While creating ARE1 we enter BondNo,means what & why?

[Former Member]

Hi Frends

What is the meaning of Bond?

Why we enter bond no. while creating ARE1

Babu Rao

[Lakshmipathi]

Hi Babu

<b>Answer to Q1</b>

Exports can be made either by Bond, Letter of Undertaking or Rebate.

Exports under Bond means Exporters are classified into two categories. Manufacturer-Exporters who manufacture and export the goods in his own name without payment of excise duty and Merchant Exporters who buy the goods without payment of excise duty from a manufacturer and export the goods in his name.

For getting the goods without payment of duty, the merchant exporter has to necessarily execute a bond (standard forms are prescribed for various types of bonds, in which the assessee gives an undertaking to export the goods within a stipulated period as per the law). The execution of bond is to ensure that in case of non-fulfillment of obligation, the central excise duty amount liable to be paid on the goods can be realized from him. Normally the bond is executed for an amount equivalent to the duty amount payable on the goods that the exporter is planning to export.

Whenever the goods are cleared from the factory without payment of duty for export, the duty amount payable on the goods will be debited from the Running Bond Account. Whenever the goods are actually exported (after the proof of export is received from the Division/Maritime Commissioner), the manufacturer will take credit of the duty amount debited earlier by him.

The manufacturer also has the option to maintain a running bond account by executing a bond with the Central Excise authorities. Though it is optional for a manufacturer-exporter to execute a bond for export clearances, it is very much necessary for merchant exporters.

<b>Answer to Q2</b>

If I am correct, if the exports is under Bond, no need to give bond number. If you are giving bond number, then it is Letter of Undertaking.

<b>2) Exports under Letter of Undertaking</b>

The manufacturer exporters have another option for clearing their goods for export without payment of duty. They have to give a letter of undertaking which is valid for a year. This procedure of giving a letter of undertaking was introduced as a liberalization measure.

The assessee will not have to follow the difficult legal procedures involved in executing a bond (providing surety/security in the form of Bank Guarantee etc). It will be sufficient if he just gives the letter of undertaking in the form prescribed.

Otherwise all the conditions relating to fulfillment of export obligations remain the same for both the procedures.

Thanks

G. Lakshmipathi

[Former Member]

Hi

Can u give some exaples of this scenarios, clearly, nt in sap language

Babu Rao

[Lakshmipathi]

Hi Babu

I feel the explanation is NOT in SAP language and one can easily understand provided if you have some basic domain experience in sales or excise.

Reward to the contributors please

Thanks

G. Lakshmipathi

[Former Member]

Hi,

Just read the help file.

Excise Bond

Definition

A document that effectively licenses a manufacturing plant to remove goods from its premises without paying basic excise duty, on condition that the goods are then exported.

An excise bond covers a fixed amount of excise duty. The excise duty of the goods exported under bond cannot exceed the bond value.

In the R/3 System, the term "excise bond" also covers letters of undertaking, and all of the excise bond functions apply equally to letters of undertaking, unless stated otherwise.

Use

Master Data

When you obtain a bond from the excise department, enter it in the system. The system numbers each bond automatically.

Day-to-Day Activities

When you assign an ARE-1 to a bond, the system automatically warns you of any reservations that have already been made against the bond.

The system keeps track of the bond balance for you. When you post an ARE-1, the bond balance decreases automatically. In the case of running bonds, the balance increases again when you close the ARE-1.

Once an excise bond is no longer of any use to you, for example, if it expires or if you have exhausted a fixed bond, you can close it. This prevents any users from using it afterwards.

Reporting

You can use the SAP System to prepare two statutory reports, the Pro Forma of Running Bond Account and the Statement Regarding Export of Excisable Goods. One further report, the Bond Summary Report, gives you an overview of all of your bonds.

Regards,

Murali