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Circular No. 8/8/2017-GST
F. No. 349/74/2017-GST (Pt.) Vol.-II
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Customs
GST Policy Wing
New Delhi, Dated the 4
th
October, 2017
To,
The Principal Chief Commissioners/Chief Commissioners/Principal Commissioners/
Commissioners of Central Tax (All)
The Principal Director Generals/Director Generals (All)
Madam/Sir,
Subject: Clarification on issues related to furnishing of Bond/Letter of Undertaking for
exports
In view of the difficulties being faced by the exporters in submission of bonds/Letter of
Undertaking (LUT for short) for exporting goods or services or both without payment of
integrated tax, Notification No. 37/2017 – Central Tax dated 4
th
October, 2017 has been issued
which extends the facility of LUT to all exporters under rule 96A of the Central Goods and
Services Tax Rules, 2017 (hereafter referred to as “the CGST Rules”) subject to certain
conditions and safeguards. This notification has been issued in supersession of Notification No.
16/2017 – Central Tax dated 7
th
July, 2017 except as respects things done or omitted to be done
before such supersession.
2. In the light of the new notification, three circulars in this matter, namely Circular No.
2/2/2017 – GST dated 5
th
July, 2017, Circular No. 4/4/2017 – GST dated 7
th
July, 2017 and
Circular No. 5/5/2017 – GST dated 11
th
August, 2017, which were issued for providing clarity
on the procedure to be followed for export under bond/LUT, now require revision and a
consolidated circular on this matter is warranted. Accordingly, to ensure uniformity in the
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procedure in this regard, the Board, in exercise of its powers conferred under section 168 (1) of
the Central Goods and Services Tax Act, 2017 clarifies the following issues:
a) Eligibility to export under LUT: The facility of export under LUT has been now
extended to all registered persons who intend to supply goods or services for export
without payment of integrated tax except those who have been prosecuted for any offence
under the CGST Act or the Integrated Goods and Services Tax Act, 2017 or any of the
existing laws and the amount of tax evaded in such cases exceeds two hundred and fifty
lakh rupees unlike Notification No. 16/2017-Central Tax dated 7
th
July, 2017 which
extended the facility of export under LUT to status holder as specified in paragraph 5 of
the Foreign Trade Policy 2015-2020 and to persons receiving a minimum foreign inward
remittance of 10% of the export turnover in the preceding financial year which was not
less than Rs. one crore.
b) Validity of LUT: The LUT shall be valid for the whole financial year in which it is
tendered. However, in case the goods are not exported within the time specified in sub-
rule (1) of rule 96A of the CGST Rules and the registered person fails to pay the amount
mentioned in the said sub-rule, the facility of export under LUT will be deemed to have
been withdrawn. If the amount mentioned in the said sub-rule is paid subsequently, the
facility of export under LUT shall be restored. As a result, exports, during the period
from when the facility to export under LUT is withdrawn till the time the same is
restored, shall be either on payment of the applicable integrated tax or under bond with
bank guarantee.
c) Form for bond/LUT: Till the time FORM GST RFD-11 is available on the common
portal, the registered person (exporters) may download the FORM GST RFD-11 from
the website of the Central Board of Excise and Customs (www.cbec.gov.in) and furnish
the duly filled form to the jurisdictional Deputy/Assistant Commissioner having
jurisdiction over their principal place of business. The LUT shall be furnished on the
letter head of the registered person, in duplicate, 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. The bond, wherever required, shall be furnished on non-judicial stamp paper
of the value as applicable in the State in which the bond is being furnished.
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d) Documents for LUT: Self-declaration to the effect that the conditions of LUT have been
fulfilled shall be accepted unless there is specific information otherwise. That is, self-
declaration by the exporter to the effect that he has not been prosecuted should suffice for
the purposes of Notification No. 37/2017- Central Tax dated 4
th
October, 2017.
Verification, if any, may be done on post-facto basis.
e) Time for acceptance of LUT/Bond: As LUT/Bond is a priori requirement for export,
including exports to a SEZ developer or a SEZ unit, the LUT/bond should be processed
on top most priority. It is clarified that LUT/bond should be accepted within a period of
three working days of its receipt along with the self-declaration as stated in para 2(d)
above by the exporter. If the LUT / bond is not accepted within a period of three working
days from the date of submission, it shall deemed to be accepted.
f) Bank guarantee: Since the facility of export under LUT has been extended to all
registered persons, bond will be required to be furnished by those persons who have been
prosecuted for cases involving an amount exceeding Rupees two hundred and fifty lakhs.
