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The letter of undertaking is a document where the exporter declares that all GST obligations are fulfilled by him/her. Registered taxpayers who export goods or services can use LUTs. In case, someone is prosecuted for tax evasion of Rs. 2.5 crores or more are ineligible to provide LUTs.
The validity of LUT in GST is one year and it ends at the end of the financial year, so, this has to be updated every year. In case, the LUT conditions are not met within the timeframe, the privileges will be removed, and the exporter will be required to post bonds.
In case of export without payment of IGST, bonds must be provided to all other assesses (including those who have been prosecuted for tax evasion of Rs. 2.5 crores or more under the GST legislation). Letters of the undertaking can be provided and submitted online via the GST portal. However, the bonds must be filled out manually because a hard copy must be sent to the department. LUTs/bonds can be used in the following transactions:
If you are an exporter then you must know that on every export you have to pay tax on the export of goods and services. To avoid this, the LUT form is introduced by the GST authority for exporters. The full form of LUT is a Letter of Undertaking and this is a document that makes the process of export seamless without paying Integrated Goods and Services Tax (IGST).
As per the new regulation of GST, all the exporters are subject to pay IGST which can be reclaimed and refunded after some time. By filing the LUT form the exporters will get a refund without much effort and follow up through the GST authorities. So, having a LUT certificate is important for export and you can apply for the form online. Below a complete procedure of applying with eligibility and documents is shared.
If you file a Letter of Undertaking (LUT), then it comes with many benefits to exporters and these advantages are as follows:
Help exporters to carry out their export transactions without the burden of immediate tax payment. In contrast, you have to pay taxes upfront and later claim refunds for zero-rated exports.
The exporters can avoid the complexity of claiming tax refunds or including in the long process of follow-ups with the tax authorities. So, this saves a lot of time for exporters.
The funds that are locked as a tax payment will be available to exporters. This benefit works perfectly for small and medium-sized businesses because they have to fulfil some financial and capital requirements.
Get benefits for the entire financial year, by applying once with the LUT. So, there is no need for repetitive filing and the exporters will work on their core activities.
Last, the LUT certificate will help you navigate the realm of international trade with greater efficiency and flexibility.
The eligibility criteria to file a LUT in GST are as follows:
Any registered taxpayer engaged in the export of goods and services should file a Letter of Undertaking (LUT) on GST authority. So, the individuals involved in the tax evasion exceeding Rs. 250 lakh or more are ineligible to benefit from this option.
The applicant supplies goods or services from India to foreign countries or Special Economic Zones.
To avail the benefits the entity must be registered under the GST framework.
Must have an annual turnover of over INR 1.5 crore and INR 75 lakh for Himachal Pradesh and North Eastern states.
No inter-state supplies or exports are required.
Lastly, the business should not be a casual taxable person and not include in the manufacturing of pan masala, ice cream, or tobacco. Also, do not supply any non-taxable or exempt products.
To apply for a Letter of Undertaking (LUT) under GST, you'll need the following documents:
LUT Cover Letter signed by an authorized person.
Copy of GST Registration.
PAN Card of entity for Identification.
KYC of Authorized Person through ID and address proof.
Application GST RFD 11 Form.
Copy of IEC Code (in case of exports).
Cancelled Cheque from associated bank account.
Authorized Letter for granting power to the authorized signatory.
To file the Letter of Undertaking (LUT) for export of goods or services at the GST Portal, perform the following steps:
Visit a GST Portal, and log in with your valid credentials.
Look for the option Services > User Services > Furnish Letter of Undertaking (LUT) command.
Form GST RFD-11 is displayed. Select the financial year for which LUT in GST is applied from the LUT Applied for Financial Year drop-down list.
Click the Choose File button to upload the previous LUT. Remember,
Only PDF or JPEG file formats are allowed.
The maximum file size for upload is 2 MB.
Select the declaration checkboxes.
In the Name, Address and Occupation of the Independent and Reliable Witnesses section, enter the name and address of 2 witnesses.
Fill in other details such as place of filing, name of primary and other authorized signatory.
If you want to save the form and retrieve the form later, click the SAVE button to save the form. So, after filing the form, a confirmation message is displayed that the application is saved successfully. The LUT number can be saved.
Two options will appear to sign the PDF file.
Sign and file with DSC (Digital Signature Certificate). Sign the application using the registered DSC of the selected authorized signatory.
Sign and file with the EVC button. If the EVC option is selected, the system will trigger an OTP to the registered mobile phone number and e-mail address of the authorized signatory. Enter that OTP in the pop-up to sign the application.
Lastly, click the PROCEED button. In last:
The system generates an ARN and displays a confirmation message.
GST Portal sends the ARN to the registered email and mobile of the Taxpayer by e-mail and SMS.
You can click the DOWNLOAD button to download the acknowledgement.
Below is the different kind of statuses of the LUT certificate or application form that are filled out by the taxpayer:
Submitted: When a taxpayer successfully submits the LUT application.
Pending for Clarification: Status of the LUT in GST, after the Processing Officer issues a notice to seek clarification from the taxpayer.
Pending for Order: The taxpayer submits a reply to the notice within 15 working days or if they do not submit a response, the GST Portal changes the status from "pending for clarification" to "pending for order".
Approved: After the Tax Official accepts the undertaking provided by the taxpayer.
Rejected: When the Tax Official rejects the undertaking provided by the taxpayer.
Deemed Approved: If the Tax Official doesn't take any action within 3 working days.
Expired: The LUT application will change to "Expired" at the end of the respective financial year.
To conclude, the Letter of Undertaking (LUT) help exporters comply with GST norms and pay taxes on their exports. Through LUT, the business gets the benefit of no tax liability on exports. So, if you are a registered taxpayer who has a zero-rated supply of goods or services. Then you must furnish LUT in GST Form RFD-11 on the GST Portal before affecting such supply. For GST registration you can reach out to registrationwala.
Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.
