CBIC Clarifies Bond/LUT Requirements for Exporters

2025-03-03 10:42:51 02March

02March

CBIC Clarifies Bond/LUT Requirements for Exporters – Circular No. 5/5/2017-GST

<h3><strong>Key Highlights from CBIC Circular No. 5/5/2017-GST</strong></h3><p>On <strong>August 11, 2017</strong>, the <strong>Central Board of Excise and Customs (CBIC)</strong> issued <strong>Circular No. 5/5/2017-GST</strong> to clarify the process of furnishing <strong>Bonds and Letters of Undertaking (LUTs)</strong> for exporters supplying goods or services without IGST payment. The circular addresses concerns raised by exporters and field officers regarding Notification No. 16/2017 and previous circulars.</p><h3><strong>1. Expanded Eligibility for LUTs</strong></h3><ul><li>Previously, only <strong>manufacturer exporters</strong> were eligible for LUTs. The new circular <strong>extends this facility to all types of exporters</strong>.</li><li>To qualify for LUTs, an exporter must have received <strong>foreign inward remittances of at least ₹1 crore or 10% of export turnover in the previous financial year</strong>, whichever is higher.</li><li><strong>Status Holders</strong> under the <strong>Foreign Trade Policy (FTP) 2015-2020</strong> can avail LUTs <strong>without meeting these conditions</strong>.</li></ul><h3><strong>2. Faster Processing of LUTs/Bonds</strong></h3><ul><li>LUTs and Bonds must be <strong>accepted within three working days</strong> of submission to ensure exporters are not delayed.</li></ul><h3><strong>3. No Special Treatment for Merchant Exporters & EOUs</strong></h3><ul><li><strong>Merchant exporters</strong> purchasing goods from manufacturers must pay <strong>GST on transactions</strong>, as the earlier <strong>CT-1 Form exemption is not applicable</strong> under GST.</li><li><strong>Export Oriented Units (EOUs)</strong> are not entitled to automatic zero-rating; they must <strong>claim ITC refunds</strong> like regular exporters.</li></ul><h3><strong>4. Clarification on INR Payments for Exports</strong></h3><ul><li>Export payments <strong>received in Indian Rupees</strong> for transactions with <strong>Nepal, Bhutan, and SEZs</strong> qualify for LUTs <strong>if done through RBI-approved methods</strong>.</li><li>However, for <strong>services exported to Nepal/Bhutan</strong>, payment <strong>must be in convertible foreign exchange</strong> to be considered an export.</li></ul><h3><strong>5. Bank Guarantee Relaxation</strong></h3><ul><li>Bank guarantees, <strong>capped at 15% of the bond amount</strong>, may be <strong>waived at the Commissioner’s discretion</strong>.</li><li>Exporters registered with an <strong>Export Promotion Council</strong> or those meeting the foreign remittance criteria across multiple GST registrations (PAN-based) can submit Bonds <strong>without a bank guarantee</strong>.</li></ul><h3><strong>6. Submission Authority & Documentation</strong></h3><ul><li>Exporters can submit Bonds/LUTs to <strong>either Central or State Tax Authorities</strong>.</li><li><strong>Self-declarations</strong> will be accepted unless there is <strong>contrary evidence</strong>, simplifying compliance.</li></ul><h3><strong>7. Retrospective Applicability</strong></h3><ul><li>These guidelines apply <strong>from July 1, 2017</strong>, ensuring all exports after this date are covered under the revised rules.</li><li><a href="https://cms.plasament.com/storage/chirag-singla/circularno-5-gst-2.pdf">circularno-5-gst-2</a><br> </li></ul>