GST: Small exporters exempt from giving bank guarantee

In a major relief to small exporters, the government has exempted them from furnishing bank guarantee for shipping goods and services.

Under the Goods and Services Tax (GST), an exporter can get exemption from payment of Integrated GST by submitting a bond or Letter of Undertaking (LUT)

"To facilitate exports under GST, it has been decided that the facility of furnishing LUT, in place of a bond, for exporting goods or services or both shall be allowed to exporters and no bank guarantee will be required," government said in a release on Friday.


Exporters had raised the issue more than a week ago with revenue secretary Hasmukh Adhia and brought to the notice of the government the difficulties in furnishing bond with requisite bank guarantee.

"It is a relief to a large extent because exporters were facing high costs due to the requirement of bank guarantee," said Federation of Indian Export Organisations (FIEO) director general Ajay Sahai.

"The issue of cash blockage is expected to be partially addressed by this measure. More measures are under consideration," the government said.

As per FIEO, Rs 65,000 crore could get stuck in GST refunds in the July-October period. GST was implemented on July 1.

Exporters also want the government to do away with the need to furnish a bond and an LUT. These documents are used as a proof of export which they say anyway gets captured in the GST network through the shipping bill and invoice for outbound consignments.

However, this long term demand of exporters for the government to dispense with these documents may take some more time as it requires a legislative change.