GST Letter Of Undertaking – How To File LUT Under GST?

What is the Letter of Undertaking under GST?

An LUT (Letter of Undertaking) is a formal declaration submitted by an exporter to the GST authorities. It acts as a commitment where the exporter agrees to meet specific conditions set by the GST department.

Under the Goods and Services Tax (GST), all exports are subject to Integrated Goods and Services Tax (IGST). However, exporters can claim refunds for the IGST paid through a refund process.

Many exporters face difficulties in securing these refunds, which makes options like submitting an LUT (Letter of Undertaking) more attractive. By providing an LUT, exporters can avoid paying the tax upfront and eliminate the need for a refund process. This not only saves time and effort but also keeps their funds from being tied up in tax payments.

Filing an LUT is simple and can be done online, providing exporters with a smooth, hassle-free experience. According to the CGST Rules, 2017, any registered person can submit a bond or LUT using form GST RFD 11 to export goods without paying integrated tax.

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What are the eligibility criteria to apply for LUT?

Given below are the eligibility criteria for the Letter of Undertaking eligibility -

• Intended Supply Destination
  Exporters must plan to supply goods or services to various destinations, including India, international markets, or Special Economic Zones (SEZs).
• GST Registration
  Exporters need to be registered under the Goods and Services Tax (GST) system to benefit from the LUT provisions.
• Intention to Supply Goods Tax-Free
  Exporters who wish to use the LUT option must declare their intention to supply goods without paying integrated tax upfront.

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Validity of LUT (Letter of Undertaking)

The LUT submitted is valid for the whole financial year in which it is submitted. You need to submit a new LUT for each financial year. If the goods for export are not exported within three months of Date of Invoice issue, then the Exporter is liable to pay GST along with 18% interest within 15 days according to Section 50 (1). Also in case of payment for services are not received within one year for which the LUT has been submitted, the exporter is liable to pay GST @ 18% within 15 days. Failing to do so will lead to withdrawal of LUT facility and on subsequent payments, it can again be restored.

You can download the FORM GST RFD-11 from www.cbec.gov.in as long as it is available on the portal. Furnish the filled form to the jurisdictional Deputy/Assistant Commissioner with jurisdiction over your place of business.

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Documents Required for of LUT Under GST

• LUT Under GST Cover Letter - A formal request for LUT acceptance, signed by an authorized representative of the business, is a mandatory requirement in the application process.
• GST Registration Copy - Proof of GST registration is crucial to confirm the applicant's status as a registered entity under the GST system.
• PAN Card - The entity's Permanent Account Number (PAN) card is necessary to verify its legal identity and tax responsibilities.
• KYC of Authorized Signatory - Know Your Customer (KYC) documents of the authorized signatory or the person signing the LUT cover letter are required for verification purposes.
• GST RFD 11 Form - Submitting Form GST RFD 11, as required under GST rules, is mandatory for processing the LUT application.
• IEC Code Copy - A copy of the Import Export Code (IEC) is essential for entities involved in international trade, as it verifies their authorization to conduct export activities.
• Canceled Cheque - Providing a canceled cheque is required to verify the entity’s bank account details, ensuring smooth fund transactions.
• Authorized Letter - An official authorization letter gives the designated person the authority to represent the entity in LUT-related matters.

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How to File LUT Online Under GST?

• Step 1. Login to the GST Portal using your credentials.
• Step 2. Go to the ‘Services’ menu, select ‘User Services’, and click on ‘Furnishing Letter of Undertaking’.
• Step 3. Form GST RFD-11 will appear on your screen.
• Step 4. Select the Financial Year for which you are filing the LUT.
• Step 5. If you have an earlier LUT, you can upload it by clicking on ‘Choose File’.
• Step 6. For previously furnished offline LUTs, attach the document and continue filing.
• Step 7. If filing a new LUT, select the three checkboxes to agree to the conditions in the Letter of Undertaking.
• Step 8. Enter the name and address of two witnesses in the required section.
• Step 9. In the Place field, enter the location where the form is being filed.
• Step 10. Select the name of the Authorized Signatory who will sign the form.
• Step 11. Preview the form by clicking the ‘PREVIEW’ button.
• Step 12. Click ‘SAVE’ to store the form for later, or proceed to sign.
• >Step 13. Choose either ‘SIGN AND FILE WITH DSC’ or ‘SIGN AND FILE WITH EVC’ to submit the form.

Note: Once signed and submitted, the form cannot be edited, so review it carefully before final submission.

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Advantages of Filing LUT for Exporters

• Tax Exemption: Exporters using a LUT can export goods and services without upfront tax payments, improving cash flow and profitability.
• Time Savings: By bypassing the tax refund process, exporters save time that would otherwise be spent on refund applications and follow-ups with tax authorities.
• Unblocked Working Capital: Funds that would typically be tied up in tax payments remain available for business operations, which is especially helpful for SMEs with limited financing.
• Long-term Validity: Once an LUT is filed, it remains valid for the entire financial year, offering continuous tax benefits and reducing the administrative workload.
• Simplified Process: The online LUT filing and approval process makes compliance easier and streamlines administrative tasks.
• Enhanced Efficiency: With a LUT in place, exporters can focus on core business operations instead of dealing with complicated tax refund processes, boosting overall efficiency.
• Financial Stability: Avoiding blocked funds due to tax payments strengthens financial stability and helps prevent cash flow issues.
• Regulatory Compliance: Using a LUT ensures adherence to tax laws, reducing the risk of penalties or legal complications.
• Supporting Documents: Submitting minimal supporting documents along with the LUT simplifies the process, reducing paperwork and administrative hassle.
• Working Capital Optimization: LUTs free up working capital, allowing exporters to reinvest in growth and expansion opportunities without waiting for tax refunds.

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Important Points Related to LUT

Here are some important points that exporters must remember about LUT under GST -

• Validity Period: An LUT is valid for 12 months from the submission date, giving exporters a clear timeframe for tax exemption on their exports.
• Compliance Conditions: The acceptance of the LUT depends on meeting specified conditions. Failure to comply may lead to the revocation of benefits, requiring the submission of a bond.
• Bond Requirement: Entities that cannot submit a LUT must provide a bond on non-judicial stamp paper, along with a bank guarantee covering the estimated tax liability.
• Document Format: The LUT should be filed on the letterhead of the registered entity intending to supply goods or services without paying integrated tax, ensuring authenticity and compliance.
• Application Process: To apply for the LUT, the prescribed GST RFD-11 form must be used, which can be submitted by authorized individuals such as the Managing Director, company secretary, or a partner of a partnership firm.
• Bank Guarantee Limit: The bank guarantee that accompanies the bond should not exceed 15% of the bond amount. This limit can be waived by the jurisdictional GST Commissioner, simplifying compliance for exporters.

Downloading the LUT certificate from the GST portal is easy and has significant benefits for exporters as it helps them avoid paying IGST upfront. However, it is important to ensure timely submission of LUT. If you need help with GST-related services, you can get in touch with our tax experts who can take care of your tax needs right from tax planning to tax filing. Hire an expert now!

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