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LUT & Bond

Kunal Pansari (Accountant) (1037 Points)

05 January 2019

Differences between LUT & Bond? Eligibility criteria?

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CA Vijeta Nathani (Chartered Accountant) (505 Points)
Replied 05 January 2019

The facility of export under LUT is available to all registered persons who intend to supply goods or services for export without payment of integrated tax except those persons who have been prosecuted for cases involving an amount exceeding Rupees two hundred and fifty lakhs; and to status holder as specified in paragraph 5 of the Foreign Trade Policy 2015-2020 and to persons receiving a minimum foreign inward remittance of 10% of the export turnover in the preceding financial year which was not less than Rs. one crore.

Since the facility of export under LUT has been extended to all registered persons, BOND will be required to be furnished by those persons who have been prosecuted for cases involving an amount exceeding Rupees two hundred and fifty lakhs and persons who does not fall under eligibility of LUT. A bond, in all cases, shall be accompanied by a bank guarantee of 15% of the bond amount.

LUT shall be valid for the whole financial year in which it is tendered and BOND shall be issued and valid for each export or can also go for Running Bond. When using a Running BOND, the exporter carries forward the same terms and conditions in the BOND for the next consignment. Say if an exporter furnishes a Running bond of Rs. 2 Crores, then he can export goods worth of taxes to the tune of Rs. 2 Crores in multiple transactions. On fulfilling the conditions in the bond, the amount is freed up and can be used for next transactions for export. However, in case the goods are not exported within the time specified in subrule (1) of rule 96A of the CGST Rules and the registered person fails to pay the amount mentioned in the said sub-rule, the facility of export under LUT will be deemed to have been withdrawn. If the amount mentioned in the said sub-rule is paid subsequently, the facility of export under LUT shall be restored. As a result, exports, during the period from when the facility to export under LUT is withdrawn till the time the same is restored, shall be either on payment of the applicable integrated tax or under BOND with bank guarantee.

LUT shall be furnished on the letter head of the registered person, in duplicate, and it shall be executed by the working partner, the Managing Director or the Company Secretary or the proprietor or by a person duly authorised by such working partner or Board of Directors of such company or proprietor. The BOND, wherever required, shall be furnished on non-judicial stamp paper of the value as applicable in the State in which the bond is being furnished.

The Letter of undertakings can be furnished and submitted online through the GST portal. At the same time, the BONDs are required to be furnished manually as the hardcopy of the same has to be remitted to the department.