Nowadays there is confusion among exporters regarding applicability of GST. In Previous tax regime, exporters of Services were not required to submit any Bond or Letter of Undertaking before or after export of services. Further,exporters were not required to pay any Tax on such Export of Services before or after exports are affected and to claim refund of the same later.
But with the introduction of Rule 96A in Central Goods and Services Tax Rules, 2017, Tax Treatment of Export under GST Regime is not as same as it was earlier. GST Regime and has created additional documentation and procedural requirements, which has raised few questions in the mind of Taxpayers. Let’s go through few such questions which are in the mind of Taxpayers:-
Ans: As per section 7(5) of IGST Act, 2017, if the place of supply is outside India, then it is treated as Inter- State trade or commerce, so according to Section 24 of CGST Act, 2017, GST registration is mandatory, irrespective of threshold limit and if the person wishes to export without paying IGST, then he has to comply with Rule 96A
Ans: In the given case it is domestic sale (within the State) as well as export, So as per section 7(5) of IGST Act, 2017, it is treated as Inter- State trade or commerce, so according to Section 24 of CGST Act, 2017, GST registration is mandatory, irrespective of threshold limit and if the person wishes to export without paying IGST, then he has to comply with Rule 96A.
Please note that in the given case if there is only domestic sales (no export) then no need for GST registration because that would come under Intra State Supply.
Turnover shall include the aggregate value of all taxable supplies, exempted supplies, export of goods and/ or services and inter – state supplies of a person having the same PAN.
|Supply of Exempted Goods/Services is out of the purview of GST Registration|
Ans: Extract of Rule 96A is as follows:-
Rule 96A. Refund of integrated tax paid on export of goods or services under bond or Letter of Undertaking.-
(1) Any registered person availing the option to supply goods or services for export without payment of integrated tax shall furnish, prior to export, a bond or a Letter of Undertaking in FORM GST RFD-11 to the jurisdictional Commissioner, binding himself to pay the tax due along with the interest specified under sub-section (1) of section 50 within a period of —
(a) fifteen days after the expiry of three months from the date of issue of the invoice for export, if the goods are not exported out of India; or
(b) fifteen days after the expiry of one year, or such further period as may be allowed by the Commissioner, from the date of issue of the invoice for export, if the payment of such services is not received by the exporter in convertible foreign exchange.
(2) The details of the export invoices contained in FORM GSTR-1 furnished on the common portal shall be electronically transmitted to the system designated by Customs and a confirmation that the goods covered by the said invoices have been exported out of India shall be electronically transmitted to the common portal from the said system.
(3) Where the goods are not exported within the time specified in sub-rule (1) and the registered person fails to pay the amount mentioned in the said sub-rule, the export as allowed under bond or Letter of Undertaking shall be withdrawn forthwith and the said amount shall be recovered from the registered person in accordance with the provisions of section 79.
(4) The export as allowed under bond or Letter of Undertaking withdrawn in terms of sub-rule 3 shall be restored immediately when the registered person pays the amount due.
(5) The Board, by way of notification, may specify the conditions and safeguards under which a Letter of Undertaking may be furnished in place of a bond.
(6) The provisions of sub rule (1) shall apply, mutatis mutandis, in respect of zero-rated supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit without payment of integrated tax.”;
Answer-4 Please find attached the same in Word and PDF Format.
As per Rule 96A of CGST Act, 2017 any registered person can avail the option to supply goods or services for export without payment of IGST.
Now let’s discuss the points under ‘Export without Payment of IGST’:
Furnishing of Bond/ Letter of Undertaking (LUT) in FORM GST RFD-11
Any registered person availing the option to supply goods or services for export without payment of integrated tax shall furnish, prior to export, a bond or a Letter of Undertaking. This bond or Letter of Undertaking is required to be furnished in FORM GST RFD-11 on the common portal, binding himself to pay the tax due along with the interest specified under sub-section (1) of section 50 within a period of:
Withdrawal of bond/ LUT
If the goods are not exported within the specified time and the registered person fails to pay the mentioned amount, the export as allowed under bond or Letter of Undertaking shall be withdrawn forthwith and the said amount shall be recovered from the registered person accordingly.
Restoration of bond/ LUT
The bond/ LUT which are withdrawn shall be restored immediately when the registered person pays the amount due.
