Execution of Bond/LUT-services exporters at receiving end

Sir, Bonds or LUTs were not necessary pre-GST era as service exports were not liable to service tax in first place in view of the provisions of the Rule 3 of the Place of Provision of Services Rules, 2012 read with Section 66B of the Finance Act,1994, being service recipient in non-taxable territory. One can appreciate that there is a paradigm shift in taxation model in GST law in which export of services are liable to IGST in view of the provisions on place of supply in terms of Section 13(2) read with Section 7(5) of the of the IGST Act,2017. Therefore, Government prescribed a procedure to safeguard the revenue interests. The registered suppliers of service are allowed either to export services under bond/LUT and claim input tax credit refund later or on payment of tax with consequential refund of IGST paid under the provisions of Section 54 of the CGST Act,2017 read with Section 20 of the IGST Act,2017.

It is noticed that the learned author questioned the legality in empowering the Commissioner to extend the time limit beyond one year to receive export proceeds in terms Rule 96A of CGST Rules 2017. It is his concern that RBI’s functions under FEMA,1999 with regard to granting time to realize export proceeds are entrusted to the Commissioner. I am afraid, that the learned author misconstrued the contents of the carefully drafted provisions that mandated service exporter to pay tax in case of failure to realize export proceeds. Time period for realization of export proceeds is hardly covered in the provision. The further period allowed by the Commissioner under Rule 96A(b) is to allow exporter to pay tax even beyond fifteen days after one year from the date of issue of export invoice. The provisions with appropriate placing of commas are to be read between the lines to arrive at the legislative intent. Thus, I am of the personal view that learned author’s concern on empowering the Commissioner with RBI’s functions under FEMA,1999 is bereft of any merit.

rrkothapally rrkothapally 30/07/2017