Export Bond For GST Or Letter Of Undertaking (LUT)

Entities that are involved in the Export of goods having GST registration are permitted to export goods without the payment of IGST by furnishing an Export bond or Letter of Undertaking (LUT) in Form GST RFD-11. Small exporters must file GST RFD-11 prior to the export if they wish to avoid the blocking of working capital.

EXPORT BOND FOR GST

Entities that are not eligible to submit Letter of Undertaking according to the conditions prescribed would have to furnish an export bond along with bank guarantee. The bond should cover the amount of tax involved in the export based on estimated tax liability as assessed by the exporter himself.

The 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.

The Exporters can furnish a running bond so that the export bond need not be executed for each & every export transaction. However, in case the outstanding tax liability on exports exceeds the bond amount at any time, then the exporter must furnish a fresh bond to cover the additional liability.

Export bonds & letter of the undertaking can be submitted to the jurisdictional Deputy Commissioner or Assistant Commissioner of the concerned jurisdiction. However, once FORM RFD-11 is made live on the GST Portal, the document can be submitted online.

BANK GUARANTEE FOR EXPORTS

While filing the bond, bank guarantee equivalent to that of 15% of the bond amount must be filed. The Bond amount is the amount equal to total GST liability on the total export turnover.

For example:

Mr. C starts an import-export business. He anticipates the turnover to be around Rs. 40 lakhs. The bond amount and the BG required to be filed with the central tax department (assume GST rate 18%) is calculated as follows:

Total bond should be equal to tax liability on export. Hence, the bond amount shall be:

• Bond amount = Rs.  7,20,000 (18% of Rs. 40 lakh)
• Bank Guarantee = Rs. 1,08,000 (15% of Rs. 7,20,000)

LETTER OF UNDERTAKING FOR GST

The following persons must file Letter of undertaking in Form GST RFD-11:

1. Status holders as mentioned in the Foreign Trade Policy.
2. The registered person who receives Foreign Currency amounting to a minimum of 10% of the exports turnover & such value should be more than Rs. 1 Crore in the preceding financial year & he has not been prosecuted for any offense under the CGST act, would be required to file a Letter of undertaking.

 The period of validity of a Letter of undertaking is twelve months from the Date of submission. The privileges can be rescinded, in case the exporter fails to comply with the rules of LUT. The exporter would then be required to furnish a new bond.

Relief and clarification are provided to the exporters to continue exporting without the payment of tax & the blockage of working capital.