Business Updates

Clarification on LUT/Bond under GST Notification No. 16/2017

Below is the gist of notification/ circular issued yesterday by the Government on the export procedure.
In terms of the Notification No. 16/2017 – Central Tax, only following exporters are eligible for execution of LUT: 
• A status holder as specified in para 5 of the FTP 2015-2020;
• A person who has received the due foreign inward remittances amounting to a minimum of 10% of the export turnover, which should not be less than one crore rupees, in the preceding FY
Further, the above option is available only if the exporter has not been prosecuted for any offence under the GST Laws or under the erstwhile Laws in matters involving tax evasion of more than 2.5 crore rupees.
The notification also prescribes that LUT needs to be executed on letterhead of the company (and not on stamp paper) for each FY and the same needs to be signed by MD or company secretary or any person duly authorized by the board of directors.
The Government has also clarified following aspects relating to the export procedure vide Circular No. 4/4/2017-GST:
• Exporters who are not covered by above discussed notification shall mandatorily execute bond in place of LUT
• The bond needs to be executed on a non-judicial stamp paper of the value as applicable in the relevant State
• The bond shall be a running bond (with debit/ credit facility) and not one time bond for each export consignment
• The bond should always cover the amount of estimated tax involved in the export transaction. Thus, the exporter shall ensure that the outstanding tax liability on exports is within the bond amount. In case the bond amount is insufficient to cover the tax liability for an upcoming export transaction, the exporter shall furnish a fresh bond to cover such liability
• Jurisdictional Commissioner may decide about the amount of BG (which us required to be submitted along with the bond) depending upon the track record of the exporter. If Commissioner is satisfied with the track record of an exporter, then he may also allow furnishing of bond without BG. However, in any case, the amount of BG should normally not exceed 15% of the bond amount
• In case the exporter fails to comply with the conditions of the LUT, then he may be asked to execute a bond
• Exporter will be allowed under to make exports under existing LUTs/Bonds till 31st July 2017. However, exporters shall submit the LUT/bond in the revised format latest by 31st July, 2017
• The bond/LUT can be filed with Central Tax Authority or State Tax Authority till the time the administrative mechanism for assigning of tax payers to Centre or State is implemented
• With regard to sealing of containers for export of goods, the existing practice of sealing the container with a bottle seal under Central Excise supervision or otherwise would continue till 01st September, 2017. Such sealing shall be done under the supervision of the officer having physical jurisdiction over the place of business where the sealing is being done                                                   

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