A Letter of Undertaking (LUT) is a document that exporters can file to export goods or services without having to pay taxes. Under the new GST regime, all exports are subject to IGST, which can later be reclaimed through a tax refund.
It is necessary to provide LUT in order to export goods, services, or both without paying IGST. If the exporter fails to provide the LUT, he must pay IGST or provide an export bond.
Given the difficulties that many exporters face in processing tax refunds, alternative options may appear very appealing. A LUT saves exporters the time and effort of pursuing a refund, as well as the blocking of funds through tax payments. Its filing can be done online, making it extremely simple and quick.
Requirements for applying
According to the CGST Rules, 2017, any registered person can provide a bond or LUT in the form of GST RFD 11 and export goods without paying integrated tax. They can apply for LUT if they meet the following criteria:
- Intend to export goods or services from India or supply goods/services to a Special Economic Zone developer or a Special Economic Zone unit
- Copy of GST registration
- They wish to supply goods without having to pay an integrated tax (IGST)
- The person has never been prosecuted under the Central Goods and Services Tax Act (CGST), the Integrated Goods and Services Tax Act (IGST), or any other existing laws. Where the tax imposed exceeds Rs.250 lakhs.
- It must be provided in duplicate for each financial year. LUT is presented as an annexure to form GST RFD-11 and can be issued by the partner, MD, Company Secretary, or by a person duly authorized by the company or the proprietor.
You need to submit a new LUT for each financial year. If the goods for export are not exported within three months of the date of Invoice issue, then the Exporter is liable to pay GST along with 18% interest within 15 days If a person fails to pay the tax within the time frame specified in the Central Goods and Services Act, the ability to export without paying IGST is suspended until the tax is paid.
- LUT cover letter – acceptance request – duly signed by an authorized person.
- Copy of GST registration.
- Pan Card of the entity.
- KYC of authorized person/signatory.
- GST RFD 11 form.
- Copy of IEC code.
- Canceled Cheque.
- Authorized letter.
Export without paying taxes
An exporter can export goods or services without paying taxes if they file LUT under GST. If a LUT is not filed, the exporter must first pay the required tax while exporting and then claim a refund to take advantage of zero-rated exports.
Saves Working Capital
Regular exporters benefit greatly from filing LUT online because the refund process via another route is time-consuming. During this time the large sum of capital is frozen in the form of an overdue refund. With this mode, the capital is free to be used for other important purposes. It also lowers the cost of exporting.
Validity for an Entire Financial Year
Once filed, the Letter of Undertaking is valid for the entire fiscal year in which it is filed. As a result, unlike the refund process, an exporter does not have to go through the procedures every time an export consignment is carried out.
The process is simple and online
Since April of 2018, both the submission and acceptance of LUTs have been made online. The applicant is not required to appear before the officers for acceptance. The entire process can be done online by submitting the required documents.
- Login to the GST portal
- Under the ‘Services’ tab, there is a ‘User Services’ drop-down which has the option of ‘Furnish Letter of Undertaking (LUT)’.
- After you select this, the next step is to choose a financial year. A manually furnished LUT in PDF or JPEG format can also be uploaded here.
(If you had a LUT for the previous year offline, you must attach it by clicking choose file, as shown on the screen below, and then continue.)
- Following that, a self-declaration must be filed, in which one guarantees to Complete the export of goods/services within three months of the date of issue of the export invoice, or such longer period as the Commissioner allows.
- In terms of exports, comply with the GST laws.
- In case one fails to export, pay the IGST plus interest at the rate of 18% from the invoice date to the date of IGST payment.
- You must then enter the names of two independent witnesses, as well as their occupations and addresses.
- Enter the location of the filing in the next screen. When this procedure is finished, you can preview the form.
- The application can be signed using a digital signature certificate or an electronic verification code. Both options are available on the form. The form cannot be changed after it has been signed and submitted.
- The letter of undertaking application can be downloaded from the GST portal.
The LUT should be accepted by the Assistant or Deputy Commissioner with jurisdiction over the location of the exporter’s business. Until a specific administrative officer is assigned, the Exporter may present the LUT to any central or state officer.
The submitted LUT is valid for the entire financial year in which it is submitted. Each financial year, you must submit a new LUT. If the goods for export are not exported within three months of the invoice date, the exporter is bound to pay GST plus 18% interest within 15 days, according to Section 50. (1). In addition, if payment for services is not received within one year of submitting the LUT, the exporter is obligated to pay GST @ 18% within 15 days.
Failure to do so will result in the withdrawal of the LUT facility, which can be restored with subsequent payments.
It is necessary to provide a Letter of Undertaking (LUT) in order to export goods, services, or both without paying the IGST.
LUT can be filed by the MD, the company secretary, or other Authorised Individuals. In the case of a corporation, the form can be filed by the proprietor or the partner of a partnership firm.
Registration Arena is the expert hub that can help you with the application of LUT in GST along with other services like GST Registration and GST Return Filing. For more details call us at 8600544411 / 8600544422