An overview of GST Letter of Undertaking (LUT)

Prabhat Nigam

11 Feb, 2022

Exporters before the introduction of GST LUT had to submit an export bond for the purpose of exports. The export bond required money which became difficult for the exporters who are already short on liquidity. Keeping the genuine hardships of exporters in mind, the government came out with a concept of Letter of Undertaking where exporter promises to pay IGST on a future date.  

What is a GST Letter of Undertaking (LUT)?

A GST Letter of Undertaking is commonly known as LUT. LUT is a form that is prescribed for an exporter to be furnished under form GST RFD 11 under Rule 96A of the CGST Rules. It is nothing but a declaration from the exporter’s end that he will fulfil all the mandatory requirements that have been prescribed under the GST law while exporting without having paid IGST due on him.

Legal Framework of LUT

Filing of LUT is a mandatory requirement for an exporter while making exports of goods or services or both without making payments of Integrated Goods and Services Tax (IGST). If the exporter does not take the route of LUT, then the exports can only be made through payment of IGST or by furnishing an export bond.   

Before the introduction of LUT, the exporter only has the option of export bond. Realising the need of increasing ease of doing business, the government came up with a concept of LUT. Initially, LUT was supposed to be filed at the respective GST office physically by the exporter but now, the government has taken this process of filing LUT online. The exporter can now file LUT online through his respective account in the GST portal by the following the below mentioned steps.

Eligibility for filing LUT

Every GST registered exporter of goods or services or both are eligible for the benefits of LUT except those exporters who have been prosecuted for any offence of tax evasion whose value exceeds Rupees 250 lakhs under CGST Act or IGST Act^[1] or any other law.

It must be noted that those exporters who are not eligible for filing LUT for exports, then the only option left with them is to furnish an export bond.

The motive of the government behind introducing the facility of LUT was to expand the export base and provide relief to the exporters.

According to the CGST Rules, 2017 any person can furnish an LUT under form GST RFD 11 if that person satisfies the following eligibility criteria:

1. The person wish to export goods or services or both.
2. The person must be registered under GST.
3. The person wishes to export goods and services without payment of IGST.

Documents required for furnishing LUT

1. LUT cover letter which is signed by an authorized person
2. PAN card of the exporting entity
3. KYC document of the authorized signatory or authorized person
4. Copy of GST registration 
5. Cancelled cheque
6. Authorized letter
7. Copy of Import Export Code (IEC)
8. GST RFD 11 form

Procedure of filing LUT though online mode

Since the government has made the process of filing LUT online, an exporter wishing to avail the benefits of LUT can follow the following procedure:

• The GST registered exporter must login to his GST portal
• Select the tab titled ‘Services’, then select ‘User Services’ and further select the option of  ‘Furnish Letter of Undertaking (LUT)’.
• After selecting the tab of LUT, the option of selecting the financial year appears for which the exporter wishes to apply for LUT. This option of selecting the financial year appears in ‘LUT Applied for Financial Year’ drop down list.

[However, if the exporter has already furnished LUT manually for any of the previous period, then the same shall be uploaded by clicking on the option of ‘Choose file’. It must be noted that the uploads must be either in PDF or JPEG format with the maximum size of the file not exceeding 2MBs]

• Once the GST RFD 11 form appears, the exporter needs to fill in the following details:

I. Provision of self-declaration: The exporter gets the option of ticking following three boxes which serves as an undertaking from the side of the exporter:

1. To export the goods or services supplied without payment of IGST within the time stipulated in sub-rule 1 of Rule 96A of CGST Rules, 2017.
2. To observe the provisions of GST Act and Rules made thereunder, in respect of export of services or goods or both.
3. Pay IGST thereon in the event of failure to export goods and services along with an amount which is equal to 18% per annum on the amount of tax not paid from the date of generating invoice till the date of actual payment.

II. Requirement of furnishing information of Independent Witnesses: The details in terms of name, occupation and address of the two independent witnesses in the given boxes.

[it must be noted that the names declared in the LUT must be of those that are declared in the running Bond or Bank Guarantee.]

• The exporter then needs to enter the place of filing followed by saving and then the option of to preview to verify whether all the mentioned details are true to his knowledge.
• Then the option to Sign the form appears and it must be filed using the below two options:

I. Submit using registered Digital Signature Certificate (DSC) of the selected authorised signatory

II. Submit with Electronic Verification Code (EVC)

It must be noted that only Companies and LLPs can only file using DSCs.

In the above case, the Primary Authorised Signatory signing the GST Letter of Undertaking can be either a Working Partner, MD or CS of the company or Proprietor or by a person duly authorised by such working partner or by BOD or Proprietor to execute the given form.

Consequences

GST Letter of Undertaking is a great instrument for the exporters so it must be also be taken care that payment of IGST is not delayed by the exporter or he may be forced to pay the amount not paid at the rate of 18% per annum. The exporter must also be careful about not evading taxes more than rupees 250 lakh otherwise he will not be able to avail the benefits of LUT. However, if because of any of the abovementioned reasons, the exporter forfeits the benefits of GST Letter of Undertaking, he can still avail the benefit of export bond.

Read our Article:Legal Provisions Concerning Cancellation of GST Registration