Filing a LUT under GST

Filing a LUT under GST

A Letter of Undertaking — filed as Form GST RFD-11 under Rule 96A of the CGST Rules 2017 — is a self-processed online declaration that lets you export goods, export services, or supply to SEZ units without paying IGST at the invoice stage. File it on the GST portal before your first export invoice of the financial year. For FY 2026-27 (which began 1 April 2026), if you have not yet filed, do so immediately — every export invoice you have already raised this year without a valid LUT carries IGST exposure until it is in place.

What a Letter of Undertaking Actually Does

When you make a zero-rated supply — defined under Section 16(1) of the IGST Act 2017 as either an export of goods or services, or a supply to an SEZ unit or SEZ developer — the law gives you two routes under Section 16(3):

1. Export with payment of IGST, then claim a refund.
2. Export without IGST, provided a valid LUT is on record for that financial year.

Option 2 almost always wins on working capital. Consider a manufacturer exporting Rs. 4 crore of goods per year at 18% IGST. Under Option 1, Rs. 72 lakh is tied up in the refund pipeline at any point. At a working-capital borrowing rate of 12% per annum, and assuming refunds take an average of 60 days, the financing cost alone comes to roughly Rs. 1,42,000 per year — a real cost that an LUT eliminates at zero expense.

The legal framework rests on four provisions:

• Section 16(1)(a) and (b), IGST Act 2017 — defines zero-rated supply: exports of goods or services, and supplies to SEZ units or developers.
• Section 16(3)(a), IGST Act 2017 — permits supply without IGST under a bond or Letter of Undertaking.
• Rule 96A, CGST Rules 2017 — prescribes the precise conditions, timelines, and consequences of breach.
• Form GST RFD-11 — the prescribed form filed on the GST portal.

The LUT itself is not an approval process. There is no departmental review, no officer sign-off, no processing delay. You file it, the portal generates an ARN, and you download the acknowledgement. From that moment the LUT is valid.

Who Can — and Cannot — File an LUT

Eligible categories include:

• Exporters of goods to any country outside India (direct exporters, merchant exporters, trading houses).
• Exporters of services where consideration is received in convertible foreign exchange — or in Indian Rupees where permitted by an RBI notification.
• Suppliers of goods or services to SEZ units (manufacturing or service) within India.
• Suppliers to SEZ developers.

One disqualifying condition under Rule 96A: Any registered person who has been prosecuted for tax evasion of Rs. 2.5 crore or more under the CGST Act, IGST Act, or any earlier indirect-tax law (Central Excise, Service Tax, or Customs Act) is not eligible for LUT. Such exporters must file a running bond, accompanied by a bank guarantee equal to a percentage of the estimated IGST — a costlier and slower process requiring officer acceptance.

An important nuance: prosecution means a complaint has been filed before a court. A show-cause notice alone does not disqualify you. If your entity is facing ongoing proceedings, get a formal legal opinion on whether the LUT route is still available before you export.

Step-by-Step: Filing Form GST RFD-11 on the GST Portal

Before You Sit Down: Documents and Access to Have Ready

1. Your GSTIN login credentials (username + password).
2. A working DSC token if you are a company or LLP — the portal will not accept EVC for these entities.
3. Details of two independent witnesses: full name, complete residential address (with PIN), and occupation. You do not upload any ID proof on the portal, but prepare a signed witness declaration to keep in your files.
4. Last year's LUT acknowledgement PDF — the portal prompts you to reference it and auto-populates several fields.
5. The authorised signatory's name and PAN, matching what is registered on the GST portal. If you changed the authorised signatory during the year, ensure the portal amendment (Core Amendment) was submitted and accepted first.

The Filing Sequence

1. Log in at www.gst.gov.in.
2. Navigate to Services → User Services → Furnish Letter of Undertaking (LUT).
3. Select Financial Year 2026-27 from the dropdown. Read the screen carefully — a common error is inadvertently selecting 2025-26.
4. If a prior-year LUT exists, the portal asks whether to prefill details — click Yes to save time.
5. Under the Witness Details section, enter for each witness: full name, complete address, occupation. Two witnesses are mandatory; no field can be left blank.
6. Read the three self-declaration clauses on screen. You are confirming:
7. You have not been prosecuted for tax evasion of Rs. 2.5 crore or more.
8. Goods covered under the LUT will be exported within three months of the invoice date.
9. Consideration for services will be received in convertible foreign exchange within one year of the invoice date.
10. Tick all three checkboxes.
11. Select the authorised signatory from the dropdown.
12. Sign using DSC (companies and LLPs) or EVC (proprietorships, partnership firms).
13. Click Submit.
14. The portal generates an ARN (Application Reference Number) immediately.
15. Download the Form GST RFD-11 acknowledgement PDF right away — this is your valid LUT document for FY 2026-27.

