In a move that could bring some relief to exporters, the Centre allowed them to furnish a letter of undertaking instead of a bank guarantee to export goods.
Under the Goods and Services Tax (GST), exporters can get an exemption from paying Integrated GST by submitting a bond or a letter of undertaking.
Many small exporters and industry bodies approached the Centre seeking relaxation of the rules, citing difficulty in furnishing bonds. “Small exporters have brought to the notice of the government the difficulties in furnishing bond with requisite bank guarantee,” the Finance Ministry said.
“To facilitate exports under GST, it has been decided the facility of furnishing Letter of Undertaking, in place of a bond, for exporting goods or services or both shall be allowed to exporters and no bank guarantee will be required.
“The issue of cash blockage is expected to be partially addressed by this measure,” according to an official statement. Exporters have been airing grievances with the government saying delays in refunds of input tax credit claims were resulting in working capital to the tune of about ₹65,000 crore getting blocked.
The Centre responded saying there was no blockage for two-thirds of this amount, and the wait for the balance was commensurate to that witnessed during the pre-GST regime.
“This is much needed simplification which will help in reducing transaction time and cost of exporters,” said Ganesh Gupta, president, Federation of Indian Export Organizations. said in a statement following the decision. “Micro and small exporters will be immensely benefited as they were struggling to get bank guarantee unless (they) furnish collateral to the bank which affects their liquidity and thus flow of working capital impacting production.”
In a move that could bring some relief to exporters, the government has allowed exporters to furnish a letter of undertaking instead of a bank guarantee in order to export goods.
Under the Goods and Services Tax (GST) regime, exporters can get an exemption from paying Integrated GST by submitting a bond or a letter of undertaking. Many small exporters and industry bodies have approached the government for a relaxation of these rules, citing difficulty in obtaining the bonds.
“Small exporters have brought to the notice of the Government the difficulties in furnishing bond with requisite bank guarantee,” the finance ministry said on Saturday. “To facilitate exports under GST, it has been decided that the facility of furnishing Letter of Undertaking, in place of a bond, for exporting goods or services or both shall be allowed to exporters and no bank guarantee will be required.”