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How to furnish letter of undertaking (LUT)/Bond under GST

 

The main purpose of Bond or Letter of Undertaking (LUT) is to prevent Cash Outflow from pocket of exporter.‘Export’ and ‘Supply to SEZ units’ is collectively termed as “Zero rated Supply” under GST. Therefore, the procedures for ‘Export’ and ‘Supply to SEZ without charging tax’ are similar.

Important point to note here is that GST has removed the concept of Deemed Exporter (or Manufacturer Exporter) and Merchant Exporter. Therefore, the concept of CT-1 form, which was earlier used for purchase of goods by a merchant exporter from a manufacturer without payment of central excise duty, has become irrelevant.

Moreover, supply to Export Oriented Units (EOUs) is not considered as Deemed Export.  In other words, benefit of GST refund can be claimed only be Actual Exporter.

Export under Letter of Undertaking (LUT)

WHAT: What is LUT? – LUT is generally submitted on the letterhead containing signature and seal of the person or the person authorized. LUT shall be valid for 12 months.

WHO: Who can furnish LUT? – Only following categories of Exporters can avail facility of LUT:

(1) Status holders, that is, Star Export houses under Foreign Trade Policy (2015-2020) OR

(2) Exporters who have received a remittance which is higher of:

(a) Rs. one crore or

(b) 10% of export turnover,

in the previous financial year.

HOW: How to furnish LUT? – The format of LUT is provided in Form GST RFD-11 which has to be furnished online. However, till the time online module becomes operative, the form can be manually furnished to jurisdictional Deputy/ Assistant Commissioner of Central Tax Dept or State Tax Dept.

Export under Bond

WHAT: What is Bond? – Bond is to be furnished on non-judicial stamp paper along with Bank Guarantee. Exporter can furnish running bond instead of consignment-wise bond.

WHO: Who has to furnish bond? – All the exporters other than those eligible to furnish LUT have to furnish bond.

HOW: How to furnish bond? – The bond is to be furnished manually in Form GST RFD-11 till the time online module becomes operative.  Bank Guarantee – The bond should be accompanied with Bank Guarantee (BG). As decided by jurisdictional Commissioner, the bank guarantees which in any case cannot exceed 15% of the bond amount. However, the Commissioner may waive off the requirement to furnish bank guarantee in following cases:

  1. 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.
  2. If a person is having state-wise multiple GST registration under common PAN Number but combined export receipts satisfies criteria of “inward foreign remittances of Rs. 1 crore or 10% of turnover, whichever is higher”, then such person can be allowed to submit bond without bank guarantee.

 By Lavi Girdhar, GST special Team

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