Updates and details for Procedure of Exports without payment of IGST:
Export is one of the most important industrial activity for a country which has the spectrum of impact on all sectors. For a developing economy struggling to maintain rationality in the balance of payment situation, it becomes more vital. All countries work on the basic premises that duties and taxes should not be exported along with goods and services.
The Centre has, through a notification and a circular, eased the paperwork required to export goods without the exporter has paid the Integrated Goods and Services Tax (IGST). According to the GST Rules, traders who wanted to export without paying IGST had to provide a bond or letter of undertaking (LUT) promising to pay the tax.
This requirement did not clarify who exactly needed to provide a bond and who was eligible to provide a LUT. It also involved complexity to do with the recipient of these documents.
CBEC on 7th July 2017 issued a notification no. 16/2017, whereby it specifies the conditions and safeguards for the registered person who intends to supply goods or services for export without payment of integrated tax, for furnishing a Letter of Undertaking in place of a Bond.
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As per this notification, any person who fulfills following conditions shall be allowed to make exports by furnishing a Letter of Undertaking in place of a Bond without payment of combined tax:
(a) Person must be a status holder as specified in paragraphs 3.20 and 3.21 (Corrigendum issued in this regard) of the Foreign Trade Policy 2015-2020; or
(b) Person must have received in the preceding financial year:
- the due foreign inward remittances (a minimum of 10% of the export turnover); and
- this due foreign inward remittances should not be less than one crore rupees.
However such person should have not been prosecuted for any offence under the Central Goods and Services Tax Act, 2017 (12 of 2017) or under any of the existing laws in case where the amount of tax evaded exceeds Rs. 2,50,000/-.
As per paragraphs 3.20 of the Foreign Trade Policy 2015-2020:
- Status Holders are business leaders who have excelled in international trade and have successfully contributed to country’s foreign trade. Status Holders are expected to not only contribute towards India’s exports but also provide guidance and handholding to new entrepreneurs.
- All exporters of goods, services and technology having an import-export code (IEC) number shall be eligible for recognition as a status holder. Status recognition depends upon export performance. An applicant shall be categorized as status holder upon achieving export performance during current and previous two financial years, as indicated in paragraph 3.21 of Foreign Trade Policy. The export performance will be counted on the basis of FOB value of export earnings in free foreign exchange.
- For deemed export, FOR value of exports in Indian Rupees shall be converted in US$ at the exchange rate notified by CBEC, as applicable on 1st April of each Financial Year.
- For granting status, export performance is necessary in at least two out of three years.
Paragraphs 3.21 of the Foreign Trade Policy 2015-2020 prescribed category of status holders from one star to five star Export House, these are as follows:
|Status Category||Export Performance FOB / FOR (as converted) Value (in US $ million)|
|One Star Export House||3|
|Two Star Export House||25|
|Three Star Export House||100|
|Four Star Export House||500|
|Five Star Export House||2000|
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