Letter Of Undertaking: The Exemption From Taxes For The Exporters

Last Updated at: January 04, 2020
399
GST_ Filing of Letter of Undertaking for export of goods & services

Introduction

Every trader wants to expand their business by extending the trades, not just countrywide but also globally. Indeed, to help these traders grow their exports and enhance the functionality of their business, the government has made several provisions. One of the major ones is the GST, i.e., a unified tax across the country. Adding to this, an arrangement of Letter of Undertaking has also been made allowing the exporters to export goods without paying IGST (Integrated Goods and Services Tax). 

What is LUT?

LUT means Letter of Undertaking. Under GST, every exporter is provided with two options to supply their goods and choose the format of exemption from taxes. These include:

  • Paying the Integrated Goods and Services Tax (IGST) and then claiming for the refund amount.
  • Filling the Letter of Undertaking (LUT) or bonds, and being exempted from paying taxes (IGST) for exports.

LUT is furnished under the Form GST RFD 11, rule 96A of GST. Under this rule, the exporter makes the statement of providing the exports without paying the IGST and ultimately fulfilling all the requirements under GST rules and guidelines. 

Eligibility for submitting LUT

All the people who have registered themselves under the GST act can submit the LUT. The only exception stands for those who have been summoned for tax evasion. Under this, the amount exceeds Rs. 2.50 lacs under GST or IGST rules, 2017. 

In case, the individual is not allowed to submit the LUT, then they can submit the export bonds for exporting the goods. 

Ask a Free Legal advice

Format of the Letter of Undertaking

Under the LUT, the following details have to be filled:

  • GSTIN (Goods and Services Tax Identification Number)
  • Name registered under GST
  • Type of document (Bond/LUT)
  • Address
  • Furnishing date
  • Signature and designation
  • Witness details
  • Bank guarantee

The LUT is valid for one year from the time it is furnished. Once the validity date expires, the form needs to be furnished again by the individual. It can be done instantly online at the GST portal.

Documents Required for LUT

The list of the documents to be submitted along with the LUT includes the following:

  • Acceptance cover letter of LUT.
  • A copy of the GST certificate of registration.
  • Form GST RFD 11: Two sets of the original form.
  • Notarized original Annexure of LUT (two sets). Along with these, two witnesses have to be present.
  • Get the verification of the digital signatures done from the Bank Manager.
  • The witnesses have to provide their IDs and PAN cards. All the details provided in the LUT have to be similar to the ID.
  • The PAN card of the individual has to be provided.
  • A proof for the incorporation of the company has to be provided, i.e., the Bond Incorporation certificate. In case of a partnership, the Partnership Deed must be submitted.
  • Self-declaration of eligibility on a letterhead.
  • A summary of all the invoices for export sales. These invoices have to be verified and certified by the Chartered Accountant.
  • Copy of IEC code. 

Furnishing the LUT

Earlier, all the processes of LUT were done offline. But, now, the LUT can be provided online comfortably with some simple steps. The steps to do so are as mentioned below:

  • Firstly, log in on www.gst.gov.in using the provided user id and password.
  • Under the ‘services’ tab, select the ‘user services’ tab. 
  • From the drop-down menu, choose the ‘Furnish Letter of Undertaking’ option.
  • A new page opens up, where all the details, including the registered name, trade name, GSTIN, etc., are mentioned. On the same page, select the financial year. 
  • In case, the LUT has been furnished manually, you can upload the document. 
  • Next, fill in all the details regarding the LUT on the form that appears on the screen. (Note: The witness and their details must be the same as those mentioned on the bank statements/guarantee).
  • Lastly, the place of filing has to be entered along with the designation/signature. (Note: As of now, the signature once submitted cannot be edited.)
  • There are two ways of finally submitting the form. One is with EVC (Electronic Verification Code) and the other with DSC (Digital Signature Certificate). Both require the Application Reference Number (ARN). 
  • Finally, once all the formalities are completed, the acknowledgement for the Letter of Undertaking (LUT) can be downloaded.

*Note: The DSC method can be used only by the companies and LLPs. 

Apart from the LUT, the other method for the exporters is submitting the bonds, which also requires similar ways and means to be followed, the new thing being the bank guarantee, in which the bond has to be submitted along with 15% bank guarantee of the total amount. 

Conclusion

As such, all the exporters and traders can run their business without worrying about paying taxes on their exports just by submitting the LUT. This not helps the traders but also the government. 

