Letter of Undertaking
A Letter of Undertaking (LUT) under GST is a document that allows exporters to export goods or services without paying Integrated Goods and Services Tax (IGST). This helps in avoiding the hassle of claiming refunds later.
Who has to obtain LUT ?
Any registered person availing the option to supply goods or services for export /SEZs without payment of integrated tax has to furnish, prior to export/SEZs supply, a Letter of Undertaking (LUT), if he has not been prosecuted for tax evasion for an amount of Rs 2.5 Crore or above under the CGST Act/IGST Act/Existing law. Example of transactions for which LUT can be used are:
- Zero rated supply to SEZ without payment of IGST.
- Export of goods to a country outside India without payment of IGST.
- Providing services to a client in a country outside India without payment of IGST.
How long is the LUT Valid for ?
An LUT is valid for the financial year in which it is filed. For example, if you file an LUT for FY 2024-2025, it will be valid until March 31, 2025
Documents Required for Obtaining LUT
- KYC documents of two witnesses
- Nature of employment of witnesses
- Copy of the last year’s LUT (if any)
Advantages of Filing LUT for Exporters
Filing a Letter of Undertaking (LUT) indeed offers several advantages for exporters:
- Tax-Free Export: Exporters can carry out transactions without paying IGST upfront, avoiding the hassle of claiming refunds later.
- Simplified Process: The LUT eliminates the need for complex refund claims and follow-ups with tax authorities, saving time and effort.
- Unblocked Working Capital: Funds that would have been used for tax payments remain available for business operations, crucial for SMEs.
- Liberated Resources: Once filed, the LUT is valid for the entire financial year, reducing the need for repetitive filings and allowing exporters to focus on their core activities.
