As per the GST law, all exports are subject to IGST. However, to reduce the litigation complications of the tax refund process and to eliminate the blockage of funds, the government has provided the option to the exporters, where they can export goods or services without paying taxes.
Therefore, the exporters have two options, i.e.
- Export under LUT or Bond without payment of tax
- Export with payment of tax and later claim a refund of the tax paid.
1. Meaning of LUT in GST
The full form of LUT is “Letter of Undertaking.” It is the document that exporters have to file if they want to export without making payment of IGST. LUT is a type of bank guarantee where a bank allows its customer (exporters) to raise short-term credit from an Indian bank’s foreign branch. And, in case of failure to repay by the customer, the bank undertakes to repay the credit on behalf of the customer.
2. Who can use LUT for export under GST? – Eligibility for filing LUT in GST
To file a LUT in GST, the person can furnish LUT in the FORM –GST RFD 11, if they are
- A registered person under GST
- Intended to supply good and services to India or outside India, or SEZ
- Want to make supply without the payment of IGST.
Note: The registered persons who have been prosecuted for tax evasion, the amount exceeding Rs. 250 lakh or any other offense under the GST Act, the IGST Act, or any other existing statute are not eligible for filing LUT under GST.
3. How to file LUT for exports? – Process of filing LUT in GST and export under GST
You can always hire a professional for LUT process in GST or you can follow below steps:
Following are the simple process on how to file LUT for exports and export goods and services without payment of taxes.
Step 1: Log in to the GST portal by using the credentials, i.e., GSTN and password
Step 2: Select the “User services” option under the tab of “Services,” and then select “Furnish Letter of Undertaking.” FORM GST RFD – 11 will be displayed on the screen.
Step 3: Now, select the financial year for which you want to file your LUT under the option showing “LUT applied for financial year.”
Step 4: Read and check the boxes for accepting the conditions required for LUT. And fill in the required details of two witnesses and save them for filing with DSC.
Step 5: Sign the LUT and file the form. Once the form is signed and filed, you can’t edit it.
You will receive an email notification and SMS on your registered number. You can now download the GST letter of undertaking.
4. Documents required for LUT under GST
Persons eligible to file LUT in GST and export under GST are required to submit the following documents:
- LUT cover letter requesting acceptance of LUT, which shall be signed by an authorized person
- Authorized letter
- FORM GST RFD – 11
- Copy of GST registration
- Copy of Import Export Code (IEC)
- Copy of PAN card of the entity
- Cancelled cheque
By bringing the provision of LUT in GST and export under GST, the government aims to increase the exports while providing relief to the taxpayers. Furthermore, exporters who don’t meet the LUT filing eligibility criteria are required to submit the Bond without making payment of IGST instead of LUT.