The Central Board of Excise and Customs (CBEC) clarified various issues relating to furnishing of Bond/Letter of Undertaking for exports without payment of Integrated Goods and Services Tax (IGST).
Rule 96A of the Central Goods and Services Tax Rules, 2017 allows any registered person availing the option to supply goods or services for export without payment of integrated tax to 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. Further, Circular No. 26/2017- Customs dated 1st July, 2017 has clarified that the procedure as prescribed under rule 96A of the said rules requires to be followed for the export of goods from 1st July, 2017.
The present circular is issued by the board in the light of various communications received from the field formations and exporters that difficulties are being faced in complying with the procedure prescribed for making exports of goods and services without payment of integrated tax with respect to furnishing of bonds/Letter of Undertaking.
It is stated that all exporters, not covered by the notification no 16/2017- Central Tax, would submit bond as per the procedure prescribed vide circular No. 2/2/2017-GST dated 4th July, 2017. The bond shall be furnished on non-judicial stamp paper of the value as applicable in the State in which bond is being furnished.
With regard to the issue that whether a running bond or a one-time bond is needed under the provision, it said that “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, 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.”
Regarding the issue on the amount of bank guarantee as a security for the bond, it was clarified that the jurisdictional Commissioner may decide 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.”
It was also clarified that the letter of Undertaking shall be valid for a period of 12 months. If the 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. Exporters shall submit the LUTs/bond in the revised format latest by 31st July, 2017.
Read the full text of the Circular below.