Exports Under GST: How to Use Bond or LUT?

India's Goods and Services Tax (GST) is a unified tax system that has replaced various state and central taxes. GST is levied on the supply of goods and services within India, and it is also applicable to exports. Exporters are eligible for various benefits under GST, but they need to follow certain procedures to avail those benefits.

One of the most important procedures for exporters is to furnish a bond or a Letter of Undertaking (LUT) to the authorities. In this article, we will discuss the requirements for furnishing a bond or a LUT in detail.

What is a Bond?

A bond is a financial instrument that acts as a guarantee for the payment of taxes and duties. In the context of GST, a bond is required to be furnished by exporters to the authorities to ensure that they pay the tax dues on time. The bond is a legal commitment by the exporter to pay the tax dues within the specified period.

What is an LUT?

An LUT is a written undertaking by the exporter that they will fulfill their tax obligations without furnishing a bond. LUT is an alternative to the bond, and it is available only to certain categories of exporters.

Who is eligible to furnish LUT?

Exporters can furnish LUT instead of a bond if they satisfy the following conditions:

The exporter must have an export turnover of at least Rs. 1 crore in the previous financial year.
The exporter must not have been prosecuted for any offense under GST or any other law in force.
The exporter must not have any arrears of tax, interest, or penalty under GST or any other law in force.

Format of LUT and Bonds in RFD-11

The format of the LUT and bond to be furnished by the exporters is specified in Form RFD-11. The form has two parts- Part A and Part B. Part A is the bond/LUT, and Part B is the acknowledgement.

Part A of the form requires the following details:

Name and address of the exporter
Details of the authorized signatory
Details of the bank guarantee
Details of the security
Details of the jurisdictional GST officer
Details of the exporter's GST registration

Part B of the form is the acknowledgement of the bond/LUT. It contains the following details:

Name and address of the exporter
Details of the bond/LUT
Date of filing of the bond/LUT
Date of acceptance of the bond/LUT

Procedure for Furnishing Bond/LUT in RFD-11

The procedure for furnishing the bond/LUT in RFD-11 is as follows:

The exporter needs to log in to the GST portal and navigate to the RFD-11 form.
The exporter needs to fill in the details in Part A of the form and submit it online. The exporter also needs to upload the supporting documents, such as the bank guarantee, in the prescribed format.
The jurisdictional GST officer will verify the details and the supporting documents and either accept or reject the bond/LUT within three working days.
If the bond/LUT is accepted, the exporter can start exporting without paying any tax. The exporter needs to mention the reference number of the LUT in the shipping bill.

Conclusion

The procedure for furnishing a bond or a LUT under GST is an essential compliance requirement for exporters. Exporters need to ensure that they fulfill the eligibility conditions and furnish the bond/LUT in the prescribed format to avail the benefits under GST. The format of the bond/LUT is specified in Form RFD-11, and exporters need to follow the procedure specified by the authorities for furnishing the bond/LUT.