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An Overview of Letter of Undertaking (LUT) under GST

Editorial Team
Updated
September 1, 2023

As the Goods and Services Tax (GST) was introduced in India, it brought significant changes in the tax structure of the country. Among the many changes, one that affected businesses the most was the introduction of the Letter of Undertaking (LUT). An LUT is a legal document that eliminates the need for businesses to pay a GST bond when exporting goods or services. It is a significant relief for businesses that export frequently and can save them a lot of money. In this article, we will discuss everything businesses need to know about the LUT under GST.

Filing LUT on GST Portal to Export Goods/Services at Zero GST Rate.

The LUT under GST is a declaration filed by registered taxpayers who intend to supply goods or services outside of India without paying any IGST. In simple terms, it is a legal document that manufacturers and exporters use to claim exemption from the payment of IGST. An LUT is valid for a financial year and needs to be renewed every year as per the GST Act.

To file for an LUT, a business must have an active GST registration and a valid PAN card. The LUT needs to be filed online on the GSTN portal with a signature of the authorised signatory and two witnesses. The LUT application needs to be supported by bank guarantee or security if the exporter has a history of wrongful availing of GST refunds or has committed any tax fraud.

One of the most significant benefits of filing an LUT under GST is that it exempts businesses from paying a bond or a cash deposit while exporting goods. This saves businesses a lot of money and avoids blocking significant funds while the products are in transit. Moreover, filing an LUT ensures faster clearance of goods at the customs ports and reduces transaction time, resulting in better cash flows for businesses.

In conclusion, filing an LUT under GST is an excellent way for businesses to save money while exporting goods or services. It eliminates the need for GST bonds and speeds up the clearance process of goods through customs. Moreover, global competition has increased the demand for exports, and filing an LUT can help businesses become more competitive and expand their markets. Businesses planning to export goods or services should consider filing an LUT under GST as it can save them time, money, and help them streamline their operations. That said, businesses must also maintain compliance with all GST rules and regulations to avoid any penalties or legal complications.

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