LUT

In the context of the Indian Goods and Services Tax (GST), LUT stands for Letter of Undertaking. It is a formal legal declaration submitted online by exporters to supply goods or services internationally or to Special Economic Zones (SEZs) without paying Integrated GST (IGST) upfront. 

By submitting an LUT via the Official GST Portal, exporters bypass the cumbersome process of paying taxes first and blocking their funds while waiting for tax refunds. 

Key Benefits of LUT

• Protects Cash Flow: Keeps vital working capital from being locked up in the government's tax refund cycle.

• Reduces Compliance Hassles: Eliminates the extensive paperwork involved in tracking and claiming tax refunds.

• Boosts Global Pricing: Saves processing costs, making your international pricing structure more competitive.

Who is Eligible to File?

• Any GST-registered exporter of goods or services, including SaaS startups, freelancers, and MSMEs.

• Exporters who have not been prosecuted for tax evasion exceeding ₹2.5 Crores under the CGST/IGST Acts.

• Note: Taxpayers who are ineligible for an LUT must instead furnish an Export Bond backed by a bank guarantee. 

Validity and Deadlines

• Annual Renewal: An LUT is valid only for one financial year and must be renewed annually.

• Timeline: You must submit your LUT (Form GST RFD-11) before the start of the relevant financial year or before making your first export transaction of that year. 

Essential Commitments Made in an LUT

By clicking the mandatory checkboxes in Form GST RFD-11, you legally promise that: 

 1.Goods will be exported within 3 months from the date of the export invoice.

 2.Service payments will be received in convertible foreign exchange within 1 year from the invoice date.

 3.You will pay the due IGST plus 18% interest per annum if you fail to meet the above deadlines.