the essay of 15 April 2020 · the untouched capture
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<p align="justify"><font color="#330066" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>APRIL 15, 2020</strong></font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Undertakers - beware -</font></strong></font><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>Why LUT? - </strong></font><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Do we collect tax by undertaking or law? </strong></font></p>
<p align="center"><u><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>By Vijay Kumar</strong></font></u></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>I </strong>thought an undertaker was <em>one whose business is to prepare the dead for burial and to take the charge and management of funerals.</em> But tax laws have taught me that an undertaker is also one who undertakes (to do something). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Rule 96A of the CGST Rules, Any registered person availing the option to supply goods or services for export without payment of integrated tax shall furnish, <strong>prior to </strong> export, a bond or a <strong>Letter of Undertaking </strong> in FORM GST RFD-11 to the jurisdictional Commissioner….. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This LUT (Letter of Undertaking) is a highly legal sounding document addressed to the President of India: </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">I/We.................................. of..........................…………… (address of the registered person) having Goods & Services Tax Identification Number No…………………………………………, hereinafter called "the <strong>undertaker </strong>(s) including my/our respective heirs, executors/administrators, legal representatives/successors and assigns by these presents, hereby jointly and severally undertake on this.................. day of................... to the President </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) to export the goods or services supplied without payment of integrated tax within time specified in sub-rule (1) of rule 96A;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) to observe<strong>s </strong> all the provisions of the Goods and Services Tax Act and rules made thereunder, in respect of export of goods or services; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(c) pay the integrated tax, thereon in the event of failure to export the goods or services, along with an amount equal to eighteen percent interest per annum on the amount of tax not paid, from the date of invoice till the date of payment. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">I/We declare that this undertaking is given under <strong>the orders of the proper officer </strong> for the <strong>performance of enacts </strong> in which the public are interested. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Do we need an undertaking to <em>observe all the provisions of the Goods and Services Tax Act and rules and to pay the integrated tax, in the event of failure to export the goods or services, along with an amount equal to eighteen percent interest per annum on the amount of tax not paid, from the date of invoice till the date of payment. </em>(And who is the proper officer who has given the orders? What is his authority to order the taxpayer? The undertaking is given as per the rule and not under the orders of any officer - proper or otherwise.) </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is it not covered under the Act? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Section 16 of the IGST Act deals with <em>"zero rated supply" </em></font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#CCCCCC" span="span"><strong>ZERO RATED SUPPLY </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#CCCCCC" span="span">16. (1) <em>"zero rated supply"</em> means any of the following supplies of goods or services or both, namely:- </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#CCCCCC" span="span">(a) export of goods or services or both; or </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#CCCCCC" span="span">(b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.</font></p>
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<p align="justify" style="background-color:#CCCCCC" sans-serif="sans-serif" span="span"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(2) Subject to the provisions of sub-section (5) of section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply. </font></p>
<p align="justify" style="background-color:#CCCCCC" sans-serif="sans-serif" span="span"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(3) A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely:-</font></p>
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<p align="justify"sans-serif" style="background-color:#CCCCCC" span="span"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or</font></p>
<p align="justify"sans-serif" style="background-color:#CCCCCC" span="span"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder. </font></p>
