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Issues related to Bond/Letter of Undertaking for exports without payment of integrated tax – Reg.

Ref No.: ES/ 116/2017-18                                                                          July 11, 2017

To: Members of the Council

Sub:  Issues related to Bond/Letter of Undertaking for exports without payment of integrated tax – Reg.

Dear Member,

The Central Board of Excise and Customs (CBEC) has issued Circular No. 4/4/2017-GST dated July 7, 2017 clarifying  various issues related to furnishing of Bond/Letter of Undertaking for exports without payment of Integrated Goods and Services Tax (IGST) which is as follows :

  1. As per Rule 96A of the Central Goods and Services Tax Rules, 2017 (The CGST Rules) allows any registered person availing the option to supply goods or services for export without payment of integrated tax to furnish, prior to export, a bond or a Letter of Undertaking.
  2. Accordingly, this bond or Letter of Undertaking is required to be furnished in FORM GST RFD-11 on the common portal. Further, Circular No. 26/2017- Customs dated 1st July, 2017 has clarified that the procedure as prescribed under rule 96A of the said rules requires to be followed for the export of goods from 1st July, 2017.

The above mentioned circular is issued by CBEC in the light of the various communications received from the field formations and exporters regarding the difficulties are being faced by them in complying with the procedure prescribed for making exports of goods and services without payment of integrated tax with respect to furnishing of bonds/Letter of Undertaking (LUT).

  1. It is stated that all exporters, not covered by the Notification No 16/2017- Central Tax dated July 1, 2017, would submit bond as per the procedure prescribed vide Circular No. 2/2/2017-GST dated 4th July, 2017.
  2. The bond shall be furnished on non-judicial stamp paper of the value as applicable in the State in which bond is being furnished.

With regard to a clarification that has been sought to whether a running bond (with debit / credit facility) or a one-time bond (separate bond for each consignment / export) is needed under the provision. It is observed and clarified that –

  • Consignment-wise bond would be a significant compliance burden on the exporters. Therefore it is directed that the exporters shall furnish a running bond, in case he is required to furnish a bond, in FORM GST RFD -11.
  • The bond would cover the amount of tax involved in the export based on estimated tax liability as assessed by the exporter himself.
  • 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 in yet to be completed exports, the exporter shall furnish a fresh bond to cover such liability.”

Regarding the issue on the amount of bank guarantee as a security for the bond, it was clarified that –

  • The jurisdictional Commissioner may decide the amount of bank guarantee depending upon the track record of the exporter.
  • If Commissioner is satisfied with the track record of an exporter then furnishing of bond without bank guarantee would suffice.
  • In any case the bank guarantee should normally not exceed 15% of the bond amount.

Regarding the issue of LUT, It was also clarified that –

  • The letter of Undertaking shall be valid for a period of 12 months.
  • If the exporter fails to comply with the conditions of the LUT he may be asked to furnish a bond.
  • Exports may be allowed under existing LUTs/Bonds till 31st July 2017.
  • Exporters shall submit the LUTs/bond in the revised format latest by 31st July, 2017.

It is further stated that –

  • The Bond/LUT 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 bond/LUT before Central Tax Authority or State Tax Authority till the administrative mechanism for assigning of tax payers to respective authority is implemented.
  • However, if in a State, the Commissioner of State Tax so directs, by general instruction, to exporter, the Bond/LUT in all cases be accepted by Central tax officer till such time the said administrative mechanism is implemented. Central Tax officers are directed to take every step to facilitate the exporters.

Members are requested to follow the above instructions carefully and do as directed.

Thanking you,



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