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Clarification on issues related to furnishing of Bond/Letter of Undertaking for exports

Circular No.ES/ 185  /2017-18                                                       October 16, 2017  

To: Members of the Council

Sub: Clarification on issues related to furnishing of Bond/Letter of Undertaking for exports

Dear Member,

JNCH Customs has issued Public Notice No. 131/ 2017 dated October 12, 2017 on the above subject.

In   view   of   the  difficulties   being  faced   by   the   exporters   in   submission   of bonds/Letter  of  Undertaking  (LUT)  for  exporting  goods  or  services  or  both without  payment  of  integrated  tax,  three  circulars  in  this  matter,  namely  Circular  No. 2/2/2017 – GST dated 5th July, 2017, Circular No. 4/4/2017 – GST dated 7th July, 2017 and  Circular  No.  5/5/2017 – GST dated 11th August, 2017 were  issued by  Board for providing clarity on the procedure to be followed for export under bond/LUT .

Accordingly, to ensure uniformity in the procedure in this regard, the Board has clarified the following issues

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 unlike Notification No. 16/2017-Central Tax dated 7th July, 2017 which extended the facility of export under LUT to status holder as specified in paragraph 5 of the FTP 2015 -2020 and to persons receiving a minimum foreign inward remittance of 10% of the export turnover in the preceding financial year which was not less than Rs .1 crore. 

Validity of LUT:

  • The LUT shall be valid for the whole financial year in which it is tendered.
  • In case the goods are not exported within the time specified i n sub - rule (1) of rule 96A of the CGST 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fails to pay the amount mentioned in the said sub-rule, the facility of export under LUT will be deemed to have been withdrawn.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 As a result, exports, during the period from when the facility to export under LUT is withdrawn till the time the same is restored, shall be either on payment of the applicable integrated tax or under bond with bank guarantee or proprietor.
  • The bond, wherever required, shall be furnished on non-judicial stamppaper of the value as applicable in the State in which the bond is being furnished. 

Documents for LUT:

  • Self-declaration by the exporter to the effect that he has not been prosecuted should suffice for the purposes of Notification No. 37/2017 - Central Tax dated 4th October, 2017. Verification, if any, may be done on post-facto basis. 

 Time for acceptance of LUT/Bond:

  • As LUT/Bond is a priori requirement for export, including exports to a SEZ developer or a SEZ unit, the LUT/bond should be processed on top most priority.
  • It is clarified that LUT/bond should be accepted with in a period of three working days of its receipt along with the self-declaration as stated in para 2(d) above by the exporter.
  • If the LUT / bond is not accepted within a period of three working days from the date of submission, it shall deemed to be accepted. 


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. 

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 with in 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 office as and when required. 

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 Deputy/Assistant Commissioner having jurisdiction over the principal place of business.

Purchases from manufacturer and Form CT-1 :

  • It is clarified that there is no provision for issuance of CT-1 form which enables merchant exporters to purchase goods from a manufacturer without payment of tax under the GST regime.
  • The transaction between a manufacturer and a merchant exporter is in the nature of supply and the same would be subject to GST. 

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.

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”.

  • Accordingly, it has been clarified that the acceptance of LUT for supplies of goods to Nepal or Bhutan 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 .
  • It may also be noted that the supply of services to SEZ developer or SEZ unit under LUT will also be permissible on the same lines. The supply of services, however, to Nepal or Bhutan will be deemed to be export of services only if the payment for such services is received by the supplier inconvertible foreign exchange. 

Jurisdictional officer:

  • In exercise of the powers conferred by sub-section (3) of section 5 of the CGST Act,

Board has informed 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. 

Please note that Circular No. 2/2/2017 – GST dated 5th July, 2017, Circular No. 4/4/2017 – GST dated 7th July, 2017 and Circular No. 5/5/2017 – GST dated 11th August, 2017 have been rescinded except as respects things already done or omitted to be done. 

For any difficulty, in this  regard  may  be  brought  to  the  notice  of  the  Deputy/ ssistant  Commissioner in charge of Appraising Main (Export) (, Phone No : 022- 27244959,).

Members may kindly make note of the above changes and do the needful.

Thanking You,


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