Letter of Undertaking (LUT) under GST
A Letter of Undertaking (LUT) is a document required under the Goods and Services Tax (GST) system in India. It is used by exporters to supply goods or services without payment of Integrated Goods and Services Tax (IGST). By furnishing an LUT, the exporter commits to fulfilling all the conditions prescribed under GST law.
Who Can Apply for LUT?
Any registered taxpayer engaged in exporting goods or services.
Entities wishing to supply goods/services without payment of IGST.
Procedure For Letter of Undertaking TaxWare ?
Letter of Undertaking
Key Features of LUT under GST
No IGST Payment: Exporters can supply goods or services without paying IGST and later claim a refund.
Mandatory for Exports: LUT is essential for exporting goods/services under GST without tax payment.
Form GST RFD-11: The LUT is to be furnished in this prescribed form under Rule 96A of CGST Rules.
Validity: Generally valid for one financial year.
Compliance Commitment: The exporter undertakes to comply with all GST regulations.
Uses of a Letter of Undertaking
Exports: Allows exporters to avoid upfront IGST payment.
Legal Compliance: Ensures adherence to GST rules.
Financial Flexibility: Helps maintain liquidity by not blocking funds in tax payments.
Benefits of Filing an LUT
Smooth Export Process: Ensures faster processing without the need for tax payments.
Improved Cash Flow: Eliminates the burden of paying IGST and waiting for refunds.
Legal Compliance: Helps avoid penalties or delays in shipments.
Ease of Doing Business: Encourages Indian exporters to trade internationally without financial constraints.
Example
| Type | Export without IGST (under LUT) | Export under IGST (without LUT) |
|---|---|---|
| Sales Value | 100 (no GST) | 100 + IGST = 118 |
| Purchase Value | 80 + 18% GST = 94.40 | 80 + 18% GST = 94.40 |
| GST Paid to Govt. | Nil | 18-14.40 = 3.60 |
| - | In this case, the exporter can apply for refund of GST paid on purchase which is accumulated as ITC (Rs.14.40), or use it against non-export sales GST set-off
Lesser amount is stuck with the department for refund. |
In this case, the exporter can apply for refund of GST paid on sales (Rs.18/-), there is no possibility of any set-off of this amount. |
