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Published on:

November 28, 2024

Shaaransh Sharma

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Basics of GST

What is Letter of Undertaking (LUT) in GST and How to File It

The introduction of Goods and Services Tax (GST) has changed how a business in India manages its Indirect tax liabilities. Spectrum of provisions that fall within GST and LUT being one of them forms the base strategy element for export business. It allows exporters to avoid upfront payment of Integrated GST (IGST) while doing their business. In this blog, we will discuss the LUT in GST, its necessity, the process to file it and how one can download the LUT certificate.

What is LUT in GST?

LUT full form in GST is Letter of Undertaking. This is a document to be provided by the exporters to the GST Department to export goods or services without payment of IGST. Under LUT, businesses continue to undertake exports without having to pay IGST and claim a refund later however they commit via LUT that they will adhere to the conditions prescribed there under GST law. Letter of undertaking in GST has simplified the exporting process, lessened the financial burden and improved cash flow for exporters.

You might also be interested in applying IGST on Swipe billing software

Who Needs to File LUT in GST?

Exporters for whom the LUT application is mandatory.

Export of Goods or Services without Payment of IGST
SEZs are allowed to supply goods without payment of IGST.

In the case of non-filing LUT by Zoom Enterprises, he has to draw IGST on exports and later refund it which is time-consuming & cumbersome.

Conditions for Filing LUT in GST

Businesses must fulfil the following conditions before filing the LUT:

No Pending Tax Dues: The applicant should not have been prosecuted for any offence against the Income Tax Act which involves an amount over ₹250 lacks and also there should not be any pending undue dues tax on him.
Export Commitment: The goods or services exported are to be supplied within a specified period, normally not exceeding three months.

How to File LUT in GST

Filing the LUT application is an online process conducted via the GST portal. Here is a step-by-step guide to ensure smooth LUT filing:

Step 1: Log in to the GST Portal

Visit the official GST portal (www.gst.gov.in).
Log in using your credentials (GSTIN, username, and password).

Step 2: Navigate to the LUT Filing Section

On the dashboard, go to the Services tab.
Select User Services and click on Furnish Letter of Undertaking (LUT)

Step 3: Fill in the LUT Application

The form for the LUT application will be opened
Provide additional information like the financial year, name of the business and address.
Give the names, addresses, and telephone numbers of 2 witnesses.

Step 4: Upload Required Documents

The process is mostly automated, however you may have to upload further documents like the GST registration certificate of your business.

Step 5: Declaration and Digital Signature

Go through it well, the statement.
The LUT has to be signed using a Digital Signature Certificate (DSC) or an Electronic Verification Code (EVC), however, it can differ based on the way you file.

Step 6: Submit the LUT

Submit the completed LUT application form online.
Once submitted, a confirmation message will be displayed.

Step 7: Receive the Acknowledgment

The GST portal will generate an acknowledgment or the LUT certificate.

How to Download LUT Certificate

After successful LUT filing, you can easily download the certificate for your records. Here’s how:

Step 1: Log in to the GST Portal

Use your GST credentials to log in.

Step 2: Navigate to Previous LUTs

1. Go to the Services tab.

2. Select View My Submitted LUTs under User Services

Step 3: Select the Relevant Financial Year

Choose the financial year for which you want to download the LUT certificate.

Step 4: Download the Certificate

1. Click the link for the submitted LUT

2. LUT certificate is issued in pdf format only. Save it to download for future reference.

Validity of LUT in GST

LUT is valid for a financial year. The LUT is valid for a financial year and businesses need to reapply for the LUT with every new FY. If LUT is not renewed, the exporters face complications in their export transactions and end up paying IGST.

Benefits of Filing LUT in GST

The filing of LUT is advantageous in the following manner:

Free of cost: For exporters, no need to pay IGST on the export transactions, thus at least a vast finance is freed up.
Enhanced Liquidity: Exporters can have a much more healthy cash flow as there is no payment of IGST upfront and waiting for a refund.
Smoother Processes: With a LUT (letter of undertaking), the compliance process is much simpler which, in turn, speeds up the export process.

Common Mistakes to Avoid While Filing LUT

Negligence in Formulas: Make sure all boxes in the LUT application form are properly filled.
Non-renewal: Submit a new LUT at the beginning of each financial year to prevent this from disrupting export operations.
Delay in Export: Goods or services must be exported within the time limit to fulfil the GST compliance.

Conclusion

Letter of Undertaking in GST is a recent and relevant instrument for exporters, which eases their international trade functioning. Using LUT filing, they provide businesses with the flexibility of doing business without paying IGST upfront and then getting it paid back to them by filling out refund forms — allowing enterprises to expand their overseas footprints. Therefore, you should be aware of what is LUT, the process to apply LUT and how to download an LUT certificate so as not only to comply with GST provisions but also to manage finances in an optimized and efficient manner.

LUT can help exporters save time and money if filed on time and accurately. As an exporter, you should get your LUT filed every financial year and also check its validity. So, you can still give your best in the GST ecosystem as well as in the global market.

FAQs

1. What is LUT in GST, and why is it required?

The LUT (Letter of Undertaking) full form in GST is a file document that exporters are required to file in order to export goods or services without a levy of IGST. It makes export better by removing upfront payment of IGST and claiming refunds later, helping businesses with liquidity.

2. Who is eligible to file LUT in GST?

Only Goods or Services Exporters as well as suppliers to Special Economic Zones (SEZs) can apply for an LUT. However, the exporter should not have any tax dues more than ₹250 lakh against them and he should not be prosecuted for a tax-related offence.

3. How can I download my LUT certificate from the GST portal?

Follow these steps to download your LUT certificate:

Logging into the GST portal.
Under Services > User Services > View My Submitted LUTs
Choose the financial year and download the certificate in PDF format.

4. Is the LUT valid for multiple years, or do I need to renew it annually?

The validity of LUT in GST is one Financial Year. Exporters shall have to file a new LUT at the beginning of each financial year, to keep exporting without payment of IGST.

5. What happens if I fail to file an LUT or export within the stipulated time?

If no LUT is filed, then IGST will be paid on exports and refunded later. Moreover, any goods or services not exported within three months of LUT issuance will be liable for the relevant IGST.