GST Compliance Guide
Letter of Undertaking (LUT) under GST – Complete Step-by-Step Process
Are you an exporter or service provider struggling with GST compliance? Letter of Undertaking (LUT) is your solution. It allows you to supply goods and services at zero GST rate without paying taxes upfront, streamlining your export process.
In this comprehensive guide, we'll walk you through everything you need to know about LUT – from eligibility criteria to the step-by-step filing process on the GST portal, along with common mistakes to avoid.
What is Letter of Undertaking (LUT)?
A Letter of Undertaking (LUT) is a formal declaration filed by a GST-registered person on the GST portal stating their intention to supply goods or services without collecting GST from customers. It's primarily used by exporters to claim zero GST rate on exported goods and services.
💡 Key Point:
LUT allows you to export goods/services at zero GST rate, meaning you don't charge GST to your foreign customers but also don't get to claim input tax credit on your purchases.
Eligibility Criteria for LUT Filing
One of the biggest advantages of LUT is its flexibility. Here's who can file:
GST-Registered Persons
Any business with active GST registration can file LUT
No Turnover Threshold
There's no minimum or maximum turnover limit for LUT eligibility
Service Providers & Traders
Both goods suppliers and service providers can file LUT
Special Economic Zones
Units in SEZ can file LUT for supplies
Key Benefits of Filing LUT
✓ Zero GST on Exports
Supply goods/services to foreign customers at 0% GST rate without complications
✓ Simplified Compliance
Easy filing process on the GST portal with minimal documentation
✓ Avoid Cash Refunds
Eliminates the need to wait for GST refunds on export supplies
✓ Flexible Validity
File fresh LUT each financial year based on your business needs
Documents Required for LUT Filing
The beautiful part about LUT is that most documents are not required to be submitted upfront. However, you must keep them ready for GST officer verification:
1. GST Registration Certificate
Your active GST registration document
2. Bank Account Details
For receiving GST refunds (if applicable)
3. Proof of Authorization
If LUT is filed by an authorized representative (CA, consultant)
4. Self-Certification
Declaration that you won't claim ITC and will supply at zero rate
Step-by-Step LUT Filing Process on GST Portal
Follow these simple steps to file your LUT:
Login to GST Portal
Visit www.gst.gov.in and log in with your username and password
Navigate to Services
Go to Services → Registration → Letter of Undertaking → Furnish LUT
Select Financial Year
Choose the financial year for which you want to file LUT (April - March)
Fill LUT Form
Enter your bank account details and select reason for LUT (Exports/Supply to SEZ/Supplies covered under Section 54)
Declaration
Confirm that you understand the consequences - no ITC claim and zero GST on covered supplies
E-sign
E-sign the LUT using your authorized signatory's digital signature
Submit
Submit the LUT and you'll receive an acknowledgment with UARNNumber
Get Certificate
Download the LUT certificate from Services section for your records
Validity & Renewal of LUT
Important Points:
- • Validity Period: LUT is valid for one financial year (April 1 to March 31)
- • Automatic Renewal: LUT automatically becomes invalid on April 1 each year
- • Fresh Filing Required: You must file a new LUT before April 1 if you want to continue
- • Revocation: You can revoke LUT anytime during the financial year if you want to claim ITC
- • Deemed Coverage: Once LUT is filed, all covered supplies are automatically at 0% GST
Common Mistakes to Avoid When Filing LUT
❌ Filing LUT but Claiming ITC
✓ Once you file LUT, you absolutely cannot claim input tax credit. Choose wisely based on your cost structure.
❌ Not Updating GST Portal
✓ Keep your bank account and other details updated on GST portal for smooth LUT processing.
❌ Missing the April Deadline
✓ File new LUT before April 1 of the next financial year if you want continuous coverage.
❌ Mixing LUT and Non-LUT Supplies
✓ Maintain separate accounting and invoicing for LUT-covered and non-LUT supplies to avoid confusion.
❌ Ignoring Bank Account Verification
✓ Banks sometimes mark GST refunds as rejected due to account mismatch. Ensure account details are accurate.
Practical Example: How LUT Works
Scenario: ABC Exports Ltd supplies software services to a US client for $10,000 (₹8,30,000).
Without LUT (18% GST):
- Service value: ₹8,30,000
- GST @ 18%: ₹1,49,400
- Total invoice: ₹9,79,400
- Wait for refund on export
With LUT (0% GST):
- Service value: ₹8,30,000
- GST @ 0%: ₹0
- Total invoice: ₹8,30,000
- Immediate payment without GST complications
*LUT is beneficial when you export frequently and want to avoid GST refund procedures.
Frequently Asked Questions
Q: What is the difference between LUT and export under refund?
A: LUT allows you to supply at 0% GST without claiming refund, while export under refund means charging 5% GST and claiming refund. LUT is faster and simpler for frequent exporters.
Q: Can I revoke LUT and claim ITC later?
A: Yes, you can revoke LUT anytime during the financial year on the GST portal. Once revoked, you can claim ITC on future purchases, but not on supplies made under LUT.
Q: Is LUT mandatory for all exporters?
A: No, it's optional. You can export under the 0% GST refund scheme or 5% GST refund scheme. LUT is one option that works best for frequent exporters.
Q: What happens if I supply goods under LUT to a domestic customer?
A: This is a serious violation. All supplies under LUT must be to foreign customers or SEZ units. Supplying to domestic customers without charging GST can attract penalties.
Q: Can I claim GST refund on expenses incurred during LUT?
A: No. Once LUT is filed, you cannot claim any input tax credit. You must bear all GST expenses. This is why you must carefully decide before filing LUT.
Conclusion
Letter of Undertaking (LUT) is a powerful compliance tool for exporters and service providers. It simplifies the process of supplying goods and services at zero GST rate without the hassle of claiming refunds. However, it comes with the trade-off of not being able to claim input tax credit.
The key is to analyze your business structure and cost composition before deciding to file LUT. If your supplier costs are low relative to your export revenue, LUT is an excellent choice. If input costs are significant, exporting under the refund scheme might be better.
Filing LUT is simple and straightforward on the GST portal. Follow the step-by-step process outlined in this guide, and you'll have your LUT certificate within minutes.
Need Expert Guidance on LUT?
Our team of experienced CAs can help you decide if LUT is right for your business and guide you through the filing process.
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