All Registered Taxpayers (Exporters) can Furnish Letter of Undertaking (LUT) in lieu of Bond/ Bank Guarantee (BG) under IGST for making Exports/ Supplies to SEZ
The CBEC has notified that all registered persons/ taxpayers under GST (Exporters) are eligible to make supply of goods or services under exports or to SEZs, without payment of integrated tax (IGST) by just furnishing Letter of Undertaking (LUT) in lieu of Bond/ Bank Guarantee (BG), as prescribed earlier, subject to certain specified conditions and safeguards, as under:
A. Specified Conditions/ Safeguards for furnishing LUT to make Exports without Payment of IGST: CBEC Notification
G.S.R. 1218(E).- In exercise of the powers conferred by section 54 of the Central Goods and Services Tax Act, 2017, and section 20 of the Integrated Goods and Services Tax Act, 2017, sub-rule (5) of rule 96A of the Central Goods and Services Tax Rules, 2017, and in supersession of notification No. 16/2017-Central Tax, dated the 7th July, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 848 (E), dated the 7th July, 2017 except as respects things done or omitted to be done before such supersession, the Central Board of Excise and Customs hereby specifies conditions and safeguards for furnishing a Letter of Undertaking in place of a Bond by a registered person who intends to supply goods or services for export without payment of integrated tax –
(i) all registered persons who intend to supply goods or services for export without payment of integrated tax shall be eligible to furnish a Letter of Undertaking in place of a bond except those who have been prosecuted for any offence under the Central Goods and Services Tax Act, 2017 (12 of 2017) or the Integrated Goods and Services Tax Act, 2017 (13 of 2017) or any of the existing laws in force in a case where the amount of tax evaded exceeds two hundred and fifty lakh rupees;
(ii) the Letter of Undertaking shall be furnished on the letter head of the registered person, 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;
(iii) where the registered person fails to pay the tax due along with interest, as specified under sub-rule (1) of rule 96A of Central Goods and Services Tax Rules, 2017, within the period mentioned in clause (a) or clause (b) of the said sub-rule, the facility of export without payment of integrated tax will be deemed to have been withdrawn and if the amount mentioned in the said sub-rule is paid, the facility of export without payment of integrated tax shall be restored.
2. The provisions of this notification shall mutatis mutandis apply in respect of zero-rated supply of goods or services or both made by a registered person (including a Special Economic Zone developer or Special Economic Zone unit) to a Special Economic Zone developer or Special Economic Zone unit without payment of integrated tax.
B. Facility of furnishing Letter of Undertaking in lieu of Bond/ BG Extended by Govt. to more Exporters to meet requirements of IGST
As per GOI Press Release dt. 30 Sept. 2017, it has been decided that, for exporting goods or services or both, the facility of furnishing Letter of Undertaking, in place of a bond, shall be allowed to exporters under IGST and no bank guarantee will be required, to facilitate the exports. The issue of cash blockage is expected to be partially addressed by this measure. More measures are under consideration. The relevant notification for this shall be issued in due course.
It may be noted that Small exporters have brought to the notice of the Government the difficulties in furnishing bond with requisite bank guarantee.