GST LUT Filing

LUT, or Letter of Undertaking, plays a key role in the Goods and Services Tax (GST) system. This important document empowers exporters to carry out their export activities without the requirement of immediate tax payments. 

If you're a registered taxpayer involved in exporting goods or services, you'll need to submit a Letter of Undertaking (LUT) through Form GST RFD-11 on the GST portal. This requirement is crucial for enabling your exports to proceed without the need to pay Integrated Goods and Services Tax (IGST).

A Letter of Undertaking (LUT) under GST is valid for one year, meaning a new LUT must be submitted at the beginning of each financial year. If the conditions specified in the LUT are not fulfilled within the set period, the associated benefits will be revoked. This will then require the exporter to furnish bonds.

Bonds are also needed for exports that do not involve the payment of Integrated Goods and Services Tax (IGST). LUTs and bonds apply in the following scenarios:

• Zero-rated Supply to SEZs: Exporting to Special Economic Zones (SEZs) without paying IGST.
• Goods Export: Exporting goods to countries outside India without IGST payment.
• Service Export: Providing services to international clients without IGST.

When applying for a Letter of Undertaking (LUT) under GST, ensure you have the following documents ready:

• LUT Cover Letter: A formal request letter signed by an authorized representative.
• Eligibility Proof: Verify that you meet the eligibility requirements (no major tax evasion issues).
• GST Registration Copy: Evidence of your GST registration.
• PAN Card of the Entity: Identification through the entity’s PAN card.
• KYC of Authorized Person: Identification and address proof for the authorized person.
• GST RFD 11 Form: The application form required for LUT submission.
• IEC Code Copy: If you are engaged in export activities.
• Cancelled Cheque: From your linked bank account.
• Authorization Letter: Empowering the authorized signatory.

Filing a Letter of Undertaking (LUT) offers numerous advantages for exporters, simplifying export procedures and enhancing financial management:

Tax-Free Export Transactions: With an LUT certificate, exporters can execute their international transactions without immediate tax payments. This is a significant improvement over the alternative method, where taxes are paid upfront and later reclaimed as refunds for zero-rated exports.

Streamlined Operations: The LUT certificate eliminates the need for complex tax refund claims and persistent follow-ups with tax authorities. This results in considerable time savings and operational efficiency for exporters.

Improved Cash Flow: Funds that would otherwise be tied up in tax payments remain available for use. This is particularly beneficial for small and medium-sized businesses (SMBs) that face challenges with financing and working capital.

Reduced Administrative Burden: Exporters benefit from the LUT certificate's validity throughout the financial year. This extended validity reduces the frequency of filings, allowing exporters to concentrate on their core business activities.

When dealing with LUTs (Letter of Undertaking) in GST, here are some key aspects to consider:

1. Duration of Validity: An LUT is valid for one year from the date of its submission.
2. Conditional Terms: Acceptance of an LUT comes with specific requirements. If these conditions aren't met, the LUT privilege might be revoked, and a bond could be required instead.
3. Alternative Bond Options: For entities not eligible for LUT registration, providing a bond is still an option. This bond, typically on non-judicial stamp paper, must include a bank guarantee that covers the estimated tax liability based on the exporter’s assessment.
4. Submission on Official Letterhead: LUT applications should be submitted on the letterhead of the registered entity, which is the entity intending to supply goods or services without tax payment.
5. Required Form: Apply for an LUT using the official GST RFD-11 form. This form can be filed by authorized representatives such as the Managing Director, company secretary, or partners.
6. Flexible Submission: For companies, the form can be submitted by a partner in a partnership firm or the business proprietor.
7. Bank Guarantee Cap: The bank guarantee accompanying the bond should not exceed 15% of the bond amount. This requirement may be waived by the GST Commissioner depending on the jurisdiction.