Last updated: December 21st, 2024 2:52 PM

Letter of Undertaking (LUT): Definition, Process, & Format

A Letter of Undertaking (LUT) is a formal document where one party assures another that certain obligations or requirements are fulfilled or will be fulfilled under the law. In India, a Letter of Undertaking requires exporters to export goods or services without paying the Integrated Goods and Services Tax (IGST). It is a formal assurance submitted on the GST portal using Form GST RFD-11, ensuring compliance with legal obligations. While not a contract, a GST LUT is a key requirement for businesses to facilitate tax-free exports and streamline their international trade processes. In this article, you will learn about the letter of undertaking (LUT), eligibility to file a GST LUT, procedure to file, and more.  File your GST Letter of Undertaking (LUT) effortlessly with IndiaFilings and export without IGST hassle! Get Started!

What is a Letter of Undertaking (LUT) in India?

A Letter of Undertaking (LUT) in India is an export document required under the Central Goods and Services Tax (CGST) Act, 2017, enabling exporters to supply goods or services without paying Integrated Goods and Services Tax (IGST). By submitting an LUT in Form GST RFD-11 or export bond, exporters declare they will comply with all GST requirements while undertaking exports. This provision helps avoid the blockage of funds by eliminating upfront tax payments and facilitates a tax refund mechanism under GST law. The LUT facility is available to all registered persons except those prosecuted for offences involving tax evasion exceeding ₹250 lakh as per Rule 96A of the CGST Rules, 2017.

Eligibility to Obtain a Letter of Undertaking (LUT)

To be eligible for a Letter of Undertaking (LUT), the exporter must meet specific criteria:

• Export Locations: Exports should be made either outside or within India. It can also be from places under the Special Economic Zones (SEZs).
• Registered Taxpayer: The exporter must be a registered taxpayer under the Goods and Services Tax (GST) Act. The exporting goods or services should also be registered under GST.
• Disqualification Due to Prosecution: Exporters who have been prosecuted under the Central Goods and Services Tax (CGST) Act, 2017 or the Integrated Goods and Services Tax (IGST) Act, 2017, for tax evasion of Rs. 2.5 crore or above are not eligible to submit an LUT.
• LUT Submission Requirements: The LUT should be provided on the exporter’s letterhead that is registered under GST. If the exporting entity is a company, the LUT must be digitally signed by a partner, company secretary, managing director, or any person duly authorised by the company.
• Compliance with Tax Payment Timelines: If an exporter fails to pay the tax within the prescribed time, the facility of supplying without IGST payment will be revoked.
• Validity: The LUT is valid for one financial year. A fresh LUT must be generated every financial year to continue availing the benefits under the scheme.

What is the required information to file the GST LUT Form?

When filling out the GST Letter of Undertaking (LUT) form, ensure all required information is accurately provided:

• GSTIN and Name (Legal Name): The GST Identification Number (GSTIN) and the legal name of the taxpayer will be prefilled based on the login details. Verify that these details are correct.
• Financial Year Selection: Select the financial year for which the LUT is being filed. This helps establish the period for which the undertaking is valid.
• Details of Independent Witnesses: Enter the name, address, and occupation details of two independent and reliable witnesses. These witnesses should not have any connection to the taxpayer and should be able to confirm the authenticity of the information provided.
• Self-Declaration Points: Select all applicable points of self-declaration before filing the LUT. This may include declarations regarding compliance with GST laws, tax payment timelines, and not being prosecuted under the CGST or IGST Acts for tax evasion.

Who should sign a LUT Application?

The LUT application must be signed by the primary authorised signatory or any other authorised signatory responsible for filing the verification. This can include the working partner, managing director, proprietor, or any person duly authorised by the working partner or the Board of Directors of the company or proprietor. The authorised signatory must use a Digital Signature Certificate (DSC) or an Electronic Verification Code (EVC) to complete the filing process. This ensures that the application is legally binding and complies with GST regulations.

How to File a Letter of Undertaking on the GST Portal?

Follow these steps to file a Letter of Undertaking (LUT) for the export of goods or services at the GST Portal:

• Step 1: Go to the official GST Portal of India. The GST Home page is now visible.

• Step 2: Select the Furnish Letter of Undertaking (LUT) command from the Services > User Services menu.

