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:-
Page Contents
- Question 1. I am an exporter of Service and not doing any Local Trade and My Turnover in Last Year was less than 20 Lakh and expected to remain below 20 Lakh in Current Year Too. Do I need to register under GST and comply with the procedures prescribed under Rule 96A of CGST Rules, 2017 r.w. Various Notifications and Circulars issued from time to time?
- Question 2. My Domestic Turnover which is within the State of Registration and Export is Less than 20 Lakh do I need to Register and if Yes do I need to comply with the procedures prescribed under Rule 96A of CGST Rules, 2017?
- Question 3. What is Rule 96A?
- Question 4.What is the Format of FORM GST RFD-11, Bond, Letter of Undertaking which is to be Supplied under Rule 96A?
Question 1. I am an exporter of Service and not doing any Local Trade and My Turnover in Last Year was less than 20 Lakh and expected to remain below 20 Lakh in Current Year Too. Do I need to register under GST and comply with the procedures prescribed under Rule 96A of CGST Rules, 2017 r.w. Various Notifications and Circulars issued from time to time?
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
Question 2. My Domestic Turnover which is within the State of Registration and Export is Less than 20 Lakh do I need to Register and if Yes do I need to comply with the procedures prescribed under Rule 96A of CGST Rules, 2017?
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 |
Question 3. What is Rule 96A?
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.”;
Question 4.What is the Format of FORM GST RFD-11, Bond, Letter of Undertaking which is to be Supplied under Rule 96A?
Answer-4 Please find attached the same in Word and PDF Format.
Download GST RFD-11, Bond, Letter of Undertaking in PDF Format
Download GST RFD-11, Bond, Letter of Undertaking in word 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:
- 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
- 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.
Please note-
- Exporter need not submit separate bond for each consignment / export and shall furnish a running bond, 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.
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:
Status Holder
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
OR
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.
BOND
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. |
Conclusion
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 csektamaheshwari14@gmail.com
References
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.
Can anyone confirm if the conditions for obtaining LUT are dropped or not? As per https://tutorial.gst.gov.in/userguide/refund/Furnishing_of_Letter_of_Undertaking_for_Export_of_Goods_or_Services.htm , i.e, GST tutorials, they have not mentioned any 1 crore min turnover or any other limit.
Dear Sir
Please clarify,
My firm has export under LUT but during the year ITC accumulated, So one of the bills of export with payment of IGST to claim the refund. question is can I export with payment of GST if I already have LUT under export?
You need to get GST registration for the purpose
If we filed LUT form ,then what we show in GSTR 1 in Invoice type – SEZ Supply with payment or SEZ supply without payment
sir
Can I Use separate sl .no. for export invoice under zero rated tax with(LUT BOND)
Is IEC is not required if you have GST no. Please confirm.
What is about google adsense income for youtube earned ? If 500000
1.Can you kindly clarify if we send small single single shipments through courier/indiapost where value of shipment itself is Rs,200-300 per shipment how can we pay IGST & export .To whom should we pay IGST & how ? We dont want to go for bond option.
2.Secondly,how can we claim ITC on such shipments since all we get is a shipping receipt .
please also clearify,
We are manufacturer of fluid coupling & spares falling under HSN 8483, earlier we were supplying the goods to mega power project without charging excise duty as per govenrment notification 12/2012 ce full filling the condition where required bank guarantee etc.
Since we had submitted the required data in central excise department for supply to mega power project.
Please let me know, whether supply to mega power project is having any exemption in GST, OR same to be supply by charging GST.
Regards,
Girish
9039811571
Hi, my concern is regarding not to pay gst nor execute bond. For claiming refund need to follow required procedure.
If I don’t want to claim refund then why should I pay GsT on export of Services and goods.
Kindly clarify. As export is zero rated.
I am basically a Blogger from India. My Current Earnings are Less than 20 Lakh Per Year. Do I need to Pay for GST? If yes then Please tell me How to register for GST?
My company had received an export order say worth 1000 USD in pre-GST regime.In the post GST regime can we raise an export invoice of 848 + 152.64 (IGST @ 18%)= 1000 (rounded)
We can then claim refund of IGST after showing proof that the goods were exported.
Would this be OK and if not what would be the correct procedure to be followed if we have to export on payment of IGST.Thanks
Very simple language and proper reply thanks
Dear madam,
please tell me that how i can get status holder certificate for applying LUT if i am a service exporter company, please tell us detail procedure in this regards.
I am working in a transmission utility. our utility is claiming O&M charges from the other states for maintaining their electric transmission lines which are starting from our state and ending in respective states. what is the provision of IGST in this case .
We do content writing for a company in the Gulf. Our invoices are raised in the currency of that country and paid in to our account in Indian rupees.
Is GST applicable on this service?
Dear Madam,
We appreciate and thank you for your detailed post clarifying the export formalities under GST.
S Ravi Chandiran
Good article
Very informative and precise.
Well explained. But I have a question. What about merchant exporter of goods. What will be the position if we procure goods from local manufacturer for exports. Are we allowed to purchase under bond/ lut. If not then will he get refund of GST paid on purchases made for exports. Earlier merchant exporter use to purchase on h-form without paying vat, under bond without paying excise.
Can you please clarify these two points in detail.
Nice elaborated article explaining all provisions of export..Well done..
FOR LUT ,
IF EXPORT TURNOVER IS 1.5 CR AND MORE THAN 1 CR HAS BEEN RECEIVED IN FIRC AGAINST IT IN P.Y. THEN LUT WILL DO ?
OR
EXPORT TUNOVER SUPPOSE TO BE 10 CR , AND 1 CR (10%) HAS TO BE RECIEVED IN FIRC FOR ELIGIBILTY TO ISSUE LUT ?
Thanks for the details. It is really clarify the doubt for the export transaction.
Nice article.
it is very helpful, I was confused before reading it.
Thanks
Confusion Over Export of Services without Payment of IGST – Really a nice article, and total article is self explanatory. Nice One. Thanks for sharing knowledge.
Small Exports under GST
We have an ecommerce website and send small export packages through India Post or Courier [FedEx or so]. Shipping Bills are not generated as these are not big Commercial Shipments.
What type of Bills [Tax Invoice or Bill of Supply] we have to generate for these Exports?
Do these Exports also come under “ZERO RATE SUPPLY”?
Please reply.
Thanks,
Lakshmanan
Chennai