Exports of goods and services from India form a significant part of India’s growth and economy. Hence, the exports are promoted by various means and schemes by the centre whereby zero-rated supply is one of the means to promote the exports. Under zero-rated exports, the Government waives off means the taxes i.e. GST levied on supply.
Zero-rated exports are made by two options: Exports with payment of GST followed by the refund of tax and Exports without payment of GST. In order to make exports without payment of taxes, the exporter is required to file Letter of Undertaking (LUT) with the GST Network.
Tax reforms that aim for simplification and ease of process, the Government has deployed the online system for Letter of Undertaking (LUT) under GST Regime with effect from April 1, 2018. Prior to this introduction, the exporters were required to make an application by physical submission of documents, which lacked the centralised database with the department.
Under the newly introduced system, the exporters are required to file LUT in form GST RFD – 11 under Rule 96A. By filing the Letter of Undertaking, the concerned exporter declares that he will fulfil all the requirements prescribed for exports. Unlike previous conditions for eligibility of filing LUT by exporters, Government has made all the exporters eligible for filing LUT irrespective of their turnover or receipt in the financial year. The filing of the bond by small exporters is no more required.
The announcement of implementation prescribed filing LUT in Form GST RFD – 11 on the portal by the exporters, which was subsequently furnished to the Jurisdiction Officers to issue Letter of Acceptance in form of its approval.
In the first week of its introduction, the system glitches made officers unable to provide Letter of Acceptance as the officers could not find the details of LUT on the portal. Therefore, the offline submission was also considered as an obstacle in simplification of the system due to the involvement of officials.
Subsequently, the Network through its Twitter handle made an announcement to pay relief by Circular No. 40/14/2018-GST dated 06.04.2018 “Exporters to file LUT in FORM GST RFD-11 on the portal only. LUT will be deemed to be accepted as soon as ARN is generated. No document needs to be physically submitted to the jurisdictional office.” The acknowledgement bearing Application Reference Number (ARN) is considered for acceptance of the LUT filed. However, if the exporter filing LUT is found ineligible, the LUT is liable for rejection by the department.
The exporter may now be able to file LUT by submission of necessary documents login credentials on the portal. The documents may require the filing of Importer – Exporter Code Certificate, as applicable. Further, the online filing requires attestation from two witnesses, whose PAN Card and address proof is also submitted. Renewal of the Letter of Undertaking is required to be effected in the same manner with filing previous LUT filed physically with the department.
The Government also eliminates the exporter from filing LUT in case he has been prosecuted for any offense under Central Goods and Services Tax (CGST) exceeding INR 250 Lakh. This group of exporters is required to make exports through payment of IGST applicable only.
As a condition to export with LUT, the exporters undertake that Exports of goods/ services will be completed within a period of three months from the date of issue of Export invoice or further period allowed by the Commissioner, if any. The failure will require paying IGST applicable on supplies with interest at the rate of 18% p.a. from date of invoice to payment of GST.
LUT filed under GST is valid for the whole Financial Year in which it is filed. However, if the exporter fails to abide the conditions of export under this route, the said facility is deemed to have been withdrawn, where exports can be facilitated by payment of taxes only.
The facilitation of filing and acceptance only through online portal eliminating the physical submission is welcomed step, which will demonstrate simplification of process for taxpayers. The Government also invite stakeholders to bring in notice the difficulties in implementation of the system.