LUT Under GST — Letter of Undertaking for Export Without Tax Payment

LUT Under GST — Letter of Undertaking for Export Without Tax Payment

Under Rule 96A of the CGST Rules, 2017 read with Section 16 of the IGST Act, 2017, a Letter of Undertaking (LUT) lets you export goods or services — or supply to an SEZ unit or developer — without charging or depositing IGST. You file it once per financial year on the GST portal, and it becomes valid the moment the system generates an ARN. For FY 2026-27 (April 2026 to March 2027), every eligible exporter who has not yet filed should do so today — any export invoice raised without a live LUT forces you back into the pay-first-then-refund cycle and locks up cash unnecessarily.

Why the LUT Exists: The Legal Architecture

Section 16(1) of the IGST Act, 2017 classifies exports of goods or services and supplies to SEZ units and SEZ developers as zero-rated supplies. Zero-rated does not simply mean the rate is zero — it means the exporter has two operationally distinct choices:

• Option A (LUT route): Export without paying IGST and claim a refund of accumulated, unutilised ITC under Rule 89(4).
• Option B (Tax-first route): Export after paying IGST at the applicable rate and claim a cash refund of that IGST under Rule 96.

Rule 96A of the CGST Rules, 2017 governs the mechanics of Option A — who can file an LUT, what conditions attach to it, and what happens when those conditions are breached.

The LUT replaces the pre-GST export under bond mechanism and, critically, eliminates the need for a bank guarantee in almost all cases. It is a self-declaration: "I will export within the prescribed time, realise foreign exchange within the prescribed time, and if I fail, I will pay the IGST with interest." That single page of undertaking unlocks zero-tax exports for an entire financial year.

Who Can File an LUT — and One Critical Exclusion

Eligible Persons

Any registered taxpayer under GST is eligible to file an LUT if they intend to:

1. Export goods outside India
2. Export services outside India — payment receivable in convertible foreign exchange, or in INR where permitted by the Reserve Bank of India
3. Supply goods or services to an SEZ unit or SEZ developer for authorised operations

The scope is deliberately broad. A Pune-based SaaS startup billing a German client, a Tirupur garment exporter, a Hyderabad ITES company with a US contract — all qualify, as long as they hold an active GST registration.

The Disqualification You Cannot Ignore

Rule 96A draws a hard line: if you have been prosecuted for any offence under the CGST Act, the IGST Act, or any erstwhile indirect tax law (Central Excise, Service Tax, Customs) in a case where the tax evaded exceeds Rs. 2.5 crore, you cannot file an LUT. You must instead furnish a bond with a bank guarantee.

The GST portal does not run a live prosecution check at filing — this is a self-declaration. Filing an LUT when you are ineligible is itself a legal irregularity. If your company has any unresolved litigation from the pre-GST era involving large tax demands, verify the prosecution status with your legal counsel before ticking the eligibility box.

The Real Cost of Not Having a Live LUT: A Worked Example

Scenario: Mumbai-based engineering consultancy, Astra Advisory Pvt Ltd, exports design services to a UAE client. Monthly invoice value: Rs. 28 lakh. GST rate on these services: 18%.

Without LUT — exporting with IGST payment:

With LUT:

Over a full year, the LUT preserves over Rs. 60 lakh in usable cash. Even if Astra earns only 7.5% per annum on short-term liquid funds, that translates to a Rs. 4.5 lakh annualised gain — just from not getting into the refund queue. The LUT filing itself takes under 20 minutes and costs nothing.

This arithmetic applies equally to a small export house shipping Rs. 5 lakh per month: the IGST locked per month at 12% is Rs. 60,000, or Rs. 7.2 lakh annually. The LUT is the single highest-return administrative task available to an Indian exporter.

Step-by-Step: Filing Your LUT on the GST Portal in FY 2026-27

Portal path: gst.gov.in → Services → User Services → Furnish Letter of Undertaking (LUT)

Pre-Filing Checklist

Before you open the portal, keep the following on your desk:

• [ ] GSTIN login credentials + active OTP-linked mobile/email
• [ ] DSC USB token (Class 3) if you are a company or LLP — this is mandatory, not optional
• [ ] Details of two independent witnesses: full name, residential address, and identity document type + number (Aadhaar, PAN, or Passport)
• [ ] Previous year's LUT ARN (not mandatory to renew, but useful for reference)
• [ ] Authorisation letter or board resolution if the person filing is not the primary authorised signatory on GST

Filing Sequence

1. Log in to gst.gov.in with your GSTIN and password.

1. Navigate to Services → User Services → Furnish Letter of Undertaking (LUT). If the option is absent, confirm that your GST registration status is "Active" — suspended or cancelled GSTINs cannot file.