 

Letter Of Undertaking: The Exemption From Taxes For The Exporters

399

Introduction

Every trader wants to expand their business by extending the trades, not just countrywide but also globally. Indeed, to help these traders grow their exports and enhance the functionality of their business, the government has made several provisions. One of the major ones is the GST, i.e., a unified tax across the country. Adding to this, an arrangement of Letter of Undertaking has also been made allowing the exporters to export goods without paying IGST (Integrated Goods and Services Tax). 

What is LUT?

LUT means Letter of Undertaking. Under GST, every exporter is provided with two options to supply their goods and choose the format of exemption from taxes. These include:

  • Paying the Integrated Goods and Services Tax (IGST) and then claiming for the refund amount.
  • Filling the Letter of Undertaking (LUT) or bonds, and being exempted from paying taxes (IGST) for exports.

LUT is furnished under the Form GST RFD 11, rule 96A of GST. Under this rule, the exporter makes the statement of providing the exports without paying the IGST and ultimately fulfilling all the requirements under GST rules and guidelines. 

Eligibility for submitting LUT

All the people who have registered themselves under the GST act can submit the LUT. The only exception stands for those who have been summoned for tax evasion. Under this, the amount exceeds Rs. 2.50 lacs under GST or IGST rules, 2017. 

In case, the individual is not allowed to submit the LUT, then they can submit the export bonds for exporting the goods. 

Ask a Free Legal advice

Format of the Letter of Undertaking

Under the LUT, the following details have to be filled:

  • GSTIN (Goods and Services Tax Identification Number)
  • Name registered under GST
  • Type of document (Bond/LUT)
  • Address
  • Furnishing date
  • Signature and designation
  • Witness details
  • Bank guarantee

The LUT is valid for one year from the time it is furnished. Once the validity date expires, the form needs to be furnished again by the individual. It can be done instantly online at the GST portal.

Documents Required for LUT

The list of the documents to be submitted along with the LUT includes the following:

  • Acceptance cover letter of LUT.
  • A copy of the GST certificate of registration.
  • Form GST RFD 11: Two sets of the original form.
  • Notarized original Annexure of LUT (two sets). Along with these, two witnesses have to be present.
  • Get the verification of the digital signatures done from the Bank Manager.
  • The witnesses have to provide their IDs and PAN cards. All the details provided in the LUT have to be similar to the ID.
  • The PAN card of the individual has to be provided.
  • A proof for the incorporation of the company has to be provided, i.e., the Bond Incorporation certificate. In case of a partnership, the Partnership Deed must be submitted.
  • Self-declaration of eligibility on a letterhead.
  • A summary of all the invoices for export sales. These invoices have to be verified and certified by the Chartered Accountant.
  • Copy of IEC code. 

Furnishing the LUT

Earlier, all the processes of LUT were done offline. But, now, the LUT can be provided online comfortably with some simple steps. The steps to do so are as mentioned below:

  • Firstly, log in on www.gst.gov.in using the provided user id and password.
  • Under the ‘services’ tab, select the ‘user services’ tab. 
  • From the drop-down menu, choose the ‘Furnish Letter of Undertaking’ option.
  • A new page opens up, where all the details, including the registered name, trade name, GSTIN, etc., are mentioned. On the same page, select the financial year. 
  • In case, the LUT has been furnished manually, you can upload the document. 
  • Next, fill in all the details regarding the LUT on the form that appears on the screen. (Note: The witness and their details must be the same as those mentioned on the bank statements/guarantee).
  • Lastly, the place of filing has to be entered along with the designation/signature. (Note: As of now, the signature once submitted cannot be edited.)
  • There are two ways of finally submitting the form. One is with EVC (Electronic Verification Code) and the other with DSC (Digital Signature Certificate). Both require the Application Reference Number (ARN). 
  • Finally, once all the formalities are completed, the acknowledgement for the Letter of Undertaking (LUT) can be downloaded.

*Note: The DSC method can be used only by the companies and LLPs. 

Apart from the LUT, the other method for the exporters is submitting the bonds, which also requires similar ways and means to be followed, the new thing being the bank guarantee, in which the bond has to be submitted along with 15% bank guarantee of the total amount. 

Conclusion

As such, all the exporters and traders can run their business without worrying about paying taxes on their exports just by submitting the LUT. This not helps the traders but also the government. 

 

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