Letter of Undertaking (LUT) in GST: A Complete Guide for Exporters
The Letter of Undertaking (LUT) is an essential compliance document under the Goods and Services Tax (GST) regime in India. It allows exporters to supply goods or services without paying the Integrated Goods and Services Tax (IGST). By filing LUT, businesses can avoid blocking working capital, making exports more cost-effective and competitive in the global market.
What is LUT in GST?
A Letter of Undertaking (LUT) is a declaration that an exporter submits to the GST authorities, stating that they will comply with the provisions of GST and will fulfill their tax liabilities if applicable. Under GST laws, businesses involved in export of goods or services, or supplying to Special Economic Zones (SEZs), can opt to file an LUT instead of paying IGST upfront and claiming a refund later.
Legal Provisions for LUT in GST
- Rule 96A of CGST Rules, 2017: It allows registered taxpayers to export goods/services without paying IGST by furnishing an LUT.
- Section 16 of IGST Act, 2017: Defines the concept of zero-rated supplies, which includes exports and supplies to SEZs.
Who Can Apply for LUT?
Any registered taxpayer engaged in the following activities can apply for an LUT:
- Exporting goods or services without paying IGST.
- Supplying goods or services to an SEZ without IGST.
- Providing services outside India where the recipient is located abroad, and the payment is received in convertible foreign exchange or Indian Rupees (where allowed by RBI).
Who Cannot Apply for LUT?
- Taxpayers who have been prosecuted for tax evasion of ₹2.5 crore or more under GST or earlier laws are not eligible.
- Businesses not involved in exports or SEZ supplies cannot file an LUT.
Why is LUT Important?
Filing an LUT has several advantages for exporters:
- Avoid IGST Payment: Eliminates the need to pay IGST on exports and then apply for refunds, reducing cash flow issues.
- Faster Processing: Saves time by avoiding the lengthy refund process.
- Boosts Competitiveness: Reduces the cost burden, making Indian goods and services more competitive internationally.
- Easy Online Filing: The LUT filing process is simple and entirely online through the GST portal.
Documents Required for Filing LUT
To file an LUT, the following documents are generally required:
- GST Registration Certificate
- PAN Card of the Business
- Authorized Signatory Details (PAN & Aadhaar)
- Previous LUT (if applicable)
- IEC (Import Export Code) (for export businesses)
- Business Bank Account Details
- Declaration on Company Letterhead stating adherence to GST provisions
How to File LUT in GST? (Step-by-Step Guide)
Filing an LUT is a straightforward online process:
Step 1: Login to GST Portal
- Visit www.gst.gov.in
- Use your Username and Password to log in.
Step 2: Navigate to LUT Filing Section
- Go to Services > User Services > Furnish Letter of Undertaking (LUT).
Step 3: Fill LUT Form (GST RFD-11)
- Select the Financial Year for which LUT is being filed.
- Enter the details of authorized signatory and their designation.
- Provide necessary declarations regarding compliance with GST rules.
Step 4: Upload Required Documents
- Attach the required supporting documents.
Step 5: Submit the Form
- Verify using DSC (Digital Signature Certificate) or EVC (Electronic Verification Code).
- After successful submission, the system generates an Acknowledgment Reference Number (ARN).
Step 6: Download the LUT
- Once approved, the LUT can be downloaded from the GST portal for records.
Validity of LUT
- LUT is valid for one financial year (April 1 – March 31).
- A new LUT must be filed before the expiry of the previous LUT to continue exporting without IGST.
What Happens If LUT is Not Filed?
If an exporter does not file an LUT, they have to pay IGST on exports and later claim a refund, which:
- Locks working capital for a long period.
- Requires additional compliance efforts.
- Involves a long processing time for refund approvals.
GST LUT Filing due date
LUT is valid from the date of filing till 31st March of the financial year. For instance, Mr. P has filed LUT on 30/06/2021 , hence the LUT is valid till 31st March 2022. LUT for the exports to be supplied is required to be filed on the GST portal prior to the export.
Common Issues and Solutions in LUT Filing
| Issue | Solution |
|---|---|
| Unable to submit LUT | Clear browser cache or use another browser. |
| LUT application stuck in processing | Contact GST helpdesk or check for missing documents. |
| LUT rejected by authorities | Review rejection reasons and correct any errors before reapplying. |
| Missed filing deadline | File immediately to avoid IGST payment on exports. |
Comparison: LUT vs Bond for Exports
| Feature | LUT | Bond |
|---|---|---|
| Eligibility | Available to all exporters (except those with tax evasion cases) | Required for exporters not eligible for LUT |
| Requirement | No security required | Requires a bank guarantee/security deposit |
| IGST Payment | Not required | Not required |
| Processing Time | Faster | Slower due to verification |
| Compliance Cost | Low | High due to bank charges |
FAQs on LUT in GST
1. Can I use a single LUT for multiple exports?
Yes, a single LUT is valid for all exports and SEZ supplies during the financial year.
2. Is LUT required for exports with IGST payment?
No, LUT is only required if you want to export without paying IGST. If IGST is paid, you can claim a refund instead.
3. Can I modify my LUT after submission?
No, once filed, an LUT cannot be modified. However, you can apply for a fresh LUT in the next financial year.
4. What happens if I fail to comply with the LUT conditions?
If an exporter fails to comply, authorities may require them to pay IGST on future exports or submit a Bond with security.
5. How long does it take for LUT approval?
LUT is usually approved instantly unless additional verification is required.
Conclusion
Filing a Letter of Undertaking (LUT) under GST is a crucial compliance step for exporters who wish to avoid paying IGST upfront. It not only improves cash flow but also simplifies the export process. The online filing process ensures that businesses can quickly obtain approval and continue to export seamlessly.
For Indian exporters, LUT serves as a valuable tool to enhance global trade competitiveness while maintaining compliance with GST laws. By understanding the nuances of LUT, businesses can leverage tax benefits and optimize their working capital management effectively.