A bond, in all cases, shall be accompanied by a bank guarantee of 15% of the bond
amount.
g) Clarification regarding running bond: The exporters shall furnish a running bond
where the bond amount would cover the amount of self-assessed estimated tax liability
on the export. The exporter shall ensure that the outstanding integrated tax liability on
exports is within the bond amount. In case the bond amount is insufficient to cover the
said liability in yet to be completed exports, the exporter shall furnish a fresh bond to
cover such liability. The onus of maintaining the debit / credit entries of integrated tax in
the running bond will lie with the exporter. The record of such entries shall be furnished
to the Central tax officer as and when required.
h) Sealing by officers: Till mandatory self-sealing is operationalized, sealing of containers,
wherever required to be carried out under the supervision of the officer, shall be done
under the supervision of the central excise officer having jurisdiction over the place of
business where the sealing is required to be done. A copy of the sealing report would be
forwarded to the Deputy/Assistant Commissioner having jurisdiction over the principal
place of business.
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i) Purchases from manufacturer and Form CT-1: It is clarified that there is no provision
for issuance of CT-1 form which enables merchant exporters to purchase goods from a
manufacturer without payment of tax under the GST regime. The transaction between a
manufacturer and a merchant exporter is in the nature of supply and the same would be
subject to GST.
j) Transactions with EOUs: Zero rating is not applicable to supplies to EOUs and there is
no special dispensation for them under GST regime. Therefore, supplies to EOUs are
taxable like any other taxable supplies. EOUs, to the extent of exports, are eligible for
zero rating like any other exporter.
k) Realization of export proceeds in Indian Rupee: Attention is invited to para A (v) Part-
I of RBI Master Circular No. 14/2015-16 dated 01
st
July, 2015 (updated as on 05
th
November, 2015), which states that “there is no restriction on invoicing of export
contracts in Indian Rupees in terms of the Rules, Regulations, Notifications and
Directions framed under the Foreign Exchange Management Act, 1999. Further, in terms
of Para 2.52 of the Foreign Trade Policy (2015-2020), all export contracts and invoices
shall be denominated either in freely convertible currency or Indian rupees but export
proceeds shall be realized in freely convertible currency. However, export proceeds
against specific exports may also be realized in rupees, provided it is through a freely
convertible Vostro account of a non-resident bank situated in any country other than a
member country of Asian Clearing Union (ACU) or Nepal or Bhutan”.
Accordingly, it is clarified that the acceptance of LUT for supplies of goods to Nepal or
Bhutan or SEZ developer or SEZ unit will be permissible irrespective of whether the
payments are made in Indian currency or convertible foreign exchange as long as they are
in accordance with the applicable RBI guidelines. It may also be noted that the supply of
services to SEZ developer or SEZ unit under LUT will also be permissible on the same
lines. The supply of services, however, to Nepal or Bhutan will be deemed to be export of
services only if the payment for such services is received by the supplier in convertible
foreign exchange.
l) Jurisdictional officer: In exercise of the powers conferred by sub-section (3) of section
5 of the CGST Act, it is hereby stated that the LUT/Bond shall be accepted by the
jurisdictional Deputy/Assistant Commissioner having jurisdiction over the principal place
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of business of the exporter. The exporter is at liberty to furnish the LUT/bond before
either the Central Tax Authority or the State Tax Authority till the administrative
mechanism for assigning of taxpayers to the respective authority is implemented.
3. Circular No. 2/2/2017 – GST dated 5
th
July, 2017, Circular No. 4/4/2017 – GST dated 7
th
July, 2017 and Circular No. 5/5/2017 – GST dated 11
th
August, 2017 are hereby rescinded
except as respects things already done or omitted to be done.
4. It is requested that suitable trade notices may be issued to publicize the contents of this
circular.
5. Difficulty, if any, in implementation of the above instructions may please be brought to
the notice of the Board. Hindi version would follow.
(Upender Gupta)
Commissioner (GST)
