As you are aware, there have been several queries/ concerns over LUT/BOND, bank guarantee exemption etc which has impacted export shipments since the onset of GST. In this regard, council has already sent several representations to CBEC/GST for clarifications.
Taking cognizance of the queries from the trade/industry, CBEC has issued Notification No. 16/2017- Central Tax and Circular No. 4/4//2017-GST both dated 07/07/2017 on the issues related to BOND, LUT, Validity, container sealing etc.
For the sake of your convenience, the major points from the Circular/ Notification are reproduced/ highlighted as follows:
Applicability of Letter of Undertaking (LUT)
The following shall be eligible for submission of Letter of Undertaking in place of a bond:
(a) Status holders as specified in Paragraph 5 of the Foreign Trade Policy 2015- 2020;
(b) Exporters who have received the due foreign inward remittances amounting to a minimum of 10% of the export turnover, which should not be less than one crore Rupees, in the preceding financial year.
And he has not been prosecuted for any offence under the Central Goods and Services Tax Act, 2017 (12 of 2017) or under any of the existing laws in case where the amount of tax evaded exceeds two hundred and fifty lakh rupees.
The Validity of LUT shall be twelve months. If the exporter fails to comply with the conditions of the LUT he may be asked to furnish a bond.
The Letter of Undertaking shall be furnished in duplicate for a financial year in the annexure to FORM GST RFD – 11 referred to in sub-rule (1) of rule 96A of the Central Goods and Services Tax Rules, 2017 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 on the letter head of the registered person.
All exporters, not covered by the above said LUT criteria would submit bond. The procedure for submission and acceptance of bond has already been prescribed vide circular No. 2/2/2017-GSTdated 4th July, 2017.
The bond shall be furnished on non-judicial Stamp paper of the value as applicable in the State in which bond is being furnished. Regarding validity, exporters shall furnish a running bond, in Case he is required to furnish a bond, in FORM GST RFD -11. The bond would cover the amount of tax involved in the export based on estimated tax liability as assessed by the exporter himself. The exporter shall ensure that the outstanding tax liability on exports is within the bond amount. In case the bond amount is insufficient to cover the tax liability in yet to be completed exports, the exporter shall furnish a fresh bond to cover such liability.
FORM RFD -11 under rule 96A of the CGST Rules requires furnishing a Bank guarantee with bond. In this regard, the jurisdictional Commissioner may decide about the amount of bank guarantee depending upon the track record of the exporter. If Commissioner is satisfied with the track record of an exporter then furnishing of bond without Bank guarantee would suffice. In any case the bank guarantee should normally not exceed 15% of the bond amount.
Place of submission of BOND/ LUT:
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 bond/LUT before Central Tax Authority or state Tax Authority till the administrative mechanism for assigning of taxpayers to respective authority is implemented. However, if in a State, the Commissioner of State Tax so directs, by General instruction, to exporter, the Bond/LUT in all cases be accepted by Central tax officer till such time the said administrative mechanism is implemented.
Container sealing under Central Excise supervision: The existing practice of container sealing by bottle seal under Central Excise supervision or otherwise would continue till 1st September, 2017. Such sealing shall be done under the supervision of the officer having physical jurisdiction over the place of business where the sealing is being done. A copy of the sealing report would be forwarded to the Deputy/ Assistant Commissioner having jurisdiction over the principal place of business.
Exports may be allowed under existing LUTs/Bonds till 31st July 2017. Exporters shall submit the LUTs/bond in the revised format latest by 31st July, 2017.
The above instructions shall apply to exports on or after 1st July, 2017.
Members are requested to kindly take note of the above points regarding LUT/Bond/ BG etc to facilitate exports. You may also refer to the notification No. 16/2017- Central Tax and Circular No. 4/4//2017-GST both dated 07/07/2017 attached for reference.
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 email@example.com and firstname.lastname@example.org .
Encl : notfctn-16-central tax-english