There are 3 option under GST for Exports
Export and import under GST are treated as interstate supply and hence governed mostly by the IGST act. As per the IGST act, there are only two ways possible to export goods or services in India which are as follows:
In the case of second option, one need to pay IGST as usual as domestic trade, however one can claim the refund later on. However, if someone wants to export the goods or services from India without payment of IGST, then he needs to file/furnish a bond or letter of undertaking (LUT) with the department.
Hence, you can see the importance of LUT and bond in case of export of goods and services. Let us discuss the bond and LUT in details along with the complete procedure as how to file bond and LUT.
Bond or LUT is a document through which an exporter satisfies the department that the exporter shall obey all the rules and regulations relating to export. The bond or LUT is filed in the prescribed format of GST RFD – 11.
As per notification no.16/2017, the government specifies the conditions and safeguards for LUT and bond. As a general rules, the exporter is required to file the bond along with bank guarantee to the department for export of goods and services.
However, if the following conditions are satisfied, then only a letter of undertaking can be filed instead of a bond with bank guarantee.
Therefore, in both the conditions are satisfied, and then a letter of undertaking (LUT) can be filed.
As per the government circular, the bond amount shall be equal to the tax amount on the previous year turnover or the expected export turnover. E.g. if my total expected turnover is Rs.2 crore and the tax rate on my item is 18%, then the bond amount shall be Rs.36 lakh.
The government has prescribed that bank guarantee should not be less than 15% of the bond amount. Hence, if the bond amount is equal to Rs.10 lakh, then you need to get the bank guarantee of atleast 15%, i.e. Rs.1.50 Lakh.
Yes, it is mandatory to file LUT or bond for export of services as well if you want to export without charging GST on the same. In case you do not file the LUT or bond, then you need to charge GST and then claim the refund later on.
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