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rule 96A deals with exports: </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif"style="background-color:#DFF3CB" span="span"><strong>96A. Export of goods or services under bond or Letter of Undertaking.- </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif"style="background-color:#DFF3CB" span="span">(1) Any registered person availing the option to supply goods or services for export without payment of integrated tax shall furnish, prior to export, a bond or a Letter of Undertaking in FORM GST RFD-11 to the jurisdictional Commissioner, binding himself to pay the tax due along with the interest specified under sub-section (1) of section 50 within a period of - </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif"style="background-color:#DFF3CB" span="span">(a) fifteen days after the expiry of three months, or such further period as may be allowed by the Commissioner, from the date of issue of the invoice for export, if the goods are not exported out of India; or </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif"style="background-color:#DFF3CB" span="span">(b) fifteen days after the expiry of one year, or such further period as may be allowed by the Commissioner, from the date of issue of the invoice for export, if the payment of such services is not received by the exporter in convertible foreign exchange or in Indian rupees, wherever permitted by the Reserve Bank of India. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif"style="background-color:#DFF3CB" span="span">(2) The details of the export invoices contained in FORM GSTR-1 furnished on the common portal shall be electronically transmitted to the system designated by Customs and a confirmation that the goods covered by the said invoices have been exported out of India shall be electronically transmitted to the common portal from the said system. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif"style="background-color:#DFF3CB" span="span">Provided that where the date for furnishing the details of outward supplies in FORM GSTR-1 for a tax period has been extended in exercise of the powers conferred under section 37 of the Act, the supplier shall furnish the information relating to exports as specified in Table 6A of FORM GSTR-1 after the return in FORM GSTR-3B has been furnished and the same shall be transmitted electronically by the common portal to the system designated by the Customs: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif"style="background-color:#DFF3CB" span="span">Provided further that the information in Table 6A furnished under the first proviso shall be auto-drafted in FORM GSTR-1 for the said tax period. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif"style="background-color:#DFF3CB" span="span">(3) Where the goods are not exported within the time specified in sub-rule (1) and the registered person fails to pay the amount mentioned in the said sub-rule, the export as allowed under bond or Letter of Undertaking shall be withdrawn forthwith and the said amount shall be recovered from the registered person in accordance with the provisions of section 79. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif"style="background-color:#DFF3CB" span="span">(4) The export as allowed under bond or Letter of Undertaking withdrawn in terms of sub-rule (3) shall be restored immediately when the registered person pays the amount due. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif"style="background-color:#DFF3CB" span="span">(5) The Board, by way of notification, may specify the conditions and safeguards under which a Letter of Undertaking may be furnished in place of a bond. </font></p>
<p align="justify"> <font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif"style="background-color:#DFF3CB" span="span">(6) The provisions of sub rule (1) shall apply, mutatis mutandis, in respect of zero-rated supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit without payment of integrated tax. </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now, why this LUT at all? If a taxpayer violates the conditions of the LUT, what is the remedy available to the government? Can't the government recover the tax without the LUT? Will the LUT help in any way? And what is the procedure to enforce the undertaking in the LUT? It seems they have to file a civil suit! [In a recent order, <strong><a href="https://taxindiaonline.com/RC2/caseLawDet.php?QoPmnXyZ=MTUwODM5" target="_blank">2019-TIOL-2213-CESTAT-HYD</a></strong>, the CESTAT observed, <em>"The usual method of enforcing any bond is by filing of civil suit.."</em>] Is it practically feasible and physically possible? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">When the LUT had to be physically filed before the tax officers, it was an expensive affair for the taxpayers. Thankfully, the physical contact is now eliminated with online filing and thus avoiding an inconvenient virus. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What will happen if exports are made without filing the LUT? Can tax be demanded even if it is proved that exports have taken place or can a penalty be imposed for not filing the LUT? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <font color="#663399">Circular No. <strong><a href="http://taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MjQxNDQ=" target="_blank">37/11/2018-GST</a></strong>, dated 15th March, 2018</font>, CBIC observed, </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>It has been brought to the notice of the Board that in some cases, such zero rated supplies have been made before filing the LUT and refund claims for unutilized input tax credit have been filed. </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>4.1. In this regard, it is emphasised that the <strong>substantive benefits of zero rating may not be denied </strong>where it has been established that exports in terms of the relevant provisions have been made. The delay in furnishing of LUT in such cases may be condoned and the facility for export under LUT may be allowed on ex post facto basis taking into account the facts and circumstances of each case. </em></font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In <em>Hydraulics India Services Pvt Ltd</em>,<strong> <a href="https://taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2011/2011-TIOL-1752-CESTAT-BANG.htm" target="_blank">2011-TIOL-1752-CESTAT-BANG</a></strong>, </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>The show-cause notice had