GST LUT Certification
Letter of Undertaking (LUT) under GST
A Letter of Undertaking (LUT) is a document that allows exporters to export goods or services without the need to pay Integrated Goods and Services Tax (IGST) on their exports. Instead of paying the IGST upfront, exporters can use LUT to claim a refund of the tax paid or simply avoid paying it at all at the time of export.
LUT is specifically intended for exporters who are registered under the Goods and Services Tax (GST) and intend to export goods or services without incurring the burden of taxes at the time of export.
Key Features of LUT under GST
Purpose of LUT:
LUT enables businesses to export goods and services without paying IGST on exports, which they would otherwise have to pay. The idea behind LUT is to make exports tax-free at the time of export and allow businesses to claim a refund on the taxes paid.
Eligibility: Any exporter who has been registered under GST and is in good standing can apply for an LUT.
The exporter should not have any outstanding dues or liabilities under GST for applying for the LUT.
Benefit: The major benefit of LUT is that it allows the exporter to export goods and services without paying IGST. This can significantly help cash flow as the exporter does not need to pay IGST upfront and wait for a refund.
In contrast, if an exporter does not file for LUT, they would need to pay IGST on their exports, which can be refunded later.
Validity of LUT: The LUT is generally valid for one financial year. However, it must be renewed every year if the exporter intends to continue exporting without paying IGST.
No Requirement for Bank Guarantee: If an exporter has a good compliance record and is applying for LUT, they are not required to furnish a bank guarantee, unlike a Bond under the export provisions of GST, which may require security in certain cases.
Eligibility for LUT
An exporter can apply for a LUT if:
They are a regular exporter.
They do not have any outstanding tax dues or litigation under GST.
They have not been convicted of any offense under the GST laws.
Exporters who do not qualify for LUT (such as those with a poor tax compliance history) must furnish a bond to export without payment of IGST.
Procedure for Filing LUT
Login to the GST Portal:
The exporter needs to log in to the GST portal (www.gst.gov.in) using their GSTIN (Goods and Services Tax Identification Number) and password.
Navigate to the LUT Section:
After logging in, go to the Services section.
Select User Services and then click on Furnish Letter of Undertaking (LUT).
Fill in the Required Information:
Enter details such as the financial year for which the LUT is being filed, and provide a declaration agreeing to abide by the conditions of LUT.
You may need to submit certain documents such as business details, a copy of the GST registration certificate, and other information as required by the portal.
Submit the Application:
After entering all the required information, the exporter submits the LUT application.
A confirmation message is usually displayed once the application is submitted successfully.
Acknowledgment of LUT: The GST portal will issue an acknowledgment receipt once the application is successfully filed.
The LUT will then be granted by the tax authorities, and the exporter can use it to clear exports without paying IGST.
Download the LUT:
The exporter can download the LUT certificate from the GST portal once it is issued.
Key Conditions for LUT
The exporter must adhere to the conditions set forth under the GST Act when filing LUT. These include:
The goods or services exported should be in compliance with the export rules under GST.
The exporter must be an honest taxpayer without outstanding dues or tax defaults.
The exporter must ensure that the supply is truly export-oriented, with no domestic consumption involved.
Difference Between LUT and Bond
LUT (Letter of Undertaking):
No payment of IGST at the time of export.
No bank guarantee required for the exporter with a good compliance record.
Exporters use LUT for self-certification of their exports.
Bond: Involves the exporter paying IGST at the time of export but receiving a refund later.
A bank guarantee may be required in certain cases where exporters have poor compliance or are new to the GST system.
GST Refund for Exporters Using LUT
Refund of Taxes Paid:
Exporters who use the LUT do not have to pay IGST on exports. However, if they do make any domestic purchases and pay GST on those purchases, they can claim a refund of the GST paid on inputs and input services under the Refund of Unutilized Input Tax Credit scheme.
Refund Procedure:
The process for getting a refund is simple if the exporter has filed their returns correctly and on time.
The refund application can be filed in Form GST RFD-01 on the GST portal.
When is LUT Not Applicable?
LUT is not applicable if the exporter opts to export under taxable exports or is not able to comply with the eligibility criteria set by GST.
In such cases, the exporter would be required to pay IGST on the export value and subsequently claim a refund of the IGST paid.
Conclusion
A Letter of Undertaking (LUT) is an important tool for GST-registered exporters to ensure that they do not need to pay IGST on exports, easing cash flow and simplifying the export process. By using LUT, businesses can benefit from tax-free exports and efficiently claim refunds on taxes paid on purchases related to exports.
