LUT In GST – Registration, Eligibility Criteria, How to Apply & Filing

A Letter of Undertaking is an important document for any exporter under the GST regime in India. It means that the exporter is declaring to the tax department that it will adhere to certain conditions connected essentially with the realization of export proceeds within a stipulated time frame. 

A LUT in GST furnished by the exporter will be eligible for zero-rated supply, which would imply that the exporter need not pay IGST while supplying goods or services for export. Here are all types of GST which is important to be considered.

As of January 2023, the number of entities liable to pay the goods and services tax in India under the “normal taxpayer” category consisted of more than 12.2 million taxpayers. Overall, there were over 14 million registered GST taxpayers during this time. LUT is one of the most important papers regarding exporters handling India’s goods and services taxes. 

This is why LUTs have become more important than ever for many exporters. India is becoming the hub of the world’s export market. Many exporters choose the LUT option to enhance competitiveness and ease export procedures. The guide explains the intricacies of LUT, its eligibility and ineligibility criteria, what has to be filed, and what has to be done.

Eligibility Criteria for LUT

Not all exporters can file an LUT. It requires the following conditions to be met in this manner:

• GST Registration: The exporter should be a registered taxpayer under GST.
• No Tax Evasion: The exporter should not have been committed for tax evasion amounting to Rs. 2.5 crore or more under the CGST/IGST Act or any previous law.
• Adherence to Export Obligations: The exporter must have a track record of export requirements, including realizing export proceeds.

Also Read :- Financing options for Exporters.

Benefits of Obtaining a LUT

• Zero-Rated Supply: The chief advantage is that suppliers of goods or services for export can do so without paying IGST.
• Simplified Compliance: There are a few compliance requirements under LUT; however, the compliance burden, as a whole, is less than paying IGST and then claiming a refund.
• Better Cash Flow: Since there is no blockage of working capital due to the upfront payment of tax, the exporters will face fewer issues in cash flow management.

Also Read:- GST Express Software – Key Features & Benefits For MSMEs

How To Obtain LUT?

Obtaining an LUT is not a cumbersome process. The following are the steps involved:

• Log in to the GST portal by using your credentials.
• Go to the LUT Section. After clicking on the ‘Services’ tab, click on ‘User Services.’ 
• Now click on ‘Furnish Letter of Undertaking (LUT).
• Fill in Form GST RFD-11 by providing information such as the financial year details of the witnesses and declarants.
• Upload Documents, if required, and upload the supporting documents.
• Submit the digitally signed application.

Documents Required for LUT Under GST 

Though the nature of the documents may differ, the following are the general documents that are to be furnished or attached to the LUT application : 

• KYC Documents 
• PAN Card
• Form GST RFD 11 
• Certificate of IEC code
• LUT Cover Letter
• Canceled Letter 

GST LUT Filing and Compliance

After obtaining an LUT, compliance with the conditions contained in the undertaking is required. This includes:—

• Realization of Export Proceeds: The export proceeds shall be realized within the declared time.
• Record Keeping: The exporter shall maintain the records of all exports, payments, and related data.
• LUT Renewal: The LUT shall be renewed before the expiry date if the exporter continues to export.

Note: Non-compliance with the conditions of LUT can be quite costly, as LUT cancellation may be demanded with payment of unpaid taxes.

Also Read:- How To Check & Download GST Filing Status ?

What is LUT Bond?

LUT in GST is only valid for one year, and hence, a new LUT has to be furnished for the succeeding financial year. If the conditions of the LUT are not fulfilled within the time limit, the respective benefits will be withdrawn, and the exporter will have to furnish bonds.

Bonds are necessary in situations where exports are carried out without the Integrated Goods and Services Tax (IGST) being paid. LUTs and Bonds apply in the subsequent cases:

Zero-rated supply to SEZ will mean exports to SEZs without payment of IGST.

• Goods Export: Export of goods to any country outside India without payment of IGST.
• Service Export: Supply of services to clients consuming outside the country, thus not paying IGST.

Common Mistakes While Applying for LUT

This section could include some of the mistakes that the exporters might make while applying for an LUT, such as the following:

• Incorrect or missing information
• Delayed submission
• Non-compliance with conditions in LUT
• Overlooking documentation requirements

Therefore, mentioning these common mistakes will help the reader avoid such problems and ensure smooth processing of the LUT application.

Steps To Download LUT in GST

To download the Letter of Undertaking (LUT) from the GST portal, follow these steps:

1. Log in to the GST Portal:

• Visit the official GST portal at https://www.gst.gov.in/.
• Use your credentials (Username and Password) to log in.

1. Navigate to the LUT Section:

• After logging in, go to the ‘Services’ tab in the main menu.
• From the dropdown, select ‘User Services.’
• Click on ‘View My Submitted LUTs’ under the ‘User Services’ section.

1. Select the Financial Year:

• On the LUT page, select the financial year for which you want to download the LUT.
• The details of the LUT submitted for the selected year will be displayed.

1. Download the LUT:

• Click on the ‘Download’ button/link associated with the relevant LUT.
• The LUT will be downloaded as a PDF file to your device.

1. Save and Print:

• Save the downloaded PDF file for your records.
• You can also print the document if a physical copy is required.

Takeaway

In other words, an exporter must fully understand how the LUT mechanism works to optimize the benefits of his GST compliance and cash flow.

They will be able to zero-rate the supply if they have carefully assessed their eligibility, collected the necessary documents, and followed the conditions specified therein. However, a business may face several other problems while growing its reach in the market. One such challenge is financial difficulties.

Indifi is a single-point financing partner that assists entrepreneurs and SMEs with multifarious financing solutions to curb the financial challenges experienced by the business.

By combining prudent financial management with a fair understanding of the dos and don’ts under the GST regime, exporters can set themselves up for long-term growth and success.

FAQs

1. What if I need to realize export proceeds within the stipulated time?

Your LUT will be withdrawn if you fail to realize export proceeds during the prescribed period. After that, you will be liable to pay the IGST on your exports and may also be liable to pay the penalty.

2. Can I change an LUT once it has been submitted?

Yes, you can change an LUT under certain conditions. However, to avoid any hassles, it is usually advisable to get it right before submitting it.

3. What is the period for which an LUT is valid?

An LUT is valid for one financial year. If you continue exporting, you must renew it before the expiry date.