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What is LUT?
Businesses that export goods outside the country are required to have a letter of undertaking under the GST rule.
The Central Goods and Service Act, 2017, says that businesses exporting goods or services without paying Integrated Goods and Service Tax (IGST), will have to mandatorily enclose the Letter of Undertaking along with the GST RFD-11 Form.
You can apply for Letter of Undertaking, or LUT if you meet the following conditions:
- Wish to supply goods or services overseas or to India without paying GST
- Registered business under GST
- Do not have a tax evasion case of more than Rs 2.5 crore
List of documents required for LUT under GST
Any person who is registered under GST can submit the LUT. Here are the documents required for LUT under GST:
- A cover letter requesting to accept the LUT (It should be signed by an authorised person such as the working partner, the managing director, or the proprietor.)
- Copy of GST registration
- PAN card
- KYC of the authorised person/signatory
- GST RFD11 form
- Copy of the IEC code (Importer-Exporter Code)
- Cancelled cheque
How to file LUT under GST?
- The application for Letter of Undertaking can be filed online by logging in to the GST portal.
- Next, navigate to the “Services” tab and click on “User Services.” From the drop-down menu, you need to select “Furnish Letter of Undertaking (LUT)”.
- A form will open up. Choose the financial year for LUT filing and upload the last financial year’s LUT (if you had filed it last year).
- Next, you need to name two witnesses along with their full address and occupation. Mention the place of LUT filing.
- You also need to get the form signed by an authorised person or the exporter. The authorised person includes the managing director, company secretary, or anyone authorised by these people to sign.
Also Read: What are the different GST payment modes?
- The signature can be done digitally or via Electronic Verification Code. In the case of the latter, you will receive an OTP, which you need to punch in.
- Preview the form for any errors. If there is nothing to change, sign the form or verify it via an OTP and click on the “Proceed” button.
- Once this is done, you will receive an Application Reference Number (ARN). Note it down for future reference.
- You can download the acknowledgement copy of LUT by clicking on the “Download” button.
Advantages of Letter of Undertaking
- Tax exemption: If you are an exporter of goods and services to someone with an office in Special Economic Zones (SEZs), you are eligible for zero-rated supplies under GST. It means you don’t need to pay any taxes.
- Save working capital: You can save on your working capital by submitting Letter of Undertaking and not paying IGST to begin with. This is much better than later claiming the refund on taxes paid and getting involved in a time-taking process.
- Applicable for a year: You don’t need to apply for LUT every time you export or import something. One LUT is valid for one financial year.
Frequently Asked Questions
Question: How will I know if the LUT application has been completed?
Answer: In addition to receiving an Application Reference Number (ARN) after applying, you will be informed about successful filing via SMS and email. You can also download the acknowledgement as a PDF from the GST portal.
Question: How is the LUT application processed?
Answer: LUT is processed online for the Model-2 States. There are 27 Model-2 States such as Odisha, Mizoram, Uttarakhand, Assam, Jharkhand, etc. For the Model-1 States, tax officials may process LUT manually or online, depending on the facility available at the backend of such States.
Question: The status of my LUT application shows “Pending for Order.” What does it mean?
Answer: The status is changed to “Pending for order” when you submit the reply to the tax official’s clarification notice within 15 working days. Even when you fail to reply within 15 working days, your application will show this status, which means that the tax officials will soon decide on your application.
Question: What will happen if my application is not processed?
Answer: If the LUT application is not processed, or any notice for clarification is not issued by the tax office within 3 working days, then the status of the application will be updated as “deemed approved.”
You can download the order copy through the GST Portal in the downloadable form under Dashboard > Services > User Services > View Additional Notices/Orders option.
Conclusion
Letter of Undertaking is a simple and efficient way to save up on GST as an exporter or importer. Be prepared with the documents mentioned in this blog post and apply for the LUT without any hassle or unnecessary surprises.
