GST UPDATE ON MASTER CIRCULAR FOR FURNISHING OF BOND/LUT FOR EXPORTS

GST UPDATE ON MASTER CIRCULAR FOR FURNISHING OF BOND/LUT FOR EXPORTS:-

The government has issued various circulars from time to time for prescribing the procedure to be followed for making exports under bond/LUT in the GST regime. The government has recently issued a Master Circular clarifying various issues related to furnishing of bond/LUT vide Circular No. 8/8/2017-GST dated 04.10.2017. The highlights of the circular are discussed below.

One of the major clarification issued vide this circular is that the facility of export under LUT has been 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. However, Notification No. 16/2017-Central Tax dated 7th July, 2017 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. The clarification issued vide this circular indicates that by default all the exporters are allowed to export under LUT without payment of integrated tax but if an exporter is not eligible for exporting under LUT as he has been prosecuted for offence involving amount exceeding 250 Lakh rupees, exports are to be made on payment of integrated tax or under bond with bank guarantee. It is pertinent to mention here that it is not clarified by this circular that what course of action is to be done by exporters who have already executed bond instead of LUT.

This circular also clarifies that the LUT/Bond should be processed on top most priority and the same should be accepted within a period of three working days of its receipt along with self declaration by the exporter. It is clarified that if the bond/LUT is not accepted within a period of three working days from the date of submission, it shall be deemed to be accepted. This is a welcome step as it takes care of the fact that exports should be considered at priority.

As regards, realisation of export proceeds by exporter is concerned, 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 is also clarified 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. If we compare the above clarification with the provisions contained in Central Excise and Service Tax Laws, we find that the provision was more or less similar in Excise Laws as Circular No. 961/04/2012-CX. 6 dated 26.03.2012 wherein it was stated that exports to Nepal will be permissible irrespective of whether the payments are made in Indian currency or foreign currency as long as they are in accordance with applicable RBI guidelines. However, under Service Tax Laws, Rule 6A of Service Tax Rules, 1994 pertaining to export of services clearly stated that the payment of export of service should be received by the provider of service in convertible foreign exchange thereby meaning that for export of services, the relaxation as regards realisation of export proceeds in Indian currency is not admissible. However, the present circular under GST clarified that the restriction is as regards realisation of export proceeds in convertible foreign exchange only in case of export of services to Nepal or Bhutan.

It is also clarified that old procedure of sealing by central excise officers will continue till the new system of new mandatory self sealing procedure is implemented. Earlier they were extending the date of mandatory self sealing. But now it is clearly provided that old system will be operational till the time new system is not implemented. This will force the exporters to seek extension each time as new system of electronic sealing has not come into existence.

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GST UPDATE ON MASTER CIRCULAR FOR FURNISHING OF BOND/LUT FOR EXPORTS

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