2017 (9) TMI 750 - HC - GST

Court directs clarification on bond requirements for 'zero-rated supply' exporters, adjourns to resolve bank guarantee issue.

Aphro Ecommerce Solutions Private Limited Versus Union of India & ORS.

The court acknowledged the need for clarity on the bond requirement for exporters engaged in 'zero-rated supply' and directed further deliberation. The ... Interpretation of statute - Rule 96A of the Central Goods and Services Tax Rules, 2017 - Circular No. 4/4/2017 - Prior to the implementation of the Integrated Goods and Service Tax Act, 2017, there was no service tax on the export of services provided by the Petitioner. Post the IGST Act, the export services provided by the Petitioner are covered under ‘zero rated supply’ under Section 16(1)(a) of the IGST Act - In order to avail of the input tax credit, the Petitioner, being a new entrepreneur with an export turnover of less than ₹ 1 crore per annum, has to necessarily furnish a bond with a bank guarantee - Such a condition does not apply to an exporter with an annual turnover exceeding ₹ 1 crore. Quantum of Bond - Held that: - para 4 of the above Circular envisages that the bond has to be for a sum equal to the export tax liability. The question is, when it is ‘zero rated supply’, is there a necessity to furnish a bond with a bank guarantee? And if so, for what amount? - the Respondent states that he would have to seek a clarification on this aspect and requests for a short adjournment. Issues: Interpretation of Rule 96A of Central Goods and Services Tax Rules, 2017 and Circular No. 4/4/2017-GST regarding the requirement of furnishing a bond or letter of undertaking for exporters with an export turnover of less than Rs. 1 crore per annum.Analysis:1. The judgment deals with the interpretation of Rule 96A of the Central Goods and Services Tax Rules, 2017, and Circular No. 4/4/2017-GST issued by the Central Board of Excise and Customs concerning the necessity of exporters with an annual turnover of less than Rs. 1 crore to furnish a bond or a letter of undertaking (LUT) in Form GST RFD-11 for exporting goods or services without payment of integrated tax. The Circular specifies that exporters must furnish a running bond in Form GST RFD-11 to cover the estimated tax liability on exports, ensuring that the outstanding tax liability is within the bond amount. The petitioner, a web developer and IT software solution services provider, falls under the category of exporters with an annual turnover of less than Rs. 1 crore and is required to furnish a bond with a bank guarantee post the implementation of the Integrated Goods and Service Tax Act, 2017.2. The petitioner contends that as their export services are considered 'zero-rated supply' under Section 16(1)(a) of the IGST Act, there should be no requirement to furnish a bond with a bank guarantee. The key question raised is whether exporters engaged in 'zero-rated supply' are obligated to provide a bond with a bank guarantee as per the Circular and, if so, for what amount. The petitioner seeks clarification on this issue, highlighting the disparity in treatment based on annual turnover thresholds for exporters. The court is tasked with resolving this ambiguity and determining the appropriate compliance requirements for exporters falling under the 'zero-rated supply' category with an annual turnover below Rs. 1 crore.3. The court acknowledges the need for clarity on the bond requirement for exporters engaged in 'zero-rated supply' and directs the respondent's counsel to seek clarification on this aspect, granting a short adjournment for further deliberation. The case is adjourned to 13th September 2017 for a subsequent hearing to address the unresolved issue regarding the bond and bank guarantee obligations for exporters falling within the specified turnover bracket. The judgment reflects the court's commitment to ensuring procedural fairness and adherence to tax compliance regulations while addressing the petitioner's concerns regarding the interpretation and application of the relevant GST rules and circulars.