1. The most significant change brought about by the GST is that supply of goods, Services or both is the basis of taxation as opposed to the removal of manufactured goods under the Excise regime.
2. The exporter whether manufacturer or merchant exporter can export under LUT/Bond or on payment of IGST & claim refund. Bond/Letter of Undertaking is required to be furnished by the exporter to the jurisdictional Deputy/Assistant Commissioner having control over the principal place of business of the exporter. The principal place of business is your head office/registered office shown in the GST registration. However, the manufacturers should execute LUT with the jurisdictional authority of the manufacturing facility as explained later.
3. The format of the LUT/Bond is available on the CBEC website under nomenclature FORM GST RFD-11. Please see Notification No. 15/2017–Central Tax dtd. 1.7.17.
4. The status holders recognized as such by the Director General of Foreign Trade regional offices can submit LUT. Further exporter, 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, can also execute LUT subject to conditions.
5. For executing the LUT, please give the following:
A. Cover Note.
B. LUT in duplicate on the letterhead of the registered person.
C. Declaration as per the format as given in Notification No. 16/2017–Central Tax dtd. 7.7.17.
D. Attach self certified Status certificate/CA certificate for the realization of foreign currency in excess of Rs. 1 Crore.
E. GST registration (It is not required because it is done online but being called for).
F. As a facilitation measure Exports may be allowed under existing LUTs/Bonds till 31st July 2017.
6. The fresh LUT once executed will be valid for a period of 12 months.
7. If the exporter is not eligible for the execution of the LUT then a bond in lieu of the LUT needs to be executed. The bond shall be furnished on non-judicial stamp paper of the value as applicable in the State in which bond is being furnished. The bond will be a running bond with debit/credit facility & the bond should cover the estimated tax liability as assessed by the exporter. The exporter is required to give a bank guarantee as per the decision of the Commissioner concerned but the BG amount should not be more than 15%.
8. The existing practice of sealing the container with a bottle seal under Central Excise (should read as GST official) supervision or otherwise would continue till 01st September, 2017. Such sealing shall be done under the supervision of the officer having physical jurisdiction over the place of business where the sealing is being done. Subsequently sealing methods will change.
9. In case of direct exports by the manufacturer there is not much of change. The export is treated as inter-state transaction & therefore subject to IGST. The exports can be conducted under LUT/Bond or on payment of IGST & claim refund. The S/B should contain the relevant particulars of GST tax Invoice (pertaining to the removal of goods for export) in the S/B. However, please note that the export invoice should be raised from the address of the place of removal of the goods for export & goods should be sent to the port directly for export. This is essential because if you will export from your any other address then that would result into a domestic trade transaction & tax (CGST/SGST or IGST as applicable) would be payable & that would block your capital for no reason. This is very important & therefore should be strictly adhered to.
10. In case of Merchant exports, the following needs to be strictly followed:
A. The manufacturer will raise Tax Invoice on the Merchant exporter. If the merchant exporter & the manufacturer supplier are in the same state, this transaction is intra-state (within the same state) & will be subject to levy of CGST & SGST.
B. If the merchant exporter & the manufacturer supplier are located in different states, this transaction is inter-state & will be subject to levy of IGST.
Therefore, it is important to determine the transaction category i.e. whether it is intra state or inter-state & then levy tax appropriately. Failing this, there will be problems in claim of Input tax credit, repayment of the incorrect tax & obtain refund of the tax paid earlier. This leg of the transaction is a domestic trade transaction.
C. The merchant exporter will be entitled to take the credit of the applicable taxes paid by the manufacturer (CGST/SGST or IGST as applicable). CGST/SGST can be used for the discharge of IGST in terms of the law in case of same GSTIN. Subsequently, the merchant exporter will have to prepare the final GST tax invoice & conduct exports under LUT/Bond or payment of IGST & claim refund. All export transactions are subject to IGST. Please note that in case of exclusive Merchant exporting transactions, the refund of IGST is the appropriate option to get back the tax & use the same.
11. In case of supplies to SEZ, the manufacturer/exporter can give LUT/Bond or conduct exports under IGST payment under refund provision like in the case of physical exports. Please note that SEZ is a deemed foreign territory therefore supplies to SEZ are treated as inter-state transactions & IGST will be applicable to such transactions.
12. The turnover of export in the previous Financial Year i.e. 2016-17 should be more than Rs. 1 crore & realization of at least 10% i.e. Minimum Rs. 10 Lakhs should have been realized to execute LUT instead of bond.