Government on 11-08-2017 vide Circular No. 5/5/2017 – GST, provided some clarifications on applicability of LUT’s/Bonds in case of exports of goods and services, major clarifications provided in this circular are as follows: 

Any registered person (i.e. not only manufacturer but any registered person)

♣ Who has received a minimum foreign inward remittance of 10% of export turnover in the preceding financial year


♣  The amount received as foreign inward remittance is not less than Rs. One Crore.

is eligible for availing the facility of LUT.

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.

♣  Bonds are required to be furnished on non-judicial stamp paper.

♣ LUTs are generally submitted on the letterhead containing signature and seal of the person or the person authorized in this behalf.

♣ As LUT/bond is a priori requirement for export, including supplies to a SEZ developer or a SEZ unit, the LUT/bond so it should be submitted before making such exports.

♣ 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.

♣ 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.

♣ 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.

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.

♣ Supply of SERVICES to SEZ developer or SEZ unit will also be permissible on acceptance of LUT instead of a bond, 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.

♣ However, the supply of SERVICES 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.

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:

  • 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 accountal 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.

♣  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.

♣ Unless there is any evidence to the contrary. Self-declaration shall be accepted in case of LUT For example, a self-declaration by the exporter to the effect that he has not been prosecuted should suffice. 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.

♣  All the instructions given by the all the circulars relating to exports, bonds LUT’s etc. are effective in respect of exports made on or after the 1st July 2017.

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2 responses to “Clarification on applicability of LUT’s/Bonds in case of export of goods and services”

  1. As per “Circular No. 5/5/2017 – GST dated:11.08.2017 Page No 3, last paragraph, whereas is states “supplies of goods to SEZ unit”.

    Dose it means goods and services OR only goods?

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