptance of LUT/Bond:

As LUT/bond is a priority  requirement for export, including supplies to a SEZ developer or a SEZ unit, the LUT/bond should be processed on top most priority and should be accepted within a period of three working days from the date of submission of LUT/bond along with complete documents by the exporter.


d. Purchases from manufacturer and form CT-1:

The scheme holds no relevance under GST since transaction between a manufacturer and a merchant exporter is in the nature of supply and the same has not been exempted under GST even on submission of LUT/bond. Therefore, such supplies would be subject to GST. The zero rating of exports, including supplies to SEZ, is allowed only with respect to supply by the actual exporter under LUT/bond or payment of IGST.


e. Transactions with EOUs:

Zero rating is not applicable to supplies to EOUs and there is no special dispensation for them. Therefore, supplies to EOUs are taxable under GST just like any other taxable supplies. The EOUs, to the extent of exports, are eligible for zero rating like any other exporter.


f. Forward inward remittance in Indian Rupee:

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 acceptance of LUT instead of a bond 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 applicable RBI guidelines. It may also be noted that supply of services to SEZ developer or SEZ unit 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.


g.   Bank Guarantee:

Circular No. 4/4/2017 dated 7th July, 2017 provides that bank guarantee should normally not exceed 15% of the bond amount. However, the Commissioner may waive off the requirement to furnish bank guarantee taking into account the facts and circumstances of each case. It is expected that this provision would be implemented liberally. Some of the instances of liberal interpretation are as follows:


  • RCMC: An exporter registered with recognized Export Promotion Council can be allowed to submit bond without bank guarantee on submission of a self-attested copy of the proof of registration with a recognized Export Promotion Council.

  • In the GST regime, registration is State-wise which means that the expression ‘registered person’ used in the said notification may mean different registered persons (distinct persons in terms of sub-section (1) of section 25 of the Act) if a person having one Permanent Account Number is registered in more than one State. It may so happen that a registered person may not satisfy the condition regarding foreign inward remittances in respect of one particular registration, because of splitting and accounting of receipts and turnover across different registered person with the same PAN. But the total amount of inward foreign remittances received by all the registered persons, having one Permanent Account Number, maybe Rs. 1 crore or more and it also maybe 10% or more of total export turnover. In such cases, the registered person can be allowed to submit bond without bank guarantee.


  • Jurisdictional officer:


It has been clarified in Circular Nos. 2/2/2017 – GST dated 4th July, 2017 and 4/4/2017 – GST dated 7th July, 2017 that Bond/LUT 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 bond/LUT before Central Tax Authority or State Tax Authority till the administrative mechanism for assigning of taxpayers to respective authority is implemented. It is reiterated that the Central Tax officers shall facilitate all exporters whether or not the exporter was registered with the Central Government in the earlier regime.


  • Documents for LUT:

Documents submitted as proof of fulfilling the conditions of LUT shall be accepted unless there is any evidence to the contrary. Self-declaration shall be accepted unless there is specific information otherwise. For example, a self-declaration by the exporter to the effect that he has not been prosecuted should suffice for the purposes of notification No.16/2017 - Central tax dated 7th July, 2017. Verification, if any, may be done on post facto basis. Similarly, Status holder exporters have been given the facility of LUT under the said notification and a self-attested copy of the proof of Status should be sufficient.


  • Applicability of circulars on Bond/LUTs:

The instructions issued vide earlier circulars dated 07/07/2017 and this circular are applicable to any export made on or after the 1st July 2017.


Members are requested to take note of this circular and for full text, may use following  link to download the same:


In our view, above clarifications should  resolve the existing issues related to Bond, LUT, BG etc.   However, if any  difficulty is still faced by the members, they may revert to us on  and .


Thanking you,


Yours faithfully,




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