Letter of Undertaking or LUT is an undertaking filed by an exporter exporting goods or services or both which permits them to supply without payment of Integrated Tax (IGST) on such export invoice. For this, such exporter have to submit an undertaking addressed to ‘The President of India’ that the such exporter will be responsible/liable :-
- To export the goods or services supplied without payment of integrated tax within the prescribed time
- To observe all the provisions of the Goods and Services Act and rules made thereunder, in respect of export of goods or services;
- Pay the integrated tax, thereon in the event of failure to export the goods or services, along with an amount equal to eighteen percent interest per annum on the amount of tax not paid, from the date of invoice till the date of payment.
Such an undertaking is known as ‘LETTER OF UNDERTAKING’ or say ‘LUT’.
An exporter submitting LUT have to fulfill following conditions at all times :
In case of Export of goods:- Export of goods should be completed within three months from the date of issue of an invoice for the same.
In case of Export of services:- Payment against an invoice of service should be received by such exporter within one year from the date of issue of such invoice for export. And, furthermore, such payment should be received in convertible foreign exchange.
In case of failure to comply, such an exporter will have to pay IGST tax himself along with the prescribed interest. Further, his LUT shall also be withdrawn which will be restored only after payment of the tax.
Under GST, there are two options being provided to exporters of “goods or services or both” for payment and refund of tax :
- Pay IGST on exports and then after claim refund for the same; or
- Submit an LUT to the Commissioner of GST. In this case, there is no need to pay tax on exports and the exporter can claim refund of GST paid on his inward supplies.
Eligibility:
A person registered under GST, who is intending to supply goods or services
- Outside India including special economic zones , i.e., zero rated supply
- Without paying integrated tax
Every registered person is allowed to file LUT subject to fulfillment of following conditions:
- The person applying for LUT must not be prosecuted under the Integrated Goods and Services Act or Central Goods and Services Tax Act where the levied tax amount exceeds Rs. 250 lakhs.
- The person applying for registration under LUT needs to avail this through an online portal of GST.
- The facility of exporting goods or services without paying the Integrated Goods and Service Tax will not be available if the exporter fails to export goods or services in the time period given under GST law.
Validity:
Once you submit the LUT it will be valid for the whole financial year. For each financial year you have to submit LUT.
Stipulated time for acceptance of LUT or Bond:
The Letter of Undertaking or Bond is mandatory for the purpose of export of goods or services without payment of GST including exports to SEZ units.
Hence, accepting LUT has to be on the list of top priority. The LUT must be accepted within three working days, once it has been received along with the self-declaration form of the exporter.
If the officer fails to process the Letter of Undertaking within the next three working days, the exporter can consider it to be accepted.
