Payment of GST on Return of Imported Material.

This query is : Resolved

Deepak Rawat (Querist)
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29 May 2024 Dear Experts,
I have imported 4 items from China and availed GST Credit on Custom. Now, I have to replace one item. Here, Can I use LUT for Nil Rate of GST at the time of Export ?
Please guide...

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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09 July 2024 Yes, you can use an LUT (Letter of Undertaking) for export of goods at Nil Rate of GST. Here's how it generally works in the context of your situation:

1. **GST Credit on Customs:** When you import goods into India, you pay GST at the time of import. You can claim input tax credit (ITC) on this GST paid on import, provided you use the goods for business purposes and fulfill other conditions under the GST law.

2. **Export under LUT:** If you intend to export goods after importing them, you have the option to export under LUT. Here’s what you need to consider:

- **Eligibility for LUT:** Businesses eligible for LUT are generally those with a good track record of compliance and exports. They can export goods or services without paying GST at the time of export (Nil Rate of GST).

- **Procedure:**
- **LUT Filing:** You need to file an LUT with the GST department. This LUT states that you will fulfill your export obligations and comply with GST regulations.
- **Exports:** After filing the LUT, you can export goods without paying GST at the time of export. This is because exports are generally treated as zero-rated supplies under GST, meaning the rate of tax is effectively zero.

- **Adjustment of Input Tax Credit:** Since you have already claimed GST credit on the customs duty paid during import, when you export under LUT, you won’t be paying GST on the export. This means you do not have to reverse any ITC claimed on the imported goods.

3. **Replacing an Item:** If you need to replace one of the imported items before exporting, ensure that you comply with customs and GST regulations for re-importation and subsequent export. You may need to adjust your inventory records and comply with relevant export procedures.

4. **Documentation:** Proper documentation, including invoices, shipping bills, and export declarations, will be necessary to support your exports under LUT and to ensure compliance with GST regulations.

In summary, yes, you can use LUT for exporting goods at Nil Rate of GST after importing them and claiming GST credit on customs duty. Ensure all procedural requirements are met and maintain proper documentation to facilitate smooth operations under GST. If in doubt, consulting with a GST professional or customs agent would be advisable to ensure compliance with all regulatory requirements.