The Government of India has finally shown some empathy towards the exporters with its latest notification vide Notification No. 37/2017 dated 4th October 2017 and a circular on the same day vide circular no. 8/8/2017-GST wherein export procedures have been relaxed under the GST scenario. With the roll out of Goods and Service Tax (GST) in India on the appointed day i.e., July 1st 2017 the export industry has been continuously shaken due to the cumbersome procedures to be carried out in order to export the goods or services or both from India. Initially the havoc was due to the lack of clarity among the exporters and other taxpayers regarding the manner of exporting goods or services from India which significantly disturbed the Export Industry in the initial month of GST era. This is also expected to have affected the Foreign Inward Remittances which would have otherwise flown more if proper and easy methods to export goods were provided in GST before the implementation of the same.
Following this the government once again trembled the Industry when it notified the rules on July 7th, 2017 vide Notification No. 16/2017. This notification had moderate impact on the exporters as exporting on Letter of Undertaking (LUT) was allowed only on fulfillment of various conditions.
The IGST Act spells out the two ways of exporting goods or services or both from India which are:-
- Exporting on payment of IGST and claiming refund thereafter; or
- Exporting without payment of IGST by furnishing Bond or LUT.
Exporting through LUT is the primary pick of the exporters because if one exports through LUT he is neither supposed to deposit the GST (IGST) with the government nor he had to obtain any Bank Guarantee which otherwise is a requirement to opt for the bond. LUT option not only can save the working capital but also the time and cost of the exporters.
Now that the government realizes these issues of the exporters, it has came out with the new notification suppressing its previous notification in order to give relaxation in the conditions which one has to satisfy in order to operate through LUT.
Initially only the following persons were eligible for submission of LUT:-
- The status holder as per FTP 2015-20; or
- Person who has 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
Provided 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.
Now the government through Notification No. 37/2017 dated October 4th 2017 has removed the condition 1 and 2 above. Hence all the exporters can opt for LUT provided they have not 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.
ALL THE KEY POINTS OF THE CIRCULAR :-
- Eligibility to export under LUT: 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 integrated tax except those who have been prosecuted for any offence under the CGST Act or the Integrated Goods and Services Tax Act, 2017 or any of the existing laws and the amount of tax evaded in such cases exceeds two hundred and fifty lakh rupees.
- Validity of the LUT: The LUT shall be valid for the whole financial year in which it is tendered. However, in case the goods are not exported within the time specified in sub rule (1) of rule 96A of the CGST Rules 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. As a result, 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 integrated tax or under bond with bank guarantee.
- Form for bond/LUT: Till the time FORM GST RFD-11 is available on the common portal, the registered person (exporters) may download the FORM GST RFD-11 from the website of the Central Board of Excise and Customs (www.cbec.gov.in) and furnish the duly filled form 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 authorized 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.
- Documents for LUT: Self-declaration to the effect that the conditions of LUT have been fulfilled shall be accepted unless there is specific information otherwise. That is, self-declaration by the exporter to the effect that he has not been prosecuted should suffice for the purposes of Notification No. 37/2017- Central Tax dated 4th October, 2017. Verification, if any, may be done on post-facto basis.
- Time for acceptance of LUT/Bond: As LUT/Bond is a prior requirement for export, including exports to a SEZ developer or a SEZ unit, the LUT/bond should be processed on top most priority. It is clarified that LUT/bond should be accepted within a period of three working days of its receipt along with the self-declaration as stated in para 2(d) above by the exporter. If the LUT / bond is not accepted within a period of three working days from the date of submission, it shall deemed to be accepted.
- 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 Rupees two hundred and fifty lakhs. A bond, in all cases, shall be accompanied by a bank guarantee of 15% of the bond amount.
- 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 integrated tax 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 integrated tax in the running bond will lie with the exporter. The record of such entries shall be furnished to the Central tax officer as and when required.
- Sealing by officers: Till mandatory self-sealing is operational, 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. A copy of the sealing report would be forwarded to the Deputy/Assistant Commissioner having jurisdiction over the principal place of business.
- 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.
- 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.
- Realization of export proceeds in Indian Rupee: Attention is invited to para A (v) Part I of RBI Master Circular No. 14/2015-16 dated 01st July, 2015 (updated as on 05th November, 2015), which states that “there is no restriction on invoicing of export contracts in Indian Rupees in terms of the Rules, Regulations, Notifications and Directions framed under the Foreign Exchange Management Act, 1999. Further, 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 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.
- Jurisdictional officer: In exercise of the powers conferred by sub-section (3) of section 5 of the CGST Act, it is hereby stated that the 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 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.
These are undoubtedly welcome steps by the government in the direction of prosperity for the nation since it will favorably impact the export industry in the country which will subsequently attract easier and larger foreign currency in India. The exporters would also get motivated by such steps of government to export more and save their working capital and time to complete the transactions.
Hope the information will assist you in your Business & Professional endeavours. In case of any query/ information, please do not hesitate to write back to us.
Thanks & Best Regards,
Tax Team, Get Set Business Solutions
B-217, Pacific Business Park, Site-IV, Sahibabad Industrial Area,
Ghaziabad, UP, New Delhi-NCR area, India, 201010.
|Tel: – +91 120 402 6320, | Mail : – firstname.lastname@example.org | Website: – www.getsetbusiness.com |
Disclaimer: The contents of this document are solely for informational purpose. It does not constitute any professional advice or recommendation of the firm. Neither the authors nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this document nor for any actions taken in reliance thereon. Readers are advised to consult the professional for understanding applicability of this article in the respective scenarios. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. No part of this document should be distributed or copied (except for personal, non-commercial use) without our written permission.