Circular on Bond/LUT in case of exports without payment of integrated tax.

Circular No.: 5/5/2017-GST
Date of Circular: 11th August 2017
Relevant Sections and Rules:

• Central GST Act, 2017:
  • Section 168(1): Instructions for uniformity in implementation
• Central GST Rules, 2017:
  • Rule 96A: Bond or Letter of Undertaking for exports without payment of integrated tax
• Notifications and Related Circulars:
  • Notification No. 16/2017-Central Tax dated 7th July 2017
  • Circulars No. 2/2/2017-GST, 4/4/2017-GST

Summary of Circular:

1. Eligibility for LUT Facility:
   LUT facility is extended to all registered persons, not just manufacturers. To qualify:
   • Exporters must have received foreign inward remittance of Rs. 1 crore or 10% of export turnover (whichever is higher) in the previous financial year.
   • Status holders under FTP 2015–2020 are eligible irrespective of these conditions.
2. Form and Submission of LUT/Bond:
   • LUT can be submitted on letterhead with seal/signature.
   • Bonds must be on non-judicial stamp paper.
   • Processing should be completed within 3 working days of submission.
3. Use of CT-1 Form:
   The CT-1 form (earlier used under Central Excise for duty-free procurement) has no relevance under GST. Supplies between merchant and manufacturer exporters are taxable.
4. Supplies to EOUs:
   Supplies to Export Oriented Units (EOUs) are not zero-rated and remain taxable. EOUs can claim zero rating only for their own exports.
5. Remittance in Indian Rupees:
   LUT is acceptable for supplies to Nepal, Bhutan, or SEZ units even if payment is in Indian Rupees, provided RBI norms are followed.
   • For services to Nepal/Bhutan, only foreign exchange receipts qualify the supply as export.
6. Bank Guarantee Exemption:
   • Normally, bank guarantee should not exceed 15% of bond amount.
   • Commissioner may waive this entirely based on exporter’s credentials.
   • Exemption also available if aggregate PAN-based remittance data across states satisfies eligibility.
7. Jurisdiction for Submission:
   • Bond/LUT to be accepted by Deputy/Assistant Commissioner of the principal place of business.
   • Can be submitted to either Central or State Tax officer until administrative allocation is finalised.
8. Document Acceptance:
   • Self-declarations are acceptable unless contradicted.
   • Status holders need only self-attested proof of their status.
   • Exporters’ declaration of no prosecution is sufficient.
9. Applicability Period:
   Clarifies that instructions apply retrospectively to exports from 1st July 2017, not just from the circular’s issue date.

Source: Circular No.: 5/5/2017-GST