GST Registration has now emerged as a way out to all the despair that existed in the previous tax regime. Considering its significant contribution in escalation of India’s GDP and exports, the government has now begun to envisage GST as an instrument of export promotion.
Recently, this has been more firmly justified as the GST Department has enabled online filing of LoU (Letter of Undertaking) for the exporters.
What is concept of LOU?
Post GST implementation, the manufacturers and traders involved in import-export trade had to pay IGST on the purchases of input. They could claim the GST refund later on, which was unquestionably a tedious and long drawn procedure. Many traders were still facing the anguish despite getting enough time for migration to the new tax regime through GST registration procedure and IEC Registration, just as they generally trapped in extreme liquidity crunch.
To rule out the hassles, the government has implemented the new policy wherein these traders can now sign an LoU with the GST authority and get relieved of GST on input, if their motive is export.
Backdrop of the decision
The Indian government has constituted a chain of Special Economic Zones (SEZs) in India to bump up the exports, where the movement of goods had hitherto been conducted entirely tax-free. Post GST implementation, the levy of IGST was made effective all movement of goods in SEZs. The resultant effect was that many exporters located in such zones had been left utterly dumbfounded with the awkward tax liability. Theoretically, IGST is imposed on all interstate goods transit, also considered as ‘deemed exports’, so it was considered as pointless by the traders involved in local goods transit. For all others,
Lately, the system had witnessed numerous grievances from the exporters regarding delay in refund of the input credit on account of faulty customs process, erroneously filled shipping bills and disparity in GST return filing. The ensuing blame-game between the exporters and the GST Department had to go against the authorities as the naïve exporter couldn’t be expected to be conversed with laws regarding GST return filing. This soon became the Achilles heel for the government in the encouragement of entrepreneurship.
To overcome all these anomalies, GST Department had introduced the system of LoU (Letter of Undertaking) for the exporters. To make this system even more swift and seamless, the authorities have now enabled the online service of filing LoU.
Thenceforth, the exporter in an SEZ could continue to carry out zero-rated movement of supplies by signing LoU with the GST Department on the condition that he will focus on export promotion.
Very importantly, the traders are required to possess their unique Import Exports code for availing this service.