1. Select financial year 2026-27. The form (internally mapped to GST RFD-11) auto-populates your legal name, trade name, GSTIN, and registered address. Verify these before proceeding.

1. Enter witness details for both persons. The witnesses must be independent — not employees or family members of the proprietor/directors. Capture their full name, father's name, address, and ID proof reference.

1. Check the self-declaration boxes: You are declaring that (a) you have not been prosecuted for tax evasion above Rs. 2.5 crore, (b) you will export/supply to SEZ within the prescribed time, (c) you will realise foreign exchange in the prescribed period, and (d) any default will attract IGST plus interest.

1. Sign the form:
2. Companies and LLPs: Connect the Class 3 DSC USB token, click "Sign", and select the correct certificate when the system prompts.
3. Proprietorships, registered partnership firms, and other taxpayers: Use EVC — a one-time password dispatched to the mobile number and email address registered on the GST portal.

1. Click Submit. The portal generates an ARN instantaneously. This ARN is your proof of filing.

1. Download and save the acknowledgement immediately. Share a copy with your freight forwarder, logistics team, and the person who prepares export invoices — they need to reference the LUT number on the shipping bill.

Is Acceptance Automatic?

Yes, in the standard flow. CBIC administrative guidance treats LUT acceptance as deemed upon ARN generation, unless the jurisdictional officer raises a query in your GST inbox (Notices/Communications section). In practice, renewals for exporters with a clean compliance record sail through without any officer involvement.

A first-time LUT filing or a filing flagged by the risk engine may attract a query. If you receive one, respond within the timeframe stated in the notice and attach supporting documents: export invoices from the previous year, AD bank statements confirming foreign exchange receipts, or a CA certificate confirming eligibility.

Validity, Renewal Deadlines, and the Cost of a Lapsed LUT

Annual Validity Window

An LUT is valid from the date of ARN generation (or 1 April of the financial year, if filed earlier) to 31 March of that year. It does not roll over automatically.

For FY 2026-27: The LUT should have been filed on or before 31 March 2026. If you are reading this in May 2026 and have not yet filed, file immediately — every export invoice raised after 1 April 2026 without a live LUT carries a technical IGST liability.

CBIC circulars have given officers discretion to condone short gaps in genuine cases, but relying on this is inadvisable. Make LUT renewal a 31 March calendar entry, the same way you would treat an advance tax deadline.

What Happens When Conditions Are Breached

The LUT comes with two hard realisation deadlines:

• Goods exports: The goods must be exported within 3 months from the date of issue of the export invoice (or such extended period as the Commissioner allows).
• Services exports: Payment must be received in convertible foreign exchange or in permitted INR within one year from the date of invoice.

If you miss these deadlines, Rule 96A(1) requires you to pay the IGST that would have been due, plus interest at 18% per annum under Section 50(1) of the CGST Act, calculated from the day after the deadline expires.

Penalty worked example — missed realisation:

Goods exported 1 June 2026 under LUT. Invoice value Rs. 15 lakh. IGST applicable: 12% = Rs. 1,80,000. Export proceeds due by 1 September 2026. Payment actually received 1 December 2026 (91 days late).

• IGST payable: Rs. 1,80,000
• Interest: Rs. 1,80,000 × 18% × 91/365 = Rs. 8,060
• Total outflow: Rs. 1,88,060 — on a single invoice

Scale this across five or ten invoices and a disorganised BRC/FIRC tracker and the exposure becomes material. The LUT's benefit evaporates entirely if realisation deadlines are missed.

Persistent breach can also result in the LUT facility being withdrawn and future applications requiring a bond with bank guarantee — far more cumbersome and capital-intensive.

SEZ Supplies Under LUT: The Angle Most Exporters Miss

The majority of exporters associate LUT exclusively with overseas exports. But Section 16(1)(b) of the IGST Act equally classifies supplies to an SEZ unit or SEZ developer for authorised operations as zero-rated. Your single LUT for FY 2026-27 covers both overseas exports and SEZ supplies.

If your company supplies software, consulting services, or manufactured inputs to an SEZ-based buyer in GIFT City, Kandla, or MEPZ, you can invoice without IGST under the same LUT.

What to check before invoicing an SEZ buyer without IGST:

• The buyer must be an SEZ unit or SEZ developer (not merely located near an SEZ).
• The supply must be for authorised operations as defined in the SEZ's letter of approval.
• Obtain a copy of the buyer's SEZ letter of approval and keep it on file.
• The buyer must provide an endorsement that the goods/services are for authorised operations — typically a letter or purchase order clause.

