Clarification on issues related to furnishing of Bond/Letter of Undertaking for exports - GST - States - 16/2018-19

Government of Karnataka (Department of Commercial Taxes) No. KSA/GST.CR-108/2018-19 Office of the Commissioner of Commercial Taxes Vanijya Therige Karyalaya, Gandhinagar, Bengaluru-560009, Dated: 25-03-2019 COMMISSIONER OF COMMERCIAL TAXES CIRCULAR No. GST-16/2018-19 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 4th October, 2017 has been issued by the Government of India extending the facility of LUT to all exporters under rule 96A of the Central Goods and Services Tax Rules, 2017, applicable under rule 96A of the Karnataka Goods and Services Tax Rules, 2017 (hereafter referred to as the KGST Rules ) subject to certain conditions and safeguards which have to be followed by the State Tax officers administering the cases of such exporters. 2. In the light of the new notification, a consolidated circular on this matter is warranted. Accordingly, to ensure uniformity in the procedure in this regard, in exercise of powers conferred under section 168 (1) of the Karnataka Goods and Services Tax Act, 2017 the following issues are clarified: 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. 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 KGST 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fails to pay the amount mentioned in the said sub-rule, the facility of export under LUT will be deemed to have been withdrawn.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 As a result, exports, during the period from when the facility to export under LUT is withdrawn till the time the same is restored, shall be either on payment of the applicable integrated tax or under bond with bank guarantee.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: The registered person (exporters) shall fill and submit FORM GST RFD-11 on the common portal. An LUT shall be deemed to be accepted as soon as an acknowledgement for the same, bearing the Application Reference Number (ARN), is generated online. d) Documents for LUT: No document needs to be physically submitted to the jurisdictional office for acceptance of LUT. e) Time for acceptance of LUT/Bond: An LUT shall be deemed to have been accepted as soon as an acknowledgement for the same, bearing the Application Reference Number (ARN), is generated online. If it is discovered that an exporter whose LUT has been so accepted, was ineligible to furnish an LUT in place of bond as per Notification No. 37/2017Central Tax, then the exporter's LUT will be liable for rejection. In case of rejection, the LUT shall be deemed to have been rejected ab initio. 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 Assistant Commissioner/Commercial Tax Officer having jurisdiction over the principal place of business. i) Purchases from another person and Form H: It is clarified that there is no provision for issuance of H form which enables merchant exporters to purchase goods from another person without payment of tax under the GST regime. The transaction between a taxable person 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 StJuly, 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 . Further, attention is invited to the amendment to section 2(6) of the IGST Act, 2017 which allows realization of export proceeds of services in INR, wherever allowed by the RBI. Accordingly, it is clarified that the acceptance of LUT for supplies of goods or services to countries outside India 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. l) Jurisdictional officer: In exercise of the powers conferred by sub-section (3) of section 5 of the KGST Act, it is hereby stated that the LUT/Bond shall be accepted by the jurisdictional Deputy/Assistant Commissioner having jurisdiction over the principal place 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. This circular is clarificatory in nature and cannot be made use of for interpretation of provisions of law. If any member of trade has any doubt , he may refer the matter to this office for further clarification. All the members of trade and industry are requested to follow the procedure laid down in this regard as per law and as per the contents of this circular. 4. This Circular is issued in consonance to the Central Circular No.8/8/2017-GST dated 4-10-2017 with para materia changes and the same shall be effective from the date from which the Central Circular has come into effect. (SRIKAR M.S.) Commissioner of Commercial Taxes (Karnataka) Bengaluru