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Export under bond in gst

rajesh (MBA) (97 Points)

23 June 2017

What is the procedure for export under bond in gst , should we prepare ARE-1 form as same as in the previous excise system (42/2001). what are the other procedures to be followed by a manufacturer for export under bond?

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2 Replies

Nishith Sharadchandra Parikh (Internal Auditor) (37 Points)
Replied 26 June 2017

Now the exporter has two options under GST as provided under sub section 3 of section 16 of IGST Act. Also an interesting sub-section 2 of 16 says that input tax credit can be accumulated for the zero rated supplies notwithstanding that such a supply is exempt. This means that even if a certain product is exempt of domestic consumption and ITC cannot be accumulated for the same, the moment those same goods/ services are exported, ITC to that extent can be accumulated. Further, the two options provided under the IGST Act are:- (a) a registered taxable person may export goods or services under bond, subject to such conditions, safeguards and procedure as may be prescribed in this regard, without payment of IGST and claim refund of unutilized input tax credit in accordance with provisions of section 48 of the CGST Act, 2016 read with rules made thereunder; (b) a registered taxable person may export goods or services, subject to such conditions, safeguards and procedure as may be prescribed in this regard, on payment of IGST and claim refund of IGST paid on goods and services exported in accordance with provisions of section 48 of the CGST Act, 2016 read with rules made thereunder. If we closely analyse these provisions, these are exactly the way exports are done under the current regime. We will have credit accumulation in our electronic credit ledger and out of that we can export goods/ services on payment of IGST at the rates generally prescribed for that product. Thereupon we can claim refund of same u/s 48 i.e. within maximum 60 days and 90% on self declaration. The second option is as currently being exercised in case the credit in electronic credit ledger is not sufficient, we may clear the goods/ services under bond. Also this option can be exercise even if we have balance in electronic credit ledger and later claim refund of input tax credit standing in our books of account. Rules are yet to be prescribed but I believe that rules for both the option will be different and it would be easier to claim refund under second option on payment of IGST. INVOICING FOR EXPORTS The invoice rules clearly stipulates that in case of exports, the invoice shall carry an endorsement SUPPLY MEANT FOR EXPORT ON PAYMENT OF IGST or SUPPLY MEANT FOR EXPORT UNDER BOND WITHOUT PAYMENT OF IGST and among other details shall also contain:- (i) Name and address of the recipient, (ii) Address of Delivery, (iii) Name of the Country of Destination, and (iv) Number and date of application for removal of goods for export[ARE-1] Word of Caution for Exports Refund Discussion of refunds u/s 48 is out of the purview of this article. However, one thing generally to be noted is that refunds for all exports before the appointed day will have to be claimed under earlier law only even if the claim for the same if filed on or after the appointed day or even if the goods or services are exported after the appointed day. This means that for all the goods removed from the factory, even if the Shipping Bill or Bill of Lading is received after the appointed day, the refund has to be claimed under the earlier law only. Way Forward The most important thing to note is that under the GST regime, all the forms are being discontinued. Henceforth, there will be no concept of obtaining supplies under form “H” from suppliers. This will put additional working capital pressures on the exporters especially the merchant exporters. To meet this end government is trying to have efficient system of refunds to the exporters. But the silver lining is that in the present regime in states where the refunds are not coming and are stuck since many years, the refunds as IGST will start coming very fast and if we go by the recent commitment of the commerce minister, within a week or two in some cases.

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Trupti (Manager - Accounts & Finance) (33 Points)
Replied 12 July 2017

Originally posted by : Nish*th Sharadchandra Parikh
	Now the exporter has two options under GST as provided under sub section 3 of section 16 of IGST Act. Also an interesting sub-section 2 of 16 says that input tax credit can be accumulated for the zero rated supplies notwithstanding that such a supply is exempt. This means that even if a certain product is exempt of domestic consumption and ITC cannot be accumulated for the same, the moment those same goods/ services are exported, ITC to that extent can be accumulated. Further, the two options provided under the IGST Act are:- (a) a registered taxable person may export goods or services under bond, subject to such conditions, safeguards and procedure as may be prescribed in this regard, without payment of IGST and claim refund of unutilized input tax credit in accordance with provisions of section 48 of the CGST Act, 2016 read with rules made thereunder; (b) a registered taxable person may export goods or services, subject to such conditions, safeguards and procedure as may be prescribed in this regard, on payment of IGST and claim refund of IGST paid on goods and services exported in accordance with provisions of section 48 of the CGST Act, 2016 read with rules made thereunder. If we closely analyse these provisions, these are exactly the way exports are done under the current regime. We will have credit accumulation in our electronic credit ledger and out of that we can export goods/ services on payment of IGST at the rates generally prescribed for that product. Thereupon we can claim refund of same u/s 48 i.e. within maximum 60 days and 90% on self declaration. The second option is as currently being exercised in case the credit in electronic credit ledger is not sufficient, we may clear the goods/ services under bond. Also this option can be exercise even if we have balance in electronic credit ledger and later claim refund of input tax credit standing in our books of account. Rules are yet to be prescribed but I believe that rules for both the option will be different and it would be easier to claim refund under second option on payment of IGST. INVOICING FOR EXPORTS The invoice rules clearly stipulates that in case of exports, the invoice shall carry an endorsement SUPPLY MEANT FOR EXPORT ON PAYMENT OF IGST or SUPPLY MEANT FOR EXPORT UNDER BOND WITHOUT PAYMENT OF IGST and among other details shall also contain:- (i) Name and address of the recipient, (ii) Address of Delivery, (iii) Name of the Country of Destination, and (iv) Number and date of application for removal of goods for export[ARE-1] Word of Caution for Exports Refund Discussion of refunds u/s 48 is out of the purview of this article. However, one thing generally to be noted is that refunds for all exports before the appointed day will have to be claimed under earlier law only even if the claim for the same if filed on or after the appointed day or even if the goods or services are exported after the appointed day. This means that for all the goods removed from the factory, even if the Shipping Bill or Bill of Lading is received after the appointed day, the refund has to be claimed under the earlier law only. Way Forward The most important thing to note is that under the GST regime, all the forms are being discontinued. Henceforth, there will be no concept of obtaining supplies under form “H” from suppliers. This will put additional working capital pressures on the exporters especially the merchant exporters. To meet this end government is trying to have efficient system of refunds to the exporters. But the silver lining is that in the present regime in states where the refunds are not coming and are stuck since many years, the refunds as IGST will start coming very fast and if we go by the recent commitment of the commerce minister, within a week or two in some cases.