Meaning of Bond scheme
Bond scheme:
The details about Bond scheme are explained here.
Bond scheme is an alternative to a landlord taking a deposit from their tenant(s). They are usually run by councils, housing associations or charities and operate with the scheme operator guaranteeing any losses the landlord suffers due to the damage by the tenant(s). A bond scheme is not considered a deposit so it does not have to be protected in a Tenancy Deposit Scheme
Rule 96A of Central Goods and Services Tax Rules, 2017 provides that in case of export of goods or services without payment of GST, the exporter has to furnish a bond or letter of undertaking (LUT) in form RFD-11. This is also required in the case of provision of goods or services to SEZ units/ developer.
Considering the difficulties faced by exporters, the Government has issued notification no. 16/2017- Central Tax and circular no. 4/4/2007-GST, both dated 07 July, 2017 to clarify certain aspects relating to bond/ LUT. The clarifications are summarised below:
- Exports would be allowed under existing bonds/ LUTs by 31 July 2017. New LUT/ bonds need to be submitted in the revised format by 31 July 2017.
Submission of LUT in place of a Bond
The following persons would be eligible to provide a LUT instead of a bond:
- Status holder as per Para 5 of Foreign Trade Policy 2015-2020; or
- A person who has received foreign inward remittances equal to minimum of 10% of the export turnover, which should not be less than INR 10 million, in the preceding financial year.
Such a person should not have been prosecuted for any offence under the CGST Act or any existing law where the amount of tax evaded exceeds INR 25 million.
The LUT should be furnished in duplicate for a financial year in the prescribed format. The LUT
should be executed by the working partner, the Managing Director, the Company Secretary, the
proprietor or by a person duly authorised by such working partner or Board of Directors of such company or proprietor on the letter head of the registered person.
The LUT would be valid for 12 months.
If the exporter fails to comply with the conditions of LUT, he may be asked to provide a bond.
Submission of bond
With regard to submission of bond, circular no. 4/4/2017-GST provides as follows:
- All persons not eligible to issue LUT would need to submit a bond.
- A running bond will be submitted and the bond amount should cover the amount of tax involved in the export based on estimated tax liability as assessed by the exporter. A fresh bond is to be submitted if the amount in the bond is less than the outstanding tax liability on exports.
- The amount of bank guarantee would be decided by the jurisdictional Commissioner and it should not exceed 15% of bond amount. The Commissioner has the power to accept the bond without any bank guarantee in case of assessee with good track record.
- The bond shall be furnished on non-judicial stamp paper of the value as applicable in the State in which the bond is being furnished.
Jurisdiction for submission of LUT/ Bond
Bond/ LUT shall be accepted by the jurisdictional Deputy/ Assistant Commissioner having jurisdiction over the principal place of business of the exporter. Until a specific administrative officer is assigned, the exporter can furnish bond/ LUT before any officer (Centre or State). However, State Commissioners have power to direct exporters to submit bond/ LUT to Central tax officers till the administrative framework is ready.
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