GST LUT (Letter of Undertaking)

The Goods and Services Tax (GST) regime in India has been instrumental in transforming the nation’s taxation system, aimed at simplifying tax procedures and promoting ease of doing business. A key provision under this framework, introduced in 2017, is the Letter of Undertaking (LUT). This provision allows registered exporters to export goods and services without having to pay the Integrated Goods and Services Tax (IGST) upfront at the time of export, thereby improving cash flow and reducing operational burdens. Prior to this, exporters were required to pay IGST and wait for a refund, which could take several months.

Overview of GST LUT (Letter of Undertaking)

To alleviate this, the Indian government introduced Notification 37/2017, allowing exporters to conduct their operations more smoothly by offering a tax-free export process. Businesses must file an LUT to take advantage of this benefit, which not only simplifies the export process but also encourages international trade by making Indian exports more competitive.

Eligibility Criteria for GST LUT Filing

To file a GST Letter of Undertaking (LUT), businesses must meet certain eligibility conditions. The criteria ensure that only legitimate and compliant entities benefit from this provision.

Registered GST Taxpayer: The applicant must be a registered taxpayer under the Goods and Services Tax (GST) system. This is a mandatory requirement for anyone wishing to take advantage of the LUT for exports.
No Prosecution for Tax Evasion: The exporter must not have been prosecuted for any offense related to tax evasion under the CGST Act 2017, IGST Act 2017, or any other prevailing tax laws. Specifically, the applicant should not have been involved in tax evasion involving amounts exceeding ₹2.5 crores.
No Pending Tax Liabilities: The applicant must not have any outstanding liabilities under GST, including any unpaid taxes or penalties. The business should be fully compliant with all tax filing obligations, such as the timely submission of GST returns.
Not a Casual or Non-Resident Taxable Person: Casual taxable persons (those who occasionally undertake business in India) and non-resident taxable persons (foreign entities not based in India) are not eligible for LUTs. Instead, they are required to provide a bank guarantee as an alternative.

Requirements for GST LUT Filing

Filing a GST LUT requires businesses to meet certain foundational requirements to ensure a smooth application process. These prerequisites include:

GST Registration:

Only businesses that are registered under GST are eligible to apply for a GST LUT. An active GST registration is essential for the exporter to avail the benefits of tax-free exports.

Export Intent:

The business should be engaged in exporting goods or services to foreign countries, or providing supplies to Special Economic Zones (SEZs), which are considered zero-rated supplies under GST. The LUT is specifically for exporters wishing to conduct international trade.

GST Compliance:

The business must be in good standing with GST authorities, with no pending tax returns or payments. The applicant should have a clean compliance history with the tax department, ensuring the smooth approval of the LUT.

Documents Required for GST LUT Filing

The process of filing for a GST LUT involves submitting specific documents to ensure the business is legally authorized to apply for the scheme. The key documents required are as follows:

GST Registration Certificate:

A copy of the GST registration certificate is needed to verify that the business is duly registered under GST.

PAN Card:

The applicant's Permanent Account Number (PAN) card is essential for identification and verification purposes.

Export Details:

The business may be required to provide details regarding their export operations, including the nature of the goods or services, the export turnover, and any other relevant information.

LUT Cover Letter:

A formal cover letter signed by the authorized person within the business requesting the acceptance of the LUT.

Bank Details:

The business must provide its bank account details, typically through a cancelled cheque or a bank statement, to confirm the business’s official bank account.

GST RFD-11 Form:

The required form for filing the LUT, which can be downloaded from the official GST portal.

IEC Code:

A copy of the Importer Exporter Code (IEC), a mandatory requirement for entities involved in international trade.

Authorization Letter:

If the LUT is not being signed by the business owner or director, an authorization letter should be provided to designate another person as the signatory.

Board Resolution/Partnership Deed:

Companies and partnership firms must provide a board resolution (for companies) or a partnership deed (for partnerships) authorizing the LUT application.

Self-Declaration:

A declaration signed by the applicant confirming that they have complied with all GST provisions and have no pending dues.

Procedure for GST LUT Filing

Filing for a GST LUT is a digital process that can be done via the official GST portal. Below is a step-by-step guide for businesses looking to file their LUT:

Log in to the GST Portal: Access the official GST portal and log in using your credentials to begin the application process.
Navigate to the LUT Section: Once logged in, go to the “Services” menu, select “User Services”, and click on “Furnish Letter of Undertaking”.
Select Financial Year: Choose the financial year for which you wish to file the LUT.
Attach Previous LUT (if applicable): If you have filed an LUT in the past, you may upload a copy of the previous LUT for reference.
Complete the Form: Fill out the necessary information, including your promise to export goods within the prescribed period (usually three months) and agree to pay IGST with interest if non-export occurs.
Provide Witness Information: Enter the details of two witnesses as required by the GST authorities.
Sign the LUT: The LUT must be signed by an authorized signatory of the business, using either a Digital Signature Certificate (DSC) or Electronic Verification Code (EVC).
Submit the LUT: Once all details are filled and verified, click on the “Sign and File” option to complete the filing.
Confirmation: After submission, you will receive a unique Application Reference Number (ARN) via email and SMS. This can be used to track the status of your LUT.
Track LUT Status: You can track the progress of your LUT application under “User Services” > “View My Submitted LUTs” in the GST portal.

Renewal of GST LUT Filing

GST LUTs are valid for one year. Therefore, businesses must renew their LUT annually to continue enjoying the benefits of tax-free exports. The renewal process is similar to the initial filing:

Login to the GST Portal: Access your GST portal account and navigate to the “Furnish LUT”
Select the Financial Year: Choose the financial year for which you wish to renew the LUT.
Provide Updated Information: Ensure all the details are up-to-date and correct.
Sign and Submit: Sign the renewal form using DSC or EVC, and submit the renewed LUT.
Confirmation: After submission, you will receive a confirmation and ARN for the renewed LUT.

Conclusion

The GST Letter of Undertaking (LUT) is an essential instrument for exporters in India, allowing them to export goods and services without upfront tax payments. By ensuring compliance with the necessary eligibility criteria and fulfilling documentation requirements, businesses can streamline their operations and improve cash flow. The process of filing and renewing the GST LUT is simple and can be easily completed online, offering exporters a more efficient and cost-effective way to manage their international trade activities.