Letter of undertaking

India is growing quickly and could become the third-largest economy by 2027. Exporting goods and services is a big part of this growth. It helps balance payments, creates jobs, and lets India compete globally. To support exports, the government has made policy changes.

For exporting, there are two choices:

1. Pay IGST upfront on goods or services, then get a refund later.
2. Export without paying IGST by using a bond or letter of undertaking. Then, get a refund for unused input tax credit.
These options make exporting easier and support India's economy.

1. What is a Letter Of Undertaking in GST ?
According to Rule (96A) of the CGST Rules, 2017, exporters who meet certain requirements can submit a letter of undertaking (LUT) to export goods and services without paying IGST. They need to fill out Form GST RFD 11 with the LUT before exporting. If exporters don't meet the criteria for submitting LUTs, they must instead provide a bond to export without paying IGST.

Conditions For Filing Letter Of Undertaking

According to notification no. 37/2017 dated 4th October 2017 under the CGST Act, if a registered person wants to export goods or services without paying IGST, they can submit an LUT instead of a bond, given that they meet these conditions:

They haven't been prosecuted under the CGST or IGST Act, 2017 for evading taxes exceeding Rs. 2.50 crore.
The LUT must be signed by the working partner, company secretary, managing director, proprietor, or someone authorized by the board or working partner.
The LUT must be submitted in duplicate on the registered person's letterhead for the specific financial year as specified in Form GST-RFD-11, Annexure to Sub-Rule 1 of Rule 96A of the CGST Rules, 2017.

Validity of Letter Of  Undertaking

Circular No. 4/4/2017 of GST, issued on 7th July 2017, mentions that the letter of undertaking (LUT) provided by exporters is valid for 12 months. Additionally, if a registered person chooses to submit an LUT but doesn't follow the required conditions, they must instead submit a bond in place of the LUT.

KYC documents of witnesses

1. Last year’s LUT
2. GST login ID and password
3. Digital signature of an authorized signatory

Steps to File LUT in the GST Portal

1. Log in to the GST portal.
2. Go to the "SERVICE" tab and choose "USER SERVICES."
3. Select "FURNISH LETTER OF UNDERTAKING (LUT)."
4. Choose the financial year you're filing for.
5.MUpload the PDF copy of the last financial year's LUT if available.
6.MProvide names, addresses, and occupations of two witnesses.
7. Fill in the place of filing.
8. Preview the form.
Sign the application with a registered digital signature certificate or via an electronic verification code.
Once signed and submitted, the form cannot be edited.
Download the LUT application from the GST portal.

Advantages of filing LUT for Exporters

Here are some of the advantages of filing an LUT for exporters:
Tax Exemption: Exporters don't have to pay taxes right away, which helps them have more money available and make more profit.
Time Saved: They don't need to spend time asking for tax refunds, so they can focus on their work instead.
More Money Available: The money they would have paid in taxes can now be used for their business needs, which is especially helpful for small businesses.
Valid All Year: Once they submit the LUT, they don't have to worry about it for the rest of the year.
Easy Process: They can do everything online, and it's easy to get approval from the tax authorities
Key Information to Remember about LUT for Exporters
Validity Period: An LUT is valid for 12 months from when it's submitted. This means exporters have a year of tax exemption for their exports.
Compliance Conditions: To get the LUT approved, exporters must follow certain rules. If they don't, they might lose the benefits and have to submit a bond instead.
Bond Requirement: If exporters can't submit an LUT, they can provide a bond on non-judicial stamp paper along with a bank guarantee to cover the expected tax amount.
Document Format: The LUT must be on the letterhead of the exporting company. This ensures it's genuine and meets the rules.
Application Process: To apply for an LUT, use the GST RFD-11 form. It can be filled out by certain authorized people like the managing director or company secretary.
Bank Guarantee Limit: The bank guarantee with the bond shouldn't be more than 15% of the bond amount. The GST Commissioner in charge can decide to waive this, making it easier for exporters to follow the rules.

In summary, filing a Letter of Undertaking (LUT) in GST provides valuable benefits for exporters in India. It simplifies the export process by offering tax exemption and saving time on refund procedures. By meeting specific requirements and following the correct procedure, exporters can enjoy these advantages and support economic growth. With the LUT valid for 12 months and an easy online application process, exporters can focus on their business operations confidently. It's an essential tool for exporters to succeed in the global market while adhering to tax regulations.

FAQs

1. What is LUT in export?
Ans: A Letter of Undertaking (LUT) in export is a formal declaration submitted by an exporter to GST authorities, ensuring compliance with export rules and regulations. It allows exporters to avoid paying Integrated Goods and Services Tax (IGST) on their export services.

Q2. In GST, what is an LUT certificate?
Ans: In GST, a LUT certificate, or Letter of Undertaking certificate, is a document that exempts exporters from paying IGST on export services. It signifies an exporter's commitment to comply with export regulations and is filed with GST authorities.

Q3. Is it necessary to register a LUT for GST?
Ans: Yes, it is necessary to register an LUT for GST if you are an exporter looking to avoid paying IGST on your export services. It helps streamline international transactions and ease the financial burden of tax payments.

Q4. Is it possible to obtain a LUT certificate through the GST portal?
Ans: Yes, you can obtain an LUT certificate through the GST portal. The process involves submitting the LUT application, and once approved, you can claim an exemption from paying IGST on your exports.

Q5. Is it mandatory to mention the LUT number on the invoice?
Ans: Yes, it is mandatory to mention the LUT number on your invoice when you are availing the benefit of LUT for GST. This helps in identifying that your export services are exempt from IGST.

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