LUT in GST stands for Letter of Undertaking. It is a document filed by an exporter to the government, declaring that they will fulfill all requirements for exporting goods or services without paying IGST (Integrated GST). Under the GST regime, exports are treated as “Zero-Rated Supplies.”
When you ask “what is LUT in GST,” you are likely an exporter looking for a way to avoid blocking your working capital. Instead of paying tax and then waiting for a refund, filing an LUT allows you to export without paying any tax upfront.
What Does LUT in GST Mean?
It is essentially a promise. You promise the government:
- “I will export the goods within 3 months of issuing the invoice.”
- “I will receive the payment in foreign currency (for services) within 1 year.”
- “If I fail to do so, I will pay the tax along with interest.”
It is filed via Form GST RFD-11.
Why LUT is Important
- Cash Flow: Paying 18% IGST on exports blocks huge funds. LUT frees up this cash.
- Simplicity: The refund process for tax paid is tedious. LUT avoids the refund cycle entirely.
- Mandatory for Services: Freelancers and IT companies serving foreign clients rely heavily on LUT.
Where is LUT in GST Used?
- Export Invoices: You must mention “Supply meant for export under Bond or Letter of Undertaking without payment of IGST” on the invoice.
- SEZ Supplies: Supplying to Special Economic Zones (SEZ) also qualifies for LUT benefits.
How to Find or File LUT
Step 1: Login
Visit the GST Portal and login.
Step 2: Navigate
Go to “Services” > “User Services” > “Furnish Letter of Undertaking (LUT)”.
Step 3: Select Year
Select the Financial Year (e.g., 2023-24). LUT must be filed afresh every year.
Step 4: Submit
Tick the declarations, select two independent witnesses (can be family/friends), and sign with EVC/DSC.
Example of LUT
ARN: AD2704230001234
Valid For: FY 2023-24
Status: Deemed Approved
Common Problems or Errors
- Expired LUT: LUT expires on 31st March every year. If you export on 1st April without renewing, you are liable to pay tax.
- Witness Details: People often worry about witnesses. They are just character witnesses; they don’t share liability.
Important Things to Remember
- File LUT before the start of the financial year.
- If you have been prosecuted for tax evasion above ₹2.5 Crores, you are ineligible for LUT.
- For classification of export goods, check what is HSN Code.
- For export services, check what is SAC Code.
Frequently Asked Questions
Is LUT mandatory for all exporters?
No. You have two options: Pay IGST and claim refund OR File LUT and export without tax. LUT is optional but highly recommended for cash flow.
What is the validity of LUT?
An LUT is valid for one financial year (April 1st to March 31st). You must renew it annually.
Can I file LUT after exporting goods?
No, technically the LUT should be valid on the date of the invoice. Retrospective filing is generally not accepted and may lead to litigation.
What happens if I fail to export within 3 months?
If goods do not leave India within 3 months of the invoice, you must pay the applicable GST along with 18% interest from the invoice date.
Who can be a witness in LUT?
Any Indian citizen of sound mind can be a witness. It can be your accountant, employee, or family member. Their name and address are required.