All about Letter of undertaking(LUT) under GST

letter of undertaking

1. What is Letter of undertaking (LUT)

Letter of Undertaking or LUT is an undertaking filed by an exporter of goods or service which permits him to export goods or services without payment of IGST subject to the condition that he will complete the process of export of goods or services within the prescribed time limit.. 

According to the Notification No. 37/2017 – Central Tax, it’s mandatory to file LUT for exporting goods or services or both without paying the IGST. 

In case, an exporter fails to submit LUT the person needs to pay IGST or has to provide an export bond. Earlier LUT was only available to file offline at the concerned GST office. But now, the Government of India has made the LUT filing process online to ease the process. 

Besides, there are a number of things that you must know about LUT filing. We have shared all about Letter of undertaking under GST here, have a look. 

2. Objective of LUT

  • As per section 16 of the Integrated Goods and Service Tax Act, 2017 (“IGST Act”), Export of goods or services, i.e., zero-rated supply, does not come under the Goods and service Tax. 
  • Accordingly, in such case, exporters can claim refund through either of the following options:
    • Option-1:  The person may supply goods or services under bond or Letter of Undertaking (“LUT”) without payment of integrated tax and can claim refund of unutilised input tax credit.
    • Option-2: The person may supply goods or services on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied. For the purpose of payment of GST on goods/services exported, exporters may utilise corresponding ITC claims.
  • Therefore, on filing of LUT, supplier may supply goods or services without payment of IGST subject to fulfilment of conditions given under GST law. 

3. Who can apply for LUT- Eligibility Criteria

A person registered under GST, who is intending to supply goods or services 

  • Outside India including special economic zones , i.e., zero rated supply
  • Without paying integrated tax

Every registered person is allowed to file LUT subject to fulfilment of  following conditions:

  • The person applying for LUT must not be prosecuted under the Integrated Goods and Services Act or Central Goods and Services Tax Act where the levied tax amount exceeds Rs. 250 lakhs.
  • The person applying for registration under LUT needs to avail this through an online portal of GST. The partner, Company Secretary, MD, or any authorised person is permitted to file GST RFD-11 through GST portal.
  • The facility of exporting goods or services without paying the Integrated Goods and Service Tax will not be available if exporter fails to export goods or services in the time period given under GST law,

4. Letter of Undertaking is Valid for One Year

Once you submit the LUT it will be valid for the whole financial year. For each financial year you have to submit LUT. 

4.1 Document for Letter of Undertaking (LUT)

A self-declaration is required which will state that the conditions of LUT must be accepted unless there is any specific permission given. 

For these cases, a self-declaration of the exporter is mandatory to the effect mentioning that he/she has not been prosecuted, which should serve the purpose of Notification No. 37/2017- Central Tax, 4th October 2017. 

If any verification is required, it should be done on a post-facto basis. 

5. Stipulated time for acceptance of LUT or Bond

The Letter of Undertaking or Bond is mandatory for the purpose of export of goods or services without payment of GST including exports to SEZ units. 

Hence, accepting LUT has to be on the list of  top priority. The LUT must be accepted within three working days, once it has been received along with the self-declaration form of the exporter. 

If the officer fails to process the Letter of Undertaking within the next three working days, the exporter can consider it to be accepted. 

6. Process of filing Letter of Undertaking (LUT) 

Letter of Undertaking(LUT) steps
  • Click on the services tab and select User services from the underlying section.
Letter of Undertaking(LUT) services tab
  • Then, select Furnish LUT.
  • Under the section “LUT applied for Financial year” choose the financial year for which you want to file LUT
Letter of Undertaking(LUT) applied for Financial year

Note: In case you have filed the previous year’s LUT offline, you have to attach a soft copy of that. Click the Choose File option provided in the same tab to upload the document.

  • Now, you have to furnish all the details in the form appearing on your screen followed by ticking the three boxes given below on the same page.
Letter of Undertaking(LUT) details
  • Then, you shall mention all the details of the witnesses for generating LUT
Letter of Undertaking(LUT) witnesses details
  • Once done, preview your Letter of Undertaking 
Letter of Undertaking(LUT) preview

Now, the LUT needs to be signed by any authorised signatory.

  • Finally, you will receive a confirmation mail for LUT filed along with an SMS in your registered mobile number.
  • That’s all! You can now download your GST LUT by clicking the DOWNLOAD option. 
Letter of Undertaking(LUT) download

To know more about GST on supplies by Merchant Exporter and Refund to Merchant exporter

DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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