To whom the bond/ LUT is required to be furnished
As per Rule 96A, exporter shall be required to furnish bond/ Letter of undertaking to jurisdictional Deputy/Assistant Commissioner till the administrative mechanism for assigning of Taxpayers to respective authority is implemented.
Bond/ LUT can be furnished manually also
As per Rule 96A, bond/ LUT may be furnished manually to the jurisdictional Deputy/Assistant Commissioner in the format specified in FORM RFD-11 till the module for furnishing of FORM RFD-11 is available on the common portal.
LETTER OF UNDERTAKING (LUT)
Eligibility of Furnishing LUT
Not every registered person supplying goods or services for exports are eligible for furnishing LUT. Following registered person shall be eligible for submission of Letter of Undertaking in place of a bond:
A registered person shall be a status holder as specified in paragraph 5 of the Foreign Trade Policy 2015- 2020; or
Received due foreign inward remittances (min. 10%)
A registered 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.
Not prosecuted for any offence
A registered person shall not be 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.
Please note that those who does not satisfy above mentioned conditions, would submit bond.
List of documents required to furnish LUT
1. Copy of Status Holder certificate issued by DGFT/ Development Commissioner
Bank FIRC of 10% of the export turnover which should not less than 1 crore in financial year
2. Letter of Undertaking to be executed on letter head- to be provided in duplicate; (also to be signed by witnesses)
3. Declaration required that the registered has not been prosecuted for any offence involving tax, where the tax evaded is above Rs. 250 lakhs;
4. GSTIN certificate copy;
5. Proof to indicate principle place of business- preferably copy of application for registration for GST;
6. FORM RFD- 11 to be provided in duplicate;
7. If the taxpayer is a public or private limited company than board resolution for appointment of Authorized signatory is required.
Who shall execute the LUT
The Letter of Undertaking shall be furnished in duplicate for a financial year in the annexure to FORM GST RFD – 11 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.
Validity of LUT
Letter of undertaking shall be valid for twelve months.
What if an exporter fails to comply with the conditions of LUT
If an exporter fails to comply with the conditions of the LUT he may be asked to furnish a bond.Exports may be allowed under existing LUTs/Bonds till 31st July 2017.
Running bond or One time bond
Now the question arise as to what kind of a bond is to be furnished. It is observed consignment wise bond would be a significant compliance burden on the exporters. It is directed that the exporters shall furnish a running bond (with debit / credit facility), instead of one-time bond (separate bond for each consignment / export), 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.
Furnishing of bank guarantee
Rule 96A of CGST requires to furnish bank guarantee with bond. Field formations have requested for clarity on the amount of bank guarantee as a security for the bond.
Furnishing of bond on Non- Judicial Stamp paper
The bond shall be furnished on non- judicial stamp paper of the value as applicable in the State in which bond is being furnished.
What shall be the amount of Guarantee?
In this regard it is directed that 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.
|Exporters shall submit the LUTs/bond in the revised format latest by 31st July, 2017.|
With the Introduction of Rule 96A Exporters can export Goods &Services by Paying IGST on the same and can claim refund after paying the same or can Export the same without payment of IGST under Undertaking or Bond.
In Next Article we will cover all about Refund of IGST Paid on Export of Services.
Hope this information will help you in your Professional endeavors. For further assistance/query, feel free to write to us.
Author: C S EktaMaheshwari is the Author of this article and is Company Secretary by profession. The Author can be reached at [email protected]
|1||Notification No. 16/2017– Central Tax Dated 7th July, 2017|
|2||Circular No. 4/4/2017-GST dated 7th July, 2017|
|3||Circular No. 2/2/2017-GST dated 4th July, 2017|
|4||Central Goods and Services Tax Act, 2017|
|5||Central Goods and Services Tax (CGST) Rules, 2017|
|6||Integrated Goods and Services Tax Act, 2017|
|7||Trade Cir. No. 29T of 2017 Mumbai, Date : 10/07/2017|
|8||Public Notice No. 91/2017 –JNCH Dated- 10th July 2017|
Disclaimer: The entire contents of this article is solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation.. It doesn’t constitute professional advice or a formal recommendation. The author has undertook utmost care to disseminate the true and correct view and doesn’t accept liability for any errors or omissions. You are kindly requested to verify & confirm the updates from the genuine sources before acting on any of the information’s provided herein above.