CBEC liberalises norms for letters of undertaking

The Finance Ministry has further liberalised norms for letters of undertaking (LUT) to help exporters who have been facing difficulties under the Goods and Services Tax (GST) in timely shipment of consignments.

The Central Board of Excise and Customs (CBEC) has now clarified that all registered exporters who have received remittances of ₹1 crore or 10 per cent of export turnover in the previous fiscal will be eligible to get LUTs. It will also be available to exporters of all kinds of supplies.

“Any registered person who has received a minimum foreign inward remittance of 10 per cent of export turnover in the preceding financial year is eligible for availing himself of the facility of LUT provided that the amount received as foreign inward remittance is not less than ₹1 crore,” it has said in a recent circular.

The facility was earlier available only for manufacturer exporters.

The CBEC had on July 7 also issued clarifications to help exporters that relaxed norms for LUTs and allowed the Commissioner to waive the requirement for exporters to provide a bank guarantee of up to 15 per cent of the bond guarantee.

“It is expected that this provision would be implemented liberally,” the CBEC has now instructed its officials, adding that Central tax officers must facilitate all exporters whether or not they were previously registered with the Central Government.

Under the new tax from July 1, exporters have to pay Integrated GST for exports, which is then refunded. But as this can lead to cash flow problems , exporters have the option to provide an LUT or bond.

However, procedural confusion at the ground level has been delaying shipments, especially in the case of small exporters.

The CBEC in its latest clarification has also said that officials should accept the documents submitted by exporters as proof of fulfilling the conditions of unless there is any evidence to the contrary.

Further, all relaxations are effective from July 1 and not the date of their issuing.

For export of goods to Nepal, Bhutan or special economic zones, the LUT instead of bond can be provided in line with RBI norms, regardless of whether the payments were made in Indian currency or convertible foreign exchange.

While supply of services to SEZ developer or SEZ unit will also be permissible on the same lines, the CBEC has said that supply of services to Nepal or Bhutan will be deemed to be export of services only if the payment is in convertible foreign exchange.

“Zero rating is not applicable to supplies to EOUs and there is no special dispensation for them,” it has further said.

The pace of growth of India’s exports slowed to 3.94 per cent in July, which exporters have attributed to the slowdown on the appreciating value of rupee and the liquidity crunch after roll out of GST.