Letter of Undertaking (LUT): Its Components, Eligibility, and Documents

Sanidhya Negi / February 4, 2025

Wondering what is LUT in GST and why exporters need it? If you’re exporting goods or services, a Letter of Undertaking GST (LUT certificate) lets you do so without paying upfront taxes. This not only improves cash flow but also streamlines the process.

This guide covers everything you need to know about LUT, from required documents to registration and key benefits. Plus, we’ll help you navigate common challenges that might come your way in LUT registration. Stick to this blog, to make your export process smoother!

What is LUT?

When you hear LUT, it’s short for Letter of Undertaking. It’s an official document where one party assures another that they’ll meet a legal responsibility. In simple terms, it’s a promise you make to follow certain rules.

In India, an LUT is required for exporting goods or services. The full form of LUT is important because it allows exporters to export without paying Integrated Goods and Services Tax (IGST) upfront. Instead of paying taxes right away, you commit to following all the GST laws through the LUT.

Overall, LUT meaning is simple, it’s a formal declaration to the GST authorities by allowing exporters to ship goods and services without the extra tax burden.

Components of LUT in GST

A Letter of Undertaking (LUT) is an essential document for exporters in India. But to ensure your LUT is valid, you must include certain details that make it complete and compliant with GST regulations. Let’s see what all these details are:

Information of the Exporter: The LUT must contain the name and address of the exporter. You’ll also need to include the GSTIN (Goods and Services Tax Identification Number), which is essential for any business registered under GST. Additionally, the financial period for which the LUT is applicable should also be mentioned. You must also provide a description of the goods being exported, detailing the specific products involved in the transaction.

Specifications of Export Transactions: This section should provide comprehensive details regarding the export transactions. You must include invoice details, including the invoice number, the date on which the export transaction took place, and a detailed description of goods and services. You will also need to specify the unit and quantity of goods being exported, along with the value of these goods or services. Finally, the destination of the exported goods should be clearly mentioned.

Declaration: The exporter needs to provide a formal consent to adhere to all GST regulations. This shows your commitment to complying with GST laws. You must also state that you are exempt from all reverse charges for exports, a benefit that allows you to avoid certain tax burdens on exports. 

Authorized Signatory: Lastly, the name and designation of the person authorized to sign the LUT must be provided. This could be a company director, partner, or other authorized personnel. The date of signing should be noted, as this indicates when the LUT was officially submitted. The document must be signed by the authorized person to validate the LUT.

Who Can Apply For LUT in GST?

When it comes to applying for a Letter of Undertaking (LUT) in GST, there are a few key points to consider that will determine if you are eligible. 

Registered Taxpayers Engaged in Exports: If you are a registered taxpayer under GST and are involved in exporting goods or services, you are eligible to apply for LUT in GST. 

Plan to Export Within India or Abroad: To apply for LUT, you need to intend to supply goods or services either within India, to other countries, or to Special Economic Zones (SEZs). This is an important criterion because LUTs are specifically designed for exporters who plan to take their products or services outside of the regular tax system, offering them relief from paying IGST upfront.

GST Registration is a Must: Another essential requirement for applying for LUT is that you must be GST-registered. If your business isn’t registered under GST, you won’t be eligible for the benefits of LUT. GST registration is the foundation for all the tax benefits related to exports, including the ability to claim exemptions under the LUT.

Aiming for Tax-Free Supply: When you apply for LUT, your goal should be to export goods or services without having to pay the integrated tax (IGST). The LUT is specifically meant for those who plan to make tax-free supplies, essentially allowing them to avoid upfront payments of tax during exports.

Restrictions for Legal Issues: It’s important to know that you are not eligible for an LUT if you are facing any legal action related to tax evasion of  Rs 2.5 crore or more. If you are under scrutiny for avoiding taxes under the CGST or IGST Act, the benefits of submitting an LUT will not apply to your business. 

Documents Required for Registration of LUT in GST

To apply for a LUT in GST, you need to submit certain documents to ensure compliance with GST regulations. Having all the required documents ready will make the process smoother. Below is the list of necessary documents:

• LUT Cover Letter 
• GST Registration Certificate 
• PAN Card of the Entity
• Aadhar Card
• KYC of Authorized Person
• GST RFD-11 Form 
• IEC Certificate 
• Cancelled Cheque
• Authorized Letter 
• Witness Information

How to Register LUT in GST?

If you’re an exporter, registering for a Letter of Undertaking (LUT) in GST is a must to ensure your exports remain tax-free. The process is entirely online, and you can complete it in just a few steps.

1. Start by visiting the GST portal and logging in with your credentials. This is where the entire LUT filing process takes place.

2. Once logged in, navigate to the ‘Services’ section, then select ‘User Services’ and click on ‘Furnish Letter of Undertaking (LUT)’. This is where you’ll access the LUT application form.

3. Now, complete the application form by providing the necessary details like GSTIN, business name, and address. Double-check the information to avoid errors.

4. You’ll need to attach the required documents, such as the previous year’s LUT (if applicable) or a bond. Having all documents ready beforehand will make this step quick and easy.

5. Read through the self-declaration and sign it. By doing this, you confirm that you will comply with GST export regulations and conditions.

6. Once everything is filled out and documents are uploaded, submit the form electronically through the GST portal. Make sure to review everything before submission.

7. After submission, the portal will generate an Application Reference Number (ARN) as proof that your LUT application is successfully filed. You can use this for tracking your status.

Important Things to Know About the LUT Bond in GST

If you’re applying for a Letter of Undertaking (LUT) in GST, there are a few key things you should keep in mind.

1. Your LUT is valid for 12 months from the date you submit it. If you’re exporting regularly, remember to renew it every financial year.

2. If you don’t qualify for an LUT, you’ll need to submit a bond instead. This bond must be on non-judicial stamp paper, it should be backed by a bank guarantee, and must cover the estimated tax liability of your exports.

3. Your LUT must be printed on your company’s official letterhead which confirms that you can supply goods or services without paying IGST.

4. To be eligible for LUT benefits, you must be a registered taxpayer under GST. Also, the products or services you export must be GST-registered.

5. To apply for an LUT, you need to fill out the GST RFD-11 form. It must be signed by an authorized person in your company—this could be the Managing Director, Company Secretary, or a partner of a partnership firm.

6. If you’re furnishing a bond, the bank guarantee should not exceed 15% of the total bond amount. In some cases, the GST Commissioner may waive this requirement.

7. With an LUT, you can export goods or services, outside India, within India (to entities eligible under GST rules), and to Special Economic Zones (SEZs).

8. If you fail to pay tax within the timeline mentioned in your LUT, your tax-free export benefit will be revoked. This means you’ll have to start paying IGST on your exports, which can increase costs.

How To Overcome Challenges in LUT Registration

Getting your LUT in GST approved isn’t always a smooth process. But don’t worry! Here’s how you can tackle two of the most common challenges and keep your exports running seamlessly.

Avoiding Delays in LUT Approval: One of the biggest frustrations exporters face is the long waiting time for LUT approval. Sometimes, it can take weeks or even months, causing unnecessary delays in your business operations. The best way to avoid this is to apply for your Letter of Undertaking GST well in advance.

Fixing Errors or Updating Documents: Mistakes in your application or changes in your details can slow things down and make the process more complicated. To avoid this, always double-check your documents before submitting them. If you’re unsure, seek help from a GST expert. In case you need to make any corrections, don’t wait, start the rectification process immediately and submit the required documents to expedite the approval process.

Benefits of Letter of Undertaking

If you’re an exporter, using a LUT certificate can save you from unnecessary hassles. Here’s how it benefits your business and makes exporting much easier.

No Upfront Tax Payments: One of the biggest advantages of an LUT in GST is that you don’t have to pay GST upfront when exporting goods or services. This helps you maintain better cash flow and reduces financial strain.

No Need for a Bank Guarantee: Without an LUT, exporters often need to provide a bank guarantee, which ties up funds and increases paperwork. With an LUT, you can avoid this requirement.

Boosts Credibility: An LUT serves as a formal commitment between you and the authorities, also showing that you comply with GST regulations. This builds trust with stakeholders, including suppliers, buyers, and government bodies.

Clear Legal Standing: Having LUT eliminates confusion about tax liabilities and obligations. It provides a legal framework that ensures transparency in export transactions and reduces the chances of disputes.

Makes Exporting Smoother: By removing tax-related hurdles, LUT allows you to export without unnecessary financial burdens. This makes your business more competitive in the global market.

Reduces Financial Risks: Since LUT clarifies all contractual responsibilities, it further minimizes financial risks and protects your business from unnecessary losses.

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Conclusion

Now that you know what is LUT in GST and how a LUT certificate benefits exporters, you’re better prepared to handle tax-free exports smoothly. Registering on time, avoiding errors, and understanding its validity can save you unnecessary hassles. 

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FAQs

Ques: What is LUT full form?

Ans: LUT stands for Letter of Undertaking.

Ques: Why is LUT certificate required?

Ans: An LUT certificate allows exporters to ship goods or services without paying IGST upfront. It helps businesses maintain cashflow, avoid unnecessary tax payments, and simplify the export process by ensuring compliance with GST regulations.

Ques: Who Can export goods using an LUT?

Ans: Exporters registered under GST can apply for a Letter of Undertaking in GST if they intend to export goods or services without paying IGST. This includes businesses exporting to foreign countries, SEZs, or making supplies deemed as exports.

Ques: What is the Validity Period of LUT, and when to renew it?

Ans: An LUT certificate remains valid for one financial year. To continue benefiting from zero-rated supplies under GST, exporters must renew their letter of undertaking GST every year before the current one expires.

Ques: What Are the Consequences of Exporting Without an LUT?

Ans: If you export without an LUT in GST, you must pay IGST upfront and later claim a refund.

Ques: What to do in case my LUT application is rejected?

Ans: The first thing to do in case your LUT application is rejected is to check the reasons given by the tax authorities. Once you readdress these reasons, you can reapply for your LUT.

Ques: What are the essential documents required for LUT registration?

Ans: Some of the documents needed for LUT registration are:

1. LUT Cover Letter 

2. GST Registration Certificate 

3. PAN Card of the Entity

4. Aadhar Card

5. KYC of Authorized Person

6. GST RFD-11 Form 

7. IEC Certificate 

8. Authorized Letter