LUT: Definition, Benefits & How to Furnish on the GST Portal
The Letter of Undertaking or LUT is an export-related form that businesses engaged in exports use for the smooth transportation of goods to international locations. Businesses supplying goods or services or both are eligible to use to avoid paying upfront taxes. The LUT aims to make compliance easier for exporters and enable them to streamline their operations and maintain a steady cash flow. When exporters use this document while trading, they are relieved from paying the integrated GST upfront. The upfront IGST or any kind of taxes block the cash and affect the operations negatively. Therefore, having this document can facilitate you in streamlining your business. This article talks about the LUT and its benefits, and how to furnish it on the online GST portal.
Eligible Businesses for LUT
To avoid cash problems in business and reduce the compliance burden, exporters are advised to secure an LUT document so that they can enjoy the benefits of not paying IGST in advance. Sending goods and services to international borders comes with other administrative burdens, but when the facility of LUT is available, do not worry further. The following exporters or businesses will be considered for LUT.
| Criteria | Particulars |
| Export of goods/services | LUT granted to the exporter of goods or services |
| No prosecution | The person applying for LUT is not prosecuted for any offense under GST. |
| Early defaults | They should not have pending GST dues or previous defaults. |
| Annual turnover | There is no minimum annual turnover requirement for getting an LUT |
| Category of goods/services | All types of goods and services are allowed for LUT. |
| Financial standing | Business has a convincing financial standing so that it can fulfill other export obligations. |
Benefits of LUT for Businesses
- Reduced Compliance Burden: LUT saves time and makes compliance easy, and access to international borders becomes even easier with an LUT for business purpose. It removes the need to seek refunds as it has eliminated the liability of upfront IGST, saving time and management efforts
- Competitive Pricing for Products/Services: As it eliminates the need to pay upfront taxes, the exporters can vouch for competitive pricing for the products or services as they are not burdened with taxes
- Operational Efficiency: with better cash flow and little effort in administrative work, the operations become more efficient and management is less constrained
Important Points Related to LUT
Before you apply to LUT, just learn about the important points related to it. The important points like its validity period, form, and conditional acceptance are must-know for exporters.
- The LUT is a period for a specified time. It is valid for one year from the date of submission, and after which it must be renewed
- Authorized persons have to file the form GST RFD-11 on the online GST portal and submit it to be officially eligible to use it
- When eligibility for using LUT is not met, the ineligible entities must furnish a bond, typically on non-judicial stamp paper. Exporters have to give a bank guarantee covering a total estimated tax liability based on the assessment
- Registered entity has to apply for LUT on the official letterhead of the company
- If the exporter is a partnership firm or a company, the authorized partner or proprietor has to file the form
- The bank guarantee accompanying the bond does not exceed 15% of the bond’s value
How to furnish LUT Form GST RFD 11
Log in to the GST portal
Log in to the online GST portal with valid login credentials and start with filing the form GST RFD 11.
Navigate to the LUT application.
Now go to the “services” and select “user services”, then click on the “furnish letter of undertaking”.
Fill in the details
Provide the necessary details asked in the form GST RFD 11. The details such as GSTIN of the business, business name, and address should be updated.
Upload the supporting documents.
It is time to upload the supporting documents, whatever is required, and the previous year’s LUT or bond if applicable in any particular case.
Declaration and submission
Sign the self-declaration and agree to comply with the requirements specified under the GST for using the LUT for export of services and goods. Submit the form on an electronic medium, and once the form is submitted successfully, the business or entity will receive an acknowledgment (an Application Reference Number) for further clarification.
If the specified conditions are not met in the stipulated time frame, the privilege to use LUT can be revoked discretion of the authorities. Zero-rated supplies to SEZ without IGST and export of goods or services without IGST are eligible for the LUT. Reach out to TaxDunia to confirm that you meet the conditions and criteria well to avoid the suspension of using the LUT. Our team of professionals makes sure that your organization utilizes each benefit provided by the government and grows exponentially.
