GST Export & LUT

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Government of India provides various benefits and reliefs in case of exports from time to time, to promote the foreign trade in India which helps to boost the economic growth and create a place in the international market. Tax incidence is case of Exports of Goods and/or Services is always NIL.

Under GST (IGST Act, 2017) Exports of goods and/or services is done under following 2 ways:
  • Export of Goods/Services and paying tax along with that and later on applying for Refund of the Tax paid.
  • Export of Goods/Services without payment of Tax by furnishing a Bond viz. LUT
What is Exports?

Export of Goods (Section 2(5) of IGST Act, 2017): "export of goods” with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India.

Export of Services (Section 2(6) of IGST Act, 2017): "export of services” means the supply of any service when,–

  1. The supplier of service is located in India
  2. The recipient of service is located outside India
  3. The place of supply of service is outside India
  4. The payment for such service has been received by the supplier of service in convertible foreign exchange
  5. The supplier of service and the recipient of service are not merely establishments of a distinct person.
REFUND UNDER EXPORTS

While exporting the Goods outside India, the exporter furnishes a SHIPPING BILL. To claim the refund, no separate application is required to be filed. The Shipping Bill shall be deemed to be an application for the refund of the integrated tax paid on goods exported out of India. However, following conditions are required to be met along with the filling of the Shipping Bill:

  • The person in charge of the conveyance carrying the export goods duly files an export manifest or an export report covering the number and the date of shipping bills or bills of export; and
  • The applicant has furnished a valid return in FORM GSTR-3 or FORM GSTR3B, as the case may be.
Procedure to claim refund under exports:
  1. Shipping Bill or Bill of Exports shall be filed along with the export of goods or services
  2. Form GSTR - 3 or Form GSTR - 3B shall be furnished by the exporter
  3. The details of the relevant export invoices in respect of export of goods contained in FORM GSTR-1 shall be transmitted electronically by the common portal to the system designated by the Customs and the said system shall electronically transmit to the common portal, a confirmation that the goods covered by the said invoices have been exported out of India
  4. Upon the receipt of the information regarding the furnishing of a valid return in FORM GSTR-3 or FORM GSTR-3B, as the case may be from the common portal, the system designated by the Customs or the proper officer of Customs, as the case may be, shall process the claim of refund in respect of export of goods
  5. An amount equal to the integrated tax paid in respect of each shipping bill or bill of export shall be electronically credited to the bank account of the applicant mentioned in his registration particulars and as intimated to the Customs authorities.

Refund of Export of Services can be claimed by filling Form GST RFD-01 with the department electronically.

Withholding of Refund:
A claim under refund can be withheld under following circumstances:
  • Request from jurisdictional commissioner has been received to withhold the payment of refund.
  • The proper officer of Customs has the reason to believe that the goods were exported out of India in violation of the provisions of the Customs Act, 1962
Refund in case of export to Bhutan:

In case the Goods are exported to Bhutan, the Central Government MAY pay refund of the tax to the Government of Bhutan for such class of goods as may be notified in this behalf and where such refund is paid to the Government of Bhutan, the exporter shall not be paid any refund of such tax.

Refund Thorugh Bond or LUT (Letter of Undertaking)

Letter of Undertaking is a bond or like a guarantee under which the registered person can export the goods out of India without payment of tax and interest thereon as applicable.

Who can furnish LUT?

Any registered person exporting the goods out of India can use furnish LUTs except for those who have been prosecuted for tax evasion for an amount of Rs. 2.5 Crore or above under the Act.

Validity?

LUT is valid for a period of 1 year. (end of the financial year). Fresh LUT is required to be submitted for each Financial Year.

Liability to Pay Tax?

Letter of Undertaking or Bond is furnished for binding the registered person to pay the Tax and interest thereon in case following circumstances occurs:

  • Goods are not exported within 3 months from the date of issue of the export invoice:
  • Payment is not received in convertible foreign exchange within 1 year from the date issue of the export invoice.

LUT shall stand withdrawn and the same will be restored when the Tax along with interest shall be paid by the registered person within 15 day from the end of the 3 months / One Year period as the case may be.

Procedure?
  1. Bond or Letter of Undertaking (LUT) shall be filed by the registered person prior to export to the jurisdictional commissioner in Form GSTR RFD-11 electronically.
  2. Acknowledgement shall be generated electronically specifying the particulars of the application.
  3. The registered person can now proceed with the export of the goods and or services as the case may be.