All GST registered goods and service exporters are entitled to submit LUT except for exporters who have been convicted for any offense and the amount of tax evasion exceeds Rs.250 lakhs under the 2017 CGST Act or the 2017 Integrated Goods and Services Tax Act or either of the existing laws. In such cases where the exporter is not eligible to file LUT, an export bond would need to be furnished.
Letter of Undertaking for Exports:
In FORM GST RFD-11, any registered person exporting goods without payment of integrated tax is required to furnish a bond or Letter of Undertaking (LUT) under the Central Goods and Services Tax Rules, 2017.
All exporters of GST registered goods and services are eligible to submit LUT except those exporters who have been prosecuted for any offense and the amount of tax evasion exceeds Rs.250 lakhs under the CGST Act or the Integrated Goods and Services Tax Act, 2017 or any of the existing laws.
Letter of Undertaking will be valid for12 months from the date of submission. Unless the exporter fails to follow the terms of the Letter of Undertaking, rights may be withdrawn and a bond will have to be furnished to the exporter. All exporters are required to send letters of undertaking or export bond on or before 31 July 2017 in the new format defined in GST.
Export Bond for GST:
Entities that are not entitled to send a Letter of Undertaking (LUT) will have to supply an export bond along with a bank guarantee under the above conditions. The bond should cover the export tax amount, based on the estimated tax liability as evaluated by the exporter himself. Export bond should be furnished on non-judicial stamp paper of the value as applicable in the State in which the bond is being furnished.
Exporters may also supply a running bond so that every export transaction does not need to be executed. However, if the outstanding tax liability on exports at any time exceeds the amount of the bond, then the exporter must provide a fresh bond to cover the additional liability.
A bank guarantee along with an export bond can be required. Usually, the bank guarantee value does not exceed 15 percent of the total of the bond. Moreover, based on the exporter’s track record, the bank guarantee required for submission with an export bond can be waived by the GST Commissioner of jurisdiction.