Total time from login to ARN: approximately 10–15 minutes for a first-time filer, under 5 minutes from the second year onward.

Witness Requirements: Who Qualifies and Why It Gets Scrutinised

Two witnesses are mandatory under Rule 96A. Their details appear in the portal form, but more importantly, if a GST officer visits your premises or issues an enquiry notice, they may ask to verify the witnesses and review their signed declarations.

Suitable choices:

• A director or partner of a genuinely unrelated business.
• Your statutory auditor, CA, or advocate (professional address acceptable).
• A long-standing vendor or customer with no financial stake in your entity.

Choices that attract scrutiny:

• Employees of your company — they are financially dependent on the entity and considered related parties by many officers.
• Family members of directors or proprietors.
• Co-directors in group companies who share the same beneficial ownership.

Practical step: Prepare a one-page witness declaration — name, address, occupation, PAN or Aadhaar number, relationship to the exporter, date, and original signature. Get it signed before filing. Keep the signed originals in a physical compliance file. If your witnesses change each year, update the declarations before you file the new LUT.

The Conditions You Are Committing to Under Rule 96A

The LUT is not merely a formality. It is a binding undertaking, and Rule 96A attaches precise deadlines. A breach triggers IGST plus interest regardless of intent.

For Goods Exports

Export the goods within three months of the invoice date. "Exported" means the goods have crossed the Indian customs frontier — the operative date is the Let Export Order (LEO) date stamped on the shipping bill, or the bill of lading date, whichever the department treats as the export date.

Rule 96A allows a 15-day cure window: if goods are not exported within three months, you have 15 additional days to pay the IGST plus interest before you are formally in breach. Do not rely on this window as routine — it is a last resort.

If the delay is due to reasons genuinely beyond your control (port closure, customs system downtime, buyer insolvency), apply in writing to your jurisdictional Commissioner for an extension before the deadline. Extensions granted in writing protect you; extensions assumed without formal approval do not.

For Services Exports

Receive convertible foreign exchange — or Indian Rupees where RBI has permitted — within one year of the invoice date. "Received" means the amount has been credited to your bank account and a Bank Realisation Certificate (BRC) or Foreign Inward Remittance Certificate (FIRC) has been issued by your bank.

For long-term contracts where the billing cycle stretches beyond 12 months, confirm with your banker that the specific remittance arrangement complies with RBI's FEMA guidelines and keep documentary evidence on file.

For SEZ Supplies

Supply goods or services to the SEZ unit or developer for authorised operations, supported by a valid Endorsement Certificate or Specified Officer's permission from the SEZ authority. This document is your primary evidence that the supply was for SEZ operations and legitimately zero-rated.

Worked Example: The Real Cost of Missing the One-Year Deadline

Scenario: A Bengaluru-based IT services firm raises an export invoice for Rs. 40,00,000 on 15 April 2026, relying on a valid LUT for FY 2026-27. The applicable GST rate if treated as domestic supply would be 18% IGST.

The overseas client faces a payment dispute and remits the amount on 25 June 2027 — that is 436 days after the invoice date, well past the one-year (365-day) + 15-day (380-day) window under Rule 96A.

Additionally, Section 122(1) of the CGST Act permits a penalty equal to the tax amount or Rs. 10,000, whichever is higher — meaning up to Rs. 7,20,000 in penalty exposure on top of the IGST and interest.

The practical response if a large invoice is approaching the one-year limit and payment is still outstanding: escalate collections immediately, involve the CFO, and if breach is unavoidable, pay the IGST in the same return period as the breach rather than delaying. Interest runs from the invoice date, not from when you discover the problem.

Pitfalls to Avoid: Common Mistakes That Create Compliance Gaps

1. Filing LUT after the financial year has already started Every export invoice raised before the LUT is filed — even if filed the next day — has no LUT coverage. For those invoices, IGST is due or a refund claim must be filed. In FY 2026-27, if you are reading this in May 2026 and have not yet filed, file today and review your April invoices.