• Step 3: The GST RFD-11 form appears. The form is reproduced here for ready reference:

• Step 4: From the LUT Applied for Financial Year drop-down list, choose the financial year for which LUT is being used.

• Step 5: To upload the previous LUT, click the Choose File button.

• Step 6: On the Letter of Undertaking Form/ GST RFD-11 that displays on the screen, fill in the required information. On the form, you must complete the following:
• Step 7: Self-Declaration: Check each of the three boxes by clicking on them.
• Step 8: Exporter commits to the following as a result of this:
• Step 9: Export of goods/services must be completed within three months of the date of issue of the Export invoice, or within any additional time authorized by the Commissioner. To follow the GST LUT rules when it comes to exporting. If you fail to export, you must pay IGST plus interest.

Note: Interest must be paid at a rate of 18 percent per year from the date of the export invoice until the date of IGST payment. (b) Provide Information to Independent Witnesses: Indicate the names, occupations, and addresses of two independent witnesses in the boxes outlined in red. It's worth noting that the Witnesses listed in the Letter of Undertaking (LUT) are also listed on the running Bond/Bank guarantee.

•  Select a file location > Click 'SAVE' > 'PREVIEW' to double-check the form's accuracy before submitting it. It should be noted that it is presently not possible to revise a signed/submitted form.

• Step 10: Sign and File the Form -  A letter of the undertaking can be signed by the primary authorized signatory or any additional authorized signatory. The working partner, the Managing Director, the Firm Secretary, or the proprietor, or a person properly authorized to execute the form by such working partner or the Board of Directors of such company or proprietor, might be the authorized signatory.Use one of the options below to sign and file the form:
• Step 11: Submit with DSC: Sign the application with the authorized signatory's registered Digital Signature Certificate. To take advantage of this feature, go to 'SIGN AND FILE WITH DSC' > 'SIGN AND FILE WITH DSC' > 'SIGN AND FILE WITH DSC' A message box with a warning appears. 'PROCEED'>  A one-of-a-kind ARN is generated by the system (Application reference number) (OR)
• Submit with EVC: To use this option. The system will send an OTP to the authorized signatory's registered mobile phone number and e-mail address. To sign the application, enter that OTP in the pop-up. A submission message box comes with a warning message. 'PROCEED'> Companies and LLPs can only file through DSC since the system creates a unique ARN (Application reference number).

There is a message of confirmation. By email and SMS, the GST Portal transmits this ARN to the Taxpayer's registered email and mobile phone. The acknowledgment can be downloaded by clicking the DOWNLOAD button. You can also look at the Letters of Undertakings previously posted on the GST website. Go to 'SERVICES' > 'User Services' on the home page. 'View my LUTs I've Submitted' > Choose a time frame > Check out the list of LUTs that were available during the period you choose > To see the details of a Letter of Undertaking, click the 'VIEW' button next to it. To get detailed steps: GST LUT - File Letter of Undertaking Online

Is it acceptable to file a GST LUT only once?

No, it is not acceptable to file a GST Letter of Undertaking (LUT) only once. GST LUT must be filed every financial year to remain valid and compliant with GST regulations. Businesses that export goods or services without paying Integrated Goods and Services Tax (IGST) must submit a fresh GST LUT annually to avail of the tax-free export benefit.

Different Types of Taxpayer's LUT Application Status

The following is a list of the statuses of the LUT application filed by the taxpayer in Form GST RFD-11 ARN:

• Submitted: The status of a LUT application after the taxpayer successfully submits it.
• Pending Clarification: The status of a LUT application after a notice of clarification is issued by the LUT Processing Officer.
• Pending Order: The status of the LUT application after the taxpayer provides a response to the notice within 15 days. Alternatively, if the taxpayer does not respond to the notice after 15 working days, the GST Portal switches the status from pending for clarification to pending for order.
• Approved: The status of the LUT application after the Tax Official acknowledges the taxpayer's assurance.
• Rejected: The status of the LUT application after the Tax Official rejects the taxpayer's commitment.
• Deemed Approved: Status of LUT application if the Tax Official takes no action within 3 working days.
• Expired: At the end of each fiscal year, the status of the LUT application will be changed to Expired.

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