What is an LUT and Why Exporters Need It
A Letter of Undertaking (LUT) is a declaration made by a GST-registered exporter that they undertake to fulfil the conditions for zero-rated supply — primarily that the proceeds from the export will be realised within the prescribed time (one year for goods export, goods shipped out within 3 months of LUT filing for the first export). By filing an LUT, the exporter commits to export compliance standards, and in return is permitted to export without paying Integrated GST (IGST) on the export invoice.nnWithout an LUT, an exporter has two options for zero-rated exports: either pay IGST at the applicable rate on the export invoice and then apply for a refund of the IGST paid, or file an LUT and export without paying IGST at all. The LUT route is almost universally preferred because it avoids the cash flow cost of paying IGST upfront and waiting months for a refund. For exporters with large volumes — IT companies, manufacturers, and service exporters — not having an LUT means blocking crores in IGST payment pending refund, which severely impacts working capital.nnThe LUT mechanism is available for all types of zero-rated supplies: export of goods (physical shipment outside India), export of services (services rendered to a person outside India with payment received in convertible foreign exchange), and supplies to Special Economic Zone (SEZ) units and developers. Each of these categories benefits from the LUT facility, allowing the supplier to issue a zero-tax invoice and claim refund of accumulated ITC on inputs without the intermediate step of IGST payment.
Who Can File LUT — Eligibility and Exclusions
The LUT facility is available to any registered person making zero-rated supplies (exports or SEZ supplies) under the GST law. There is no minimum turnover requirement — even a small exporter making their first shipment abroad can file an LUT before the first export.nnHowever, there is an important exclusion: exporters who have been prosecuted for or convicted of an offence under the CGST Act, IGST Act, or any earlier tax law (Central Excise, Service Tax, Customs) for an amount above Rs.2.5 crore are not eligible to file an LUT. Such exporters must use the alternative route of paying IGST and claiming a refund. This restriction is designed to prevent exporters with a history of tax fraud from using the simplified LUT route.nnFor businesses with multiple GST registrations (multiple state GSTINs), a separate LUT must be filed for each GSTIN. An LUT filed for the GSTIN of the Maharashtra office does not cover exports made from the Karnataka office's GSTIN — each registration requires its own annual LUT. Large companies with pan-India registrations must therefore file multiple LUT applications at the start of each financial year. The LUT is filed online through each respective GSTIN's GST portal login.
How to File LUT in Form RFD-11 — Step-by-Step
Filing the LUT is a quick online process on the GST portal that typically takes 10 to 15 minutes. Step 1: Log in to the GST portal at gst.gov.in using the GSTIN and password. Step 2: Navigate to Services then User Services then Furnish Letter of Undertaking (LUT). Step 3: Select the financial year for which the LUT is being filed — for FY 2025-26, select 2025-26. Step 4: The form auto-populates with the GSTIN details, legal name, and trade name. Step 5: Select the LUT type — the only option for most businesses is Annual LUT.nnStep 6: Provide details of two witnesses — name, address, and occupation of two persons who will witness the LUT declaration. Witnesses can be employees, CA, or any two responsible persons associated with the business. Step 7: The authorised signatory must check all the declarations in Form RFD-11 — the key undertaking is that export proceeds will be realised within one year from the date of export invoice and that the exported goods will be shipped out within 3 months of LUT filing (for the first export after LUT). Step 8: Submit the form using DSC (for companies and LLPs) or EVC (OTP for others). Step 9: The LUT is acknowledged on the portal with an ARN (Application Reference Number). Download and save the LUT acknowledgement.nnThe LUT is valid from the date of filing until 31 March of the financial year (or 31 March 2026 for an LUT filed in April 2025). There is no approval process — the LUT is deemed accepted on filing and is immediately valid for all subsequent export transactions under that GSTIN.
ITC Refund for Exporters Under LUT
One of the primary financial benefits of the LUT framework is the entitlement to claim a refund of accumulated ITC on inputs used in zero-rated supplies. When an exporter makes exports without IGST payment (using LUT), all the GST paid on input goods, input services, and capital goods used in producing or providing those exports accumulates as an ITC credit that cannot be utilized against domestic output tax (since the output is zero-rated). This accumulated ITC is refundable to the exporter.nnThe ITC refund for LUT-based exporters is claimed through Form RFD-01 filed on the GST portal. The refund formula is a proportionate ITC refund based on the ratio of export turnover to total turnover: Refund = (Export Turnover / Total Turnover) × Net ITC for the period. For dedicated exporters with 100% export turnover, the entire ITC balance from the period is refundable. For mixed exporters, the proportionate refund applies.nnFor service exporters — IT companies, BPO firms, consulting firms exporting services — the LUT combined with ITC refund is particularly impactful. A software development company paying 18% GST on office rent, IT infrastructure, professional services, and other inputs but making all its revenue from foreign clients under LUT would otherwise have massive ITC accumulations with no domestic output tax to set them off. The ITC refund mechanism ensures this embedded tax cost is returned, keeping the effective GST burden on pure exporters at or near zero.
| Exporter Type | LUT Required? | ITC Refund Route | Refund Time |
|---|---|---|---|
| Goods exporter — 100% export | Yes — before first shipment | Form RFD-01 for accumulated ITC | Typically 60-90 days |
| Service exporter — 100% export | Yes — before first service invoice | Form RFD-01 proportionate ITC | Typically 60-90 days |
| Mixed exporter (domestic + export) | Yes — for export portion | Proportionate ITC refund formula | 60-90 days per application |
| SEZ supplier | Yes — covers SEZ supplies too | ITC refund on SEZ portion | 60-90 days |
| Exporter without LUT | Not filed — alternative route | IGST paid upfront, then RFD-01 for IGST refund | 60-90 days from IGST payment |
Consequences of Exporting Without LUT or Bond
Exporting without either an LUT or a bond (the alternative secured mechanism for exporters who cannot file LUT due to prosecution history) constitutes a supply without proper zero-rated documentation. The GST officer can treat such exports as taxable at the standard rate — the exporter is liable to pay IGST on the export value since neither the LUT nor the bond condition is satisfied.nnIn practice, many exporters — particularly small IT companies and service exporters — are unaware of the LUT requirement and invoice foreign clients without any GST documentation, assuming exports are automatically exempt. This is incorrect: exports are zero-rated only when proper procedure is followed. The zero-rated status requires either LUT filing (and then invoice without IGST) or IGST payment followed by refund claim. Without LUT, the export invoice should technically carry IGST — and not charging it means the exporter has made a zero-rated supply without following the prescribed route.nnThe good news is that enforcement