2. Wrong financial year selected in the portal dropdown The portal defaults to the most recently available year, which in April 2026 shows 2026-27. But during a system glitch or a rushed filing, some users have inadvertently filed a second LUT for 2025-26. Always verify the year shown on the ARN acknowledgement.

3. Authorised signatory mismatch The signatory in the LUT must exactly match the authorised signatory registered on the GST portal. If your company changed the signatory via a Core Amendment but the portal update was not accepted, the LUT carries a mismatched signature — a ground for rejection during scrutiny. Confirm the portal reflects the current signatory before filing.

4. No invoice-level tracking register The three-month goods deadline and the one-year services deadline apply per invoice, not as an average. An exporter with 200 invoices per year who does not track each one individually will inevitably miss a deadline. A spreadsheet with columns for Invoice Number, Invoice Date, Export/Payment Deadline, Actual Export Date/BRC Date, and Status takes one afternoon to set up and is worth maintaining throughout the year.

5. Assuming SEZ endorsements are automatic Many exporters supply to SEZ units and never collect the endorsement certificates, assuming the SEZ unit manages this. If the GST department asks for proof that the supply was for authorised SEZ operations, absence of the endorsement certificate removes the zero-rating claim entirely.

6. Not downloading the RFD-11 acknowledgement immediately The GST portal does not reliably send email confirmations of LUT filings. If you close the browser without downloading, you may spend time searching the portal later. Download and save the PDF to your compliance folder the moment the ARN screen appears.

When to File a Fresh LUT Mid-Year

An LUT is valid for exactly one financial year. Three situations — beyond the routine 1 April renewal — require you to file a new one:

Change of authorised signatory. If the person who signed the existing LUT has resigned, been removed, or had their authorisation revoked, the LUT is considered signed by an unauthorised person from the date of the change. File a fresh LUT under the new signatory immediately after updating the GST portal.

Post-prosecution disqualification. If a prosecution is launched against your entity during the financial year, the existing LUT is invalidated. You must switch to the bond route before raising further export invoices — continuing to export under a voided LUT makes every subsequent export invoice a taxable supply without tax paid.

Significant change in business particulars. A change of GSTIN (due to restructuring), address, or business constitution may require fresh filings across GST documents including the LUT. Check with your GST consultant at the time of the change.

There is no provision to amend an LUT — if any detail is wrong, file a new one.

LUT vs. Running Bond: When You Have No Choice

For exporters who are disqualified from LUT due to prosecution, the only legal route is a running bond under Rule 96A(1).

A running bond requires:

• A bond executed on stamp paper in the prescribed format (different from RFD-11).
• A bank guarantee for an amount representing the estimated IGST — typically determined by the jurisdictional Commissioner.
• Physical submission to and acceptance by the jurisdictional GST officer, meaning processing time and a personal visit.

The bank guarantee ties up additional liquidity and the bank charges a guarantee commission (typically 1–2% per annum on the guaranteed amount), adding real financial cost. For a Rs. 1 crore annual export turnover at 18%, a 15% bank guarantee means Rs. 27 lakh locked in a guarantee facility.

For any eligible exporter, there is no rational case for preferring the bond route. The eligibility check — confirming no prosecution for Rs. 2.5 crore or more — is a one-time verification. If you are clean, file the LUT.

Key Takeaways

• File Form GST RFD-11 before your first export invoice of FY 2026-27. There is no grace period — invoices raised without a valid LUT carry full IGST liability unless you pay IGST and file for a refund.
• The legal basis is Section 16(3)(a) of the IGST Act 2017 read with Rule 96A of the CGST Rules 2017. Zero-rated supply without IGST is a conditional privilege, not an automatic right.
• Two hard deadlines run from every invoice date: goods must be exported within 90 days; foreign exchange for services must be received within 365 days. Missing either triggers IGST plus 18% p.a. interest from the invoice date under Section 50(1).
• Maintain an invoice-level tracking register — updated weekly — with export deadlines and actual completion dates. This is the only reliable early-warning system for impending breaches.
• Witness quality matters on inspection. Choose independent, identifiable individuals, obtain their signed declarations before filing, and keep those declarations in your physical compliance file indefinitely.
• Companies and LLPs must use DSC; EVC is not accepted. Verify your DSC token is active and in date before the filing session — a mid-form DSC error will force you to restart.
• Download the RFD-11 acknowledgement PDF the moment the ARN is generated. It is the document you quote on export invoices, present during departmental visits, and attach to refund claims throughout the year.