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LUT in GST - Overview
Goods and Services Tax (GST) is an indirect tax system introduced in India on 1st July 2017. It replaced many old taxes like VAT, service tax, excise duty, and others. GST made the tax system simpler and more transparent. Under GST, businesses that export goods or services have special benefits. One of the most important benefits for exporters is the facility of LUT in GST.
What is LUT in GST?
The LUT stands for Letter of Undertaking,LUT in GST is a document that exporters file to export goods or services without paying Integrated GST (IGST). It is a declaration given by the exporter to the government stating that they will fulfill all GST rules and conditions while exporting.
Normally, when goods or services are supplied, GST must be paid. However, exports are treated as zero-rated supplies under GST. This means exporters do not have to bear GST cost. To avoid paying tax at the time of export, they can submit LUT in GST.
In simple words, LUT allows exporters to export goods or services without paying GST in advance.
Why is LUT in GST Important?
LUT in GST is important because it helps exporters in the following ways:
1. No Need to Pay Tax Before Export
Without LUT, exporters must first pay IGST and later claim a refund. This process can take time. With LUT, they do not need to pay IGST at all.
2. Better Cash Flow
If exporters pay tax first and wait for a refund, their money gets blocked. LUT in GST helps save working capital.
3. Simple Process
Filing LUT is simple and can be done online through the GST portal.
4. Faster Business Operations
Since exporters do not have to wait for tax refunds, their business operations run smoothly.
Who Can File LUT in GST?
Any registered taxpayer who wants to export goods or services can file LUT in GST.
Earlier, only certain exporters could use LUT. Others had to provide a bond with bank guarantee. But now, almost all exporters can file LUT, except those who have been prosecuted for serious tax offences involving large amounts.
So, if you are:
- A manufacturer exporting goods
- A trader exporting goods
- A service provider exporting services
You can apply for LUT in GST.
What is Zero-Rated Supply?
To understand LUT in GST better, we must know about zero-rated supply.
Under GST, exports are called zero-rated supplies. This means:
- GST rate is 0%.
- Input tax credit (ITC) can still be claimed.
There are two options for exporters:
- Export with payment of IGST and claim refund later.
- Export without payment of IGST under LUT in GST.
Most exporters prefer the second option because it saves time and money.
Conditions for Filing LUT in GST
When filing LUT in GST, exporters must agree to certain conditions:
- They will export goods or services within the time limit.
- They will follow GST laws and rules.
- They will pay tax along with interest if export conditions are not fulfilled.
For goods:
- Export must happen within 3 months from the date of invoice.
For services:
- Payment must be received within 1 year from the invoice date.
If these conditions are not met, the exporter must pay GST with interest.
Documents Required for LUT in GST
- GST User id and Password
- Pan card of 2 Witness
- Adhaar card of 2 Witness
- Occuptation of Both Witness
- Cancel Cheque of Entity
- Copy of Last Filed LUT (if any)
Validity of LUT (Letter of Undertaking)
LUT in GST is valid for one financial year only. This means exporters must file LUT every year.
For example:
If you file LUT for 2025-26, it is valid only until 31st March 2026. For 2026-27, you must file a new LUT.
What Happens if LUT is Not Filed?
If an exporter does not file LUT in GST, they must:
- Pay IGST at the time of export.
- Later apply for a refund.
This can lead to:
- Delay in refund.
- Blockage of working capital.
- Extra paperwork.
Therefore, filing LUT is highly beneficial for exporters
Benefits of LUT in GST?
1. Zero Rate of Tax
The main benefit of filing an LUT in GST is that it allows exporters to conduct business without the burden of paying taxes on exports. This effectively makes the export of goods and services zero-rated.
2. Faster Refund Process
Since exporters don’t pay IGST, they don’t need to claim refunds, which can often be a lengthy and cumbersome process. The LUT ensures that the export transaction proceeds without tax delays.
3. Improved Cash Flow
By eliminating the need to pay taxes upfront, businesses can have more liquidity and improve their cash flow, especially for small and medium-sized enterprises (SMEs) involved in international trade.
4. Simplification of Export Procedures
The LUT in GST mechanism simplifies the overall export procedure by reducing paperwork and eliminating the need for tax payments on exports.
Is LUT Required for Every Export Invoice?
Yes, LUT in GST covers all export transactions during the financial year.
Once filed, you can export multiple times without paying IGST under the same LUT, as long as it is valid.
On export invoices, you must mention:
“Supply meant for export under LUT without payment of IGST.”
Important Point To Remember for filing of LUT
- An LUT remains valid for current financial year from the date of its submission. Example- If LUT was furnished in FY 2025-2026, then the date of expiry of the validity of such LUT is 31st March 2026. Therefore, you need to file fresh LUT for FY 2026-2027.
- NO bank guarantee required in case of letter of undertaking in GST.
- The LUT must be duly applied and signed by the authorised signatory of the company, firm, etc.
File Your LUT in GST Easily Today
Avoid IGST on exports. File your LUT in GST quickly with expert help. Stay compliant and save taxes. Contact us now!
FAQ on LUT in GST
A Letter of Undertaking (LUT) is a formal declaration submitted by exporters to the GST authorities. It allows them to export goods or services without having to pay Integrated Goods and Services Tax (IGST) at the time of supply.
Any registered taxpayer engaged in the export of goods or services can file an LUT, provided they meet certain eligibility criteria. This includes exporters who wish to avoid paying IGST on their exports.
To be eligible for filing an LUT, exporters must:
- Be a registered taxpayer under GST.
- Be engaged in the export of goods or services.
- Have no pending tax liabilities or arrears.
- Maintain a satisfactory compliance track record, including timely filing of GST returns.
The following documents are typically required:
- A cover letter requesting the LUT, signed by an authorized person.
- Details of two independent witnesses.
- Any previously approved LUTs (if applicable).
An LUT is valid for one financial year. Exporters must renew their LUT annually if they wish to continue exporting without paying IGST.
If you do not file an LUT before exporting, you may be liable to pay the full amount of IGST along with potential penalties, which can be up to 100% of the IGST that should have been paid.
Yes, it is advisable to mention the LUT number on invoices related to exports made under the Letter of Undertaking to ensure compliance and facilitate processing.
If your application is rejected, you will receive a notice explaining the reasons for rejection. You may then address these issues and reapply.