proposed to recover Central Excise duty with interest and also to impose penalty on the party under Section 11AC read with Rule 25. The demand of duty was raised in respect of certain goods cleared for export but without LUT and ARE-I. Other export documents viz., shipping bill, invoice, etc., had been duly made and filed and the goods exported. In adjudication of the show-cause notice, the original authority dropped the demand of duty after verification of the shipping bill and bank realization certificate produced by the party as proof of export of the goods. The exporter's omission with regard to LUT and ARE-I was reckoned as a procedural lapse and, in a lenient view, the adjudicating authority refrained from taking further action in the matter. The party was cautioned for the future and further proceedings were dropped. The department filed appeal to the Commissioner (Appeals). The appellate authority imposed a penalty of Rs.10,000/-. It took the view that the party was liable to pay penalty under the said Rule for contravention of the provisions of Notification No.<strong><a href="http://taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=NzQ5MQ==" target="_blank">42/2001-CE (NT)</a></strong> dated 26.6.2001 which had prescribed certain conditions for export of goods under bond without payment of duty. </em></font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Tribunal observed, </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>It is not in dispute that the goods were exported after filing the basic exports documents viz., shipping bill etc. The omission with regard to LUT and ARE-1 was accepted by the original authority as a procedural lapse and this approach was not faulted by the Commissioner (Appeals). If that be the case, there can be no penalty on the appellant under any of the provisions of Rule 25.</em> </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Just two days ago, the CBIC issued a clarification: Circular No. <strong><a href="http://taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MjY4ODU=" target="_blank">137/07/2020-GST</a></strong>, dated 13th April, 2020 </font></p>
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<td><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#FFD7AE" span="span">Letter of Undertaking (LUT) furnished for the purposes of zero-rated supplies as per provisions of section 16 of the Integrated Goods and Services Tax Act, 2017 read with rule 96A of the CGST Rules has expired on 31.03.2020. Whether a registered person can still make a zero-rated supply on such LUT and claim refund accordingly or does he have to make such supplies on payment of IGST and claim refund of such IGST ? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#FFEFDF" span="span">Notification No. <strong><a href="https://taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MjM0Nzc=" target="_blank">37/2017-Central Tax</a></strong>, dated 04.10.2017, requires LUT to be furnished for a financial year. However, in terms of notification No. <strong><a href="https://taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MjY4NTQ=" target="_blank">35/2020 Central Tax</a></strong> dated 03.04.2020, where the requirement under the GST Law for furnishing of any report, document, return, statement or such other record falls during between the period from 20.03.2020 to 29.06.2020, has been extended till 30.06.2020. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#FFEFDF" span="span">Therefore, in terms of Notification No. <strong><a href="https://taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MjY4NTQ=" target="_blank">35/2020-Central Tax</a></strong>, time limit for filing of LUT for the year 2020-21 shall stand extended to 30.06.2020 and the taxpayer can continue to make the supply without payment of tax under LUT provided that the FORM GST RFD-11 for 2020-21 is furnished on or before 30.06.2020. <font color="#FF0000">Taxpayers may quote the reference no of the LUT for the year 2019-20 in the relevant documents. </font></font></p></td>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What happens if he has not filed the LUT for the year 2019-20 and so has no reference number? And it seems the portal does not now accept LUT for 2019-20. Stuck? Why all the useless work? Why can't we just do away with this LUT? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But on the other hand, if the government wants to provide employment to some professionals with these forms, why can't you just comply? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While trying to endure the corona lockdown, maybe someone with a little authority can think of removing this kind of clutter in the GST law and procedure. </font></p>
<p align="justify"><font color="#990000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GST even after Covid </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">We will overcome this - I mean Covid-19, but we will still have to live with GST; let us all be prepared. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The New York Times reported on <strong>March 28, 1989</strong>, </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#D1D1E7" span="span">It will take something more than a nuclear attack to wipe out taxpayers' obligations to the Internal Revenue Service. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"sans-serif" style="background-color:#D1D1E7" span="span">An addition to the Internal Revenue Manual, which is supposed to guide the conduct of all I.R.S. employees, declares that if the bomb is dropped, <em>"operations will be concentrated on collecting the taxes which will produce the greater revenue yield." </em></font></p>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Until next week </strong></font></p>
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