Supplies for non-authorised operations within an SEZ are taxable at normal rates; zero-rating does not apply.

Reporting LUT Exports Correctly in GSTR-1 and GSTR-3B

Correct portal reporting is where many exporters create silent compliance gaps that surface only at the time of ITC refund claims or departmental scrutiny.

In GSTR-1

• Table 6B: Report all exports of goods or services without IGST payment (i.e., under LUT or bond). Enter the shipping bill number and date for goods exports.
• Table 6A: Use this only for exports made with IGST payment (Option B route).
• SEZ supplies without IGST also go into Table 6B, with the "Supply to SEZ with/without payment" flag set appropriately.

ICEGATE feeds shipping bill data directly into the GST portal. If the FOB value on your shipping bill differs from the invoice value in GSTR-1 without a documented reason (such as a freight deduction), expect an auto-generated scrutiny notice (ASMT-10).

In GSTR-3B

Report LUT-based zero-rated turnover in Table 3.1(b): "Outward taxable supplies (zero rated)" — with IGST, CGST, and SGST columns all at zero. Do not leave this blank while reporting export turnover in GSTR-1; the mismatch triggers automated flags.

Claiming Your ITC Refund

When you export under LUT, your output IGST liability is zero but you continue to accumulate ITC on inputs, input services, and capital goods. You are entitled to a refund of unutilised ITC under Rule 89(4) of the CGST Rules.

File Form GST RFD-01 on the portal. The refund must be claimed within two years from the "relevant date" — which is the date of shipment for goods and the date of receipt of payment for services. This deadline is absolute. Review your accumulated ITC balances from FY 2024-25 immediately to confirm you are within time.

Common Mistakes That Get Exporters into Trouble

Raising the First Export Invoice Before Filing the LUT

Any invoice raised before the LUT ARN is generated is technically an export without the required undertaking, making IGST chargeable. Retroactive regularisation exists as an officer's discretion, not a right. File before the first invoice of the new financial year.

Using Non-Independent Witnesses

The portal does not validate witness independence at filing, but a later audit will. Employees, spouse, or directors of the same company do not qualify as independent witnesses. Use professionals, neighbours, or other unconnected individuals.

FOB-Invoice Value Mismatches

Your GSTR-1 invoice value and the FOB value on the shipping bill must reconcile. If your freight agent deducts a commission before customs, document this in writing. Unexplained differences generate ASMT-10 scrutiny notices automatically.

No BRC/FIRC Tracker Against Export Invoices

Most realisation defaults happen not from dishonesty but from disorganisation. Maintain a simple spreadsheet tracking invoice date, realisation deadline, bank reference (BRC for goods, FIRC for services), and date of receipt. Review it monthly.

Treating LUT as Covering Only Overseas Exports

If you bill SEZ customers without IGST but have not referenced your LUT, you are operating without documentation. The LUT covers SEZ supplies — ensure your invoices to SEZ buyers reference your LUT number and financial year.

Letting the ITC Refund Clock Run Out

Two years moves faster than it appears. ITC accumulated on FY 2024-25 export invoices may be approaching its refund deadline. Run a ledger check now and file RFD-01 for any unclaimed balances before the window closes.

Key Takeaways

• An LUT filed under Rule 96A of the CGST Rules, 2017 enables zero-rated export of goods, services, and SEZ supplies without depositing IGST — preserving the working capital that would otherwise be stuck in a 30–60 day refund cycle.
• Any GST-registered exporter qualifies, except those prosecuted for tax evasion exceeding Rs. 2.5 crore, who must instead file a bond with a bank guarantee.
• Filing is done on gst.gov.in (Services → User Services → Furnish Letter of Undertaking), costs nothing, and generates an ARN immediately — companies and LLPs must use a Class 3 DSC; others may use EVC.
• For FY 2026-27, file the LUT before 1 April 2026 (or right now if you have not yet done so); exports made without a live LUT carry a technical IGST liability.
• Realisation deadlines are 3 months for goods and 1 year for services from the invoice date; breach triggers IGST plus 18% per annum interest under Section 50(1) of the CGST Act.
• Report LUT-based exports in GSTR-1 Table 6B and GSTR-3B Table 3.1(b); reconcile FOB values against shipping bills every month to prevent ASMT-10 scrutiny notices.
• File Form GST RFD-01 for unutilised ITC refunds within two years of the relevant date — track this deadline proactively; it does not pause or extend.