Reagrding issues related to Bond/Letter of Undertaking for exports without payment of integrated tax-Reg.

Circular No.: 4/4/2017-GST
Date of Circular: 7th July 2017
Relevant Sections and Rules:

• Central GST Act, 2017:
  • Section 168(1): Power to issue instructions for uniformity
• Central GST Rules, 2017:
  • Rule 96A: Bond or LUT for exports without payment of integrated tax
• Relevant Notifications and Circulars:
  • Notification No. 16/2017-Central Tax dated 01-07-2017
  • Circular No. 2/2/2017-GST dated 4th July 2017
  • Circular No. 26/2017-Customs dated 1st July 2017

Summary of Circular:

To address exporters’ difficulties in executing exports without payment of integrated tax, this circular clarifies procedural and operational aspects regarding Bonds and Letters of Undertaking (LUT) under Rule 96A of CGST Rules.

1. Eligibility and Conditions for LUT:
   • Exporters falling under the category notified in Notification No. 16/2017 may export under LUT.
   • Other exporters must submit a Bond.
   • The bond must be on non-judicial stamp paper as per State law.
2. Type of Bond Required:
   • Exporters shall furnish a “running bond” rather than a consignment-wise bond.
   • The running bond must cover the estimated tax liability on pending exports.
   • Additional bond must be submitted if liability exceeds the available bond amount.
3. Bank Guarantee Requirement:
   • Commissioner may assess the exporter’s track record to decide on the need for a bank guarantee.
   • Normally, the bank guarantee should not exceed 15% of the bond value.
   • In exceptional cases, bond without a bank guarantee may be accepted.
4. Validity and Migration:
   • LUTs will be valid for 12 months.
   • Exporters must submit revised format of LUT/Bond by 31st July 2017.
   • Exports may continue under existing Bonds/LUTs till that date.
5. Submission of Bond/LUT:
   • Shall be accepted by the jurisdictional Deputy/Assistant Commissioner over the exporter’s principal place of business.
   • Exporters may submit to either Central or State Tax authority till taxpayers are assigned.
6. Container Sealing:
   • As per Circular 26/2017-Customs, existing container sealing practices will continue till 1st September 2017.
   • Sealing to be done under supervision of jurisdictional officer, with report sent to the Deputy/Assistant Commissioner.
7. Applicability and Action:
   • Instructions apply for all exports on or after 1st July 2017.
   • Field formations are to issue trade notices and ensure facilitation of exporters.

Source: Circular No.: 4/4/2017-GST