Short on detail

After the implementation of GST, the Government has gone on an extensive media campaign clarifying various issues under the tax law apart from extolling its benefits. The GST twitter handle is responding to an eclectic variety of questions from taxpayers. Exporters had a lot of questions to ask since the procedures for export of goods under GST were not laid out unlike the erstwhile Central Excise procedures. The Central Board of Excise and Customs has responded in what is going to be a norm in the GST era — issuing a notification and a circular that draw reference to each other.

Under GST, it appears that exporters have three options: pay IGST and claim a refund, provide a letter of undertaking (LUT) or provide a bond. Notification No 16/2017 states that a status holder (which means a trading house which has earned itself one to five stars) who has received the due foreign inward remittances amounting to a minimum of 10 per cent of the export turnover, which should not be less than ₹1 crore in the preceding financial year and who has not been prosecuted for any offence either under the erstwhile indirect tax laws or under GST can provide a LUT. The prosecution should have been for an offence exceeding ₹25 crore. One is not sure if the intention really was to fix the limit at ₹25 crore.

The LUT would be valid for a period of 12 months. All exporters who do not meet these criteria would need to file a bond. Circular No 4/4/2017 clarifies that 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.

Rule 96A of the CGST Rules requires furnishing a bank guarantee with the bond. The Board has clarified that that the jurisdictional Commissioner may decide about the amount of bank guarantee depending upon the track record of the exporter. If the 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 per cent of the bond amount.

The instructions get even more interesting. It states 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 taxpayers to respective authority is implemented. However, the Commissioner of State Tax can direct the Bond/LUT in all cases to be accepted by Central tax officer till such time the said administrative mechanism is implemented. In short, the notification seems to suggest that the Bond/LUT can be submitted to any tax authority.

Though there is some clarity on exports, taxpayers have reasons to worry. The circular states that the notification is dated July 1, but the actual date of the notification is July 7. The notification draws reference to Paragraph 5 of the Foreign Trade Policy of 2015-2020 but the reference should have been to the summary of the Foreign Trade Policy and not the policy itself. In its bid to hasten clarifications, the CBEC is missing many detail and the smaller aspects of the law.

The writer is a chartered accountant

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