The Letter of Undertaking (LUT) streamlines GST for exporters by exempting them from paying taxes on exports. Discover its significance and the application process for exporters seeking tax benefits on their international trade transactions.
Letter of Undertaking (LUT)
A Letter of Undertaking (LUT) is a document that allows exporters to undertake the export of goods or services without the need to pay the Goods and Services Tax (GST) at the time of export. It is a written promise to the government that the exporter will abide by all the GST regulations and fulfil their tax liability.
Benefits of Filing LUT under GST
- Cash Flow Advantage: Exporters can avoid blocking their funds in GST payments, which helps in better cash flow management.
- Competitive Advantage: Exports become more competitive in the international market as they are GST-free, making them more appealing to foreign buyers.
- Reduced Compliance Burden: Filing LUT reduces the compliance burden as it eliminates the need to claim a refund of GST paid on exports.
Letter of Undertaking Format
| Information | Details |
| Exporter’s Details |
|
| Financial Year | Mention the relevant financial year |
| Goods/Services Exported | Description of goods or services being exported |
| Export Transaction Details |
|
| Declaration |
|
| Authorized Signatory |
|
Eligibility for Export under LUT
To be eligible for export under LUT, an exporter must meet certain criteria, such as having a clean track record of GST compliance and a valid Importer-Exporter Code (IEC). The eligibility criteria may vary from time to time and should be checked with the relevant authorities.
Documents Required for LUT filing
- GST Registration Certificate
- Importer-Exporter Code
- Bank Account Details
- Copy of Partnership Deed or MOA/AOA (as applicable)
- Details of Previous LUT (if applicable)
- Authorized Signatory’s Details
Who Can Utilise Letters of Undertaking (LUT) and Bonds?
Exporters who meet the eligibility criteria can utilize both LUTs and bonds. However, the decision to opt for an LUT or a bond depends on various factors, including the exporter’s past record, the amount of GST involved, and government regulations.
When Should You Apply For/File a LUT, and What Was the Situation Before GST?
You should apply for/file a LUT when you intend to undertake export activities. Before GST, exporters had to pay the applicable GST on their exports and then claim a refund. This process often led to working capital constraints and delayed refunds. With the introduction of the LUT, exporters can export goods and services without upfront GST payment.
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Procedure for Filing Online LUT under GST
- Step 1: Login and access the GST Portal and log in.
- Step 2: Go to ‘SERVICES’ Tab > ‘User Services’ > ‘Furnish Letter of Undertaking(LUT)’.
- Step 3: Choose the financial year (e.g., 2021-22) for the LUT.
- Step 4: Upload the LUT document (PDF or JPEG, max 2 MB).
- Step 5: Complete details on GST RFD-11 form. Tick self-declaration boxes and enter witness details.
- Step 6: Enter filing place, click ‘SAVE’, then ‘PREVIEW’ for accuracy.
- Step 7: Sign using DSC or EVC
- Step 8: Download acknowledgement. To view previous LUTs, go to ‘SERVICES’ > ‘User Services’ > ‘View my Submitted LUTs’, select period, and click ‘VIEW’.
- Following these steps ensures a streamlined process for furnishing a Letter of Undertaking (LUT) on the GST portal.
How to Fill out a LUT on the GST portal?
To fill out an LUT on the GST portal, you need to log in, navigate to the relevant section, and provide the required information, including personal and business details, bank details, and the amount for which you want to file the LUT. The exact process may vary, so it’s advisable to follow the guidelines provided on the GST portal or seek professional assistance.
Key Reminders about LUT Bond in GST:
- LUTs must be filed with accuracy and compliance with the latest GST registration regulations.
- Ensure that the LUT is valid for the relevant financial year.
- Keep records and documentation related to exports and LUT filing for audit and compliance purposes.
- Regularly monitor the eligibility criteria and the need to switch between LUT and bonds based on your circumstances.
- Seek guidance from GST professionals or authorities to navigate the LUT process efficiently.
FAQs
Who is eligible for LUT under GST?
Exporters who have a clean track record of GST compliance and hold a valid Importer-Exporter Code (IEC) are generally eligible for LUT under GST. However, eligibility criteria may vary, so it's advisable to check with the relevant authorities.
What is the benefit of LUT in GST?
The primary benefit of an LUT (Letter of Undertaking) in GST is that it allows exporters to undertake the export of goods or services without paying GST upfront. This provides a cash flow advantage, reduces compliance burden, and makes exports more competitive in the international market.
How do I get an LUT certificate?
To obtain an LUT certificate, you need to apply for it on the GST portal or through the prescribed format provided by the tax authorities. The application process typically involves providing necessary details and documents as per the guidelines.
What is the use of a letter of undertaking?
Exporters use a Letter of Undertaking (LUT) to declare their intention to export goods or services without paying GST at the time of export. It is a commitment to comply with GST regulations and fulfil tax liabilities at a later date.
How do I apply for LUT in GST for the first time?
To apply for LUT in GST for the first time, you need to visit the GST portal and navigate to the relevant section for the LUT application. Fill out the required information, submit the necessary documents, and follow the prescribed procedure. Specific steps and documentation may vary over time.
Is it mandatory to file LUT under GST?
Filing an LUT is not mandatory for all exporters. It depends on the exporter's choice and their specific circumstances. Exporters can also choose to provide a bond in lieu of an LUT in certain cases.
What is the renewal period for LUT?
LUTs typically need to be renewed on an annual basis. Exporters are required to ensure that their LUT is valid for the relevant financial year. Renewal procedures may vary, and exporters should follow the guidelines provided by the GST authorities.
What documents are required for LUT?
The specific documents required for LUT may vary, but typically, you need documents such as your GST registration certificate, IEC, bank account details, partnership deed or MOA/AOA (if applicable), and details of the authorized signatory. Always check the latest requirements from the GST authorities.
How do I get a refund from LUT?
If an exporter has paid GST inadvertently or under certain circumstances, they can claim a refund for the GST paid. The refund process involves submitting a refund application with supporting documents to the relevant tax authority. The specific procedure for claiming a refund can vary and should be followed as per the GST regulations.
