In a major relief to small exporters, the government on Wednesday allowed such businesses to supply items on the basis of a letter of undertaking (LUT) without furnishing a bond and a bank guarantee.
In a major relief to small exporters, the government on Wednesday allowed such businesses to supply items on the basis of a letter of undertaking (LUT) without furnishing a bond and a bank guarantee. However, the notification said the LUT facility will not be available for those who have been prosecuted under the existing law for evading taxes above Rs 2.5 crore.
This would improve the cash flow for exporters who are struggling to get refunds under GST due to delay in filing invoice-level returns. Since the GST rollout, the exporters needed to submit a bond to be able to avoid the levy of integrated GST on items of export. In the pre-GST regime, exporters received upfront exemption on paying domestic taxes, but the mechanism changed to provide refunds on taxes paid instead of exemptions under GST.
“LUT facility extended to all exporters except those who have been prosecuted of any offence involving GST evasion of
Rs 2.5 crore or above. This would bring a relief to small exporters (having export turnover of less than Rs 1 crore) who were earlier required to submit a bond along with bank guarantee, which was resulting in procedural hassles and cash flow issues for the exporters,” Abhishek Jain, tax partner, EY India, said.
It’s expected that the GST Council, which will meet on Friday, will announce a mechanism for exporters to claim refund on the basis of summarised return (GSTR 3B) and GSTR 1 filed for July and August so far.
As per the original rules, the refund to exporters was contingent on them having filed all the three (GSTR-1, GSTR-2, GSTR-3) invoice-level returns. However, due to glitches faced by the GST network, the council had deferred filing comprehensive July return to October.