GLOBAL SELLING BLOG
What is a Letter of undertaking (LUT)? Meaning, benefits, and format
When an exporter wants to export products and claim a GST refund, it is mandatory to submit a letter of undertaking. Learn more about it in the blog.
A letter of undertaking (LUT) is a crucial export document that exporters must have before they start selling internationally. All registered exporters who are currently exporting or intend to start their export journey are required to submit a letter of undertaking on the GST portal. This will enable them to export their products without the payment of IGST (Integrated Goods and Services Tax). In this blog post, we will discuss what a letter of undertaking is, its benefits, content, eligibility criteria, and application process.
What is a Letter of Undertaking (LUT)?
A letter of undertaking (LUT) is a formal document that allows Indian businesses to sell goods internationally or supply them to Special Economic Zones (SEZs) without paying Integrated Goods and Services Tax (IGST). By submitting an LUT, exporters commit to fulfilling their obligations under the GST law and can avoid the financial strain of upfront tax payments.1
What is a letter of undertaking (LUT) in GST?
In the context of GST, an LUT is a declaration filed on the GST portal, enabling exporters to carry out zero-rated supplies without IGST payment. It is valid for twelve months and streamlines tax compliance for exporters by eliminating the need for IGST refunds. 2
Benefits of using a letter of undertaking in GST
The following are some advantages of submitting an LUT for GST:
1. Cash flow: Increases liquidity by freeing up funds that would have been tied up in GST.
2. Ease of business: Simplifies the export process.
3. Compliance burden: Reduces the effort needed to manage tax refunds.
4. Global competitiveness: Helps exporters maintain competitive pricing in international markets.3
1. Cash flow: Increases liquidity by freeing up funds that would have been tied up in GST.
2. Ease of business: Simplifies the export process.
3. Compliance burden: Reduces the effort needed to manage tax refunds.
4. Global competitiveness: Helps exporters maintain competitive pricing in international markets.3
Eligibility criteria for a letter of undertaking
A letter of undertaking (LUT) can be submitted by any registered taxpayer involved in the export of goods and services. However, individuals facing prosecution for tax evasion exceeding INR 2.5 crore or more are not eligible to use this option, and are required to provide an export bond.
Additionally, individuals should consider the following factors before applying for an LUT:
Additionally, individuals should consider the following factors before applying for an LUT:
Intent to export:
The applicant must intend to supply goods or services domestically, to foreign countries, or to Special Economic Zones (SEZs).
GST compliance:
The applicant must be registered under the GST framework.
Tax benefits:
The applicant’s primary intention should be to export goods and services without incurring integrated tax.4
Documents required to file letter of undertaking (LUT) under GST
Some of the documents required are:
• PAN card of export business
• IEC certificate
• GST registration certificate
• Two witnesses with their address proof and PAN
• Cancelled cheque of the exporter’s current account
• Aadhaar card of exporter
• GST RDF 11 form
• Copy of GST registration
• KYC of the authorized person
• Authorized letter granting power to the authorized signatory5
• PAN card of export business
• IEC certificate
• GST registration certificate
• Two witnesses with their address proof and PAN
• Cancelled cheque of the exporter’s current account
• Aadhaar card of exporter
• GST RDF 11 form
• Copy of GST registration
• KYC of the authorized person
• Authorized letter granting power to the authorized signatory5
Step-by-step process to file a letter of undertaking
Step 1:
Log in to the GST portal.
Step 2:
Click on the services tab. Select ‘user services’ and then select ‘furnish Letter of Undertaking (LUT)’.
Step 3:
Select the financial year for which you want a letter of undertaking from the ‘LUT Applied for Financial Year’ drop-down list.
Step 4:
Fill in the required details on the form.
Step 5:
Check the preview to ensure all details filled are appropriate.
Step 6:
Sign the form. You can sign using your registered Digital Signature Certificate or by signing and filing it with an electronic verification code, which will send OTPs to your registered mobile number and email.
Step 7:
Submit the form. You will see an acknowledgment on the screen which can be downloaded for future reference.6
Contents of a letter of undertaking (LUT)
The following are some details included in a letter of undertaking (LUT):
Information about the exporter
Exporter’s name, address, and GSTIN.
Validity period
An LUT is typically valid for the duration of a financial year.
Witness details
Names, addresses, and signatures of witnesses to the undertaking.
Export transaction specifications
• Invoice number and date.
• Description of goods or services being exported like value, quantity, unit, etc.
• Destination country.
• Description of goods or services being exported like value, quantity, unit, etc.
• Destination country.
Declaration
Declare to adhere to all GST regulations.
Authorized signatory
Signature of authorized person with date and place.7
Key pointers about LUT bond in GST
Here are some essential details about LUTs under GST:
Validity period:
A LUT is valid for one year from its submission date.
Conditional acceptance:
If an exporter fails to adhere to the terms of an LUT, their privileges could be revoked, and they may be asked to provide an export bond.
Export bond for GST:
Those who do not qualify for an LUT can provide an export bond instead. This bond needs to be submitted along with a bank guarantee. It should cover the estimated tax liability as assessed by the exporter.
Submission form:
An LUT should be filed using the official GST RFD-11 form. Authorized personnel such as the managing director, company secretary, or partners of a firm can submit this form.
Bank guarantee for export bond:
Export bonds need to include a bank guarantee, which should not exceed 15% of the bond amount. However, the jurisdictional GST Commissioner may waive this requirement based on the exporter’s trade history.8
Conclusion
The LUT is an important document required in international trade, and all eligible exporters who want to export their products without paying IGST need to submit this document on the GST portal. For e-commerce exporters, a letter of undertaking not only simplifies tax compliance but also helps free up working capital, enabling faster growth and reinvestment into their business. For additional support on documentation and compliance, Indian exporters can avail of the services offered by e-commerce export programs like Amazon Global Selling.
Amazon Global Selling: Your passport to easy e-commerce exports from India
If you are a business owner and you want to sell your products to the world, Amazon Global Selling enables you to list and sell ‘Made in India’ products on 18 Amazon global marketplaces. As an e-commerce export program, Amazon Global Selling provides support and guidance at every step of your export journey, connecting you to Amazon’s Service Provider Network for tailored compliance, payments, and logistics support.
Registered sellers can choose to ship their products by themselves through Merchant Fulfilled Network (MFN) or they can opt for Fulfillment by Amazon (FBA) and outsource order fulfillment to Amazon including packing, storage, delivery, and returns. Amazon Global Selling simplifies the process of international shipping to the world, helping businesses navigate customs and reach a vast audience.
Registered sellers can choose to ship their products by themselves through Merchant Fulfilled Network (MFN) or they can opt for Fulfillment by Amazon (FBA) and outsource order fulfillment to Amazon including packing, storage, delivery, and returns. Amazon Global Selling simplifies the process of international shipping to the world, helping businesses navigate customs and reach a vast audience.
Frequently Asked Questions
What is the purpose of a letter of undertaking?
A letter of undertaking allows exporters to ship goods without paying Integrated Goods and Services Tax (IGST) upfront. Under GST, exports are generally subject to IGST, which exporters can later reclaim through a refund. However, by filing an LUT, exporters can bypass the tax payment entirely, eliminating the need for refunds.9
What is the validity of a letter of undertaking?
The validity of a LUT is one year, i.e., the financial year in which it has been filed.10
What happens if a tax official does not process an LUT application?
If a tax official does not process an LUT application or does not issue a notice for clarification within three working days, the application will be deemed approved. The status of the LUT application changes to ‘Deemed Approved’.11
Who has to sign the LUT application?
The primary authorized signatory or any other authorized signatory must sign and file the verification with DSC/EVC. An authorized signatory can be the operating partner, managing director, or proprietor, or a person authorized by the working partner, or the Board of Directors of the company or proprietorship.12
What happens when the exporter fails to furnish the LUT?
If an exporter fails to supply the LUT, they will have to either furnish an export bond or pay the IGST.13
Published on May 13, 2022.
Sources:
1.https://tutorial.gst.gov.in/userguide/refund/Furnishing_of_Letter_of_Undertaking_for_Export_of_Goods_or_Services.htm
2. https://www.indiafilings.com/learn/export-bond-gst/
3. https://www.bajajfinserv.in/gst-lut-explained
4. https://www.bajajfinserv.in/gst-lut-explained
5. https://www.indiafilings.com/gst-lut
6. https://taxguru.in/goods-and-service-tax/letter-undertaking-gst.html
7. https://vakilsearch.com/blog/letter-of-undertaking-lut-gst/
8. https://www.indiafilings.com/learn/gst-lut-form-a-comprehensive-guide-for-exporters/
9. https://cleartax.in/s/letter-of-undertaking
10. https://tax2win.in/guide/letter-of-undertaking-lut-under-gst
11.https://tutorial.gst.gov.in/userguide/refund/Furnishing_of_Letter_of_Undertaking_for_Export_of_Goods_or_Services.htm#
12.https://tutorial.gst.gov.in/userguide/refund/Furnishing_of_Letter_of_Undertaking_for_Export_of_Goods_or_Services.htm
13. https://www.indiafilings.com/learn/export-bond-gst/
Sources:
1.https://tutorial.gst.gov.in/userguide/refund/Furnishing_of_Letter_of_Undertaking_for_Export_of_Goods_or_Services.htm
2. https://www.indiafilings.com/learn/export-bond-gst/
3. https://www.bajajfinserv.in/gst-lut-explained
4. https://www.bajajfinserv.in/gst-lut-explained
5. https://www.indiafilings.com/gst-lut
6. https://taxguru.in/goods-and-service-tax/letter-undertaking-gst.html
7. https://vakilsearch.com/blog/letter-of-undertaking-lut-gst/
8. https://www.indiafilings.com/learn/gst-lut-form-a-comprehensive-guide-for-exporters/
9. https://cleartax.in/s/letter-of-undertaking
10. https://tax2win.in/guide/letter-of-undertaking-lut-under-gst
11.https://tutorial.gst.gov.in/userguide/refund/Furnishing_of_Letter_of_Undertaking_for_Export_of_Goods_or_Services.htm#
12.https://tutorial.gst.gov.in/userguide/refund/Furnishing_of_Letter_of_Undertaking_for_Export_of_Goods_or_Services.htm
13. https://www.indiafilings.com/learn/export-bond-gst/
Sell across the world with Amazon Global Selling
Ready to start exporting from India?
Want to learn about Amazon Global Selling?
Disclaimer: Whilst Amazon Seller Services Private Limited ("Amazon") has used reasonable endeavours in compiling the information provided, Amazon provides no assurance as to its accuracy, completeness or usefulness or that such information is error-free. In certain cases, the blog is provided by a third-party seller and is made available on an "as-is" basis. Amazon hereby disclaims any and all liability and assumes no responsibility whatsoever for consequences resulting from use of such information. Information provided may be changed or updated at any time, without any prior notice. You agree to use the information, at your own risk and expressly waive any and all claims, rights of action and/or remedies (under law or otherwise) that you may have against Amazon arising out of or in connection with the use of such information. Any copying, redistribution or republication of the information, or any portion thereof, without prior written consent of Amazon is strictly prohibited.
*Map not to scale. The map has been used for design and representational purpose only, it does not depict the geographical boundaries of the country. These do not conform to the external boundaries of India recognized by the Survey of India.
*Map not to scale. The map has been used for design and representational purpose only, it does not depict the geographical boundaries of the country. These do not conform to the external boundaries of India recognized by the Survey of India.
Get started with $50,000 in potential incentives.
© 2024 Amazon.com, Inc. or its affiliates. All rights reserved
