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ZERO RATED SUPPLY WITH EXPORT PROCEDURES (BOND/LUT OR REFUND ROUTE) - Part-I

Goods and Services Tax - GST - By: - CASanjay Kumawat - Dated:- 17-8-2017 Last Replied Date:- 19-8-2017 - The purpose of this article is to create awareness about the most interesting concept under GST. This article deals with the concept of zero rated supply, i.e., exports of goods and/ or services and supply to SEZ. Zero rated supply [Section 16(1) of the IGST Act, 2017] As per section 2 (23) of the IGST Act, 2017, zero-rated supply shall have the meaning assigned to it in section 16 of the IG .....

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g Zero-rated supplies. Meaning of the terms used in this provision is as follows: 1. As per section 2(5) of the IGST Act, 2017, export of goods with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India; 2. As per section 2(6) of the IGST Act export of services means the supply of any service when,- (i) the supplier of service is located in India; (ii) the recipient of service is located outside India; (iii) the place of supply of service is .....

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e IGST Act, 2017, Special Economic Zone developer shall have the same meaning as assigned to it in clause (g) of section 2 of the Special Economic Zones Act, 2005 and includes an Authority as defined in clause (d) and a Co-Developer as defined in clause (f ) of section 2 of the said Act. Input tax credit of inputs/inputs services/capital goods [Section 16(2) of the IGST Act, 2017] Section 16(2) of the IGST Act, 2017, subject to the provisions of section 17(5) of the CGST Act, credit of input tax .....

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s available to the registered supplier notwithstanding the section 17(2) of the CGST Act, 2017. Refund [Section 16(3) of the IGST Act, 2017] A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely: (a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax cr .....

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ertaking/Bond An exporter is required to take the letter of undertaking/Bond for export of goods and/or services without payment IGST. It will reduce the working capital requirement of the exporter. Procedure to obtain letter of undertaking/Bond and to claim the refund of unutilized input tax credit are as follows: Procedure to obtain letter of undertaking/Bond The CBEC (GST Policy Wing) vide Circular No. 4/4/2017-GST dated 07.07.2017, has clarified as under: (i) As per rule 96A of the CGST Rule .....

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er as specified in paragraph 5 of the Foreign Trade Policy 2015-2020; or who has received the due foreign inward remittances amounting to a minimum of 10% of the export turnover, which should not be less than one crore rupees, in the preceding financial year, and he has not been prosecuted for any offence under the CGST Act, 2017 or under any of the existing laws in case where the amount of tax evaded exceeds two hundred and fifty lakh rupees. (iii) All exporters, not covered by the said notific .....

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consignment wise bond would be a significant compliance burden on the exporters. It is directed that the exporters shall furnish a running bond, in case he is required to furnish a bond, in FORM GST RFD -11. 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 lia .....

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h 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% of the bond amount. (vi) As regards LUT, it is clarified that it shall be valid for twelve months. If the exporter fails to comply with the conditions of the LUT he may be asked to furnish a bond. Exports may be allowed under existing LUTs/Bonds till 31st July 2017. Exporters shall submit the LUTs/bond in the revised format latest by 31st J .....

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cases be accepted by Central tax officer till such time the said administrative mechanism is implemented. Central Tax officers are directed to take every step to facilitate the exporters. Following documents are required to obtain LUT/Bond: (i) Duly Signed RFD-11 along with application to proper officer. (ii) Bond on stamp paper of ₹ 500/- and Letter of Undertaking on Plain Paper. (iii) Copy of Provisional Certificate of Registration in Form GST REG-25. (iv) Copy of PAN Card. (v) Copy of .....

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ised input tax credit at the end of any tax period: Provided that no refund of unutilised input tax credit shall be allowed in cases other than- (i) zero rated supplies made without payment of tax; (ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council. Provi .....

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x credit used for making zero rated supplies made without payment of GST. It may be noted that as per section 54(8)(b) of the CGST Act, 2017, the refundable amount shall be paid to the applicant, if such amount is relatable to refund of unutilized input tax credit under section 54(3) instead of being credited to the Fund. The exporter claiming refund of IGST will file an application electronically through the Common Portal, either directly or through a Facilitation Centre notified by the GST Com .....

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provisions of section 54 of the Central Goods and Services Tax Act, 2017 or the CGST Rules, 2017. Time for payment of IGST shall be determined on the basis of provisions of time of supply of goods and/or services as described in section 12 and 13 of the CGST Act, 2017. For the purpose refund, the shipping bill filed by an exporter shall be deemed to be an application for refund of integrated tax paid on the goods exported out of India and such application shall be deemed to have been filed only .....

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CGST Act, 2017, the refundable amount shall be paid to the applicant, if such amount is relatable to refund of tax paid on zero-rated supplies of goods or services or both or on inputs or input services used in making such zero-rated supplies instead of being credited to the Fund. Refund of tax paid for inputs or input services used in making supplies is available but credit of refund in respect to capital goods used may not available. For both option (a) and (b) exporters have to provide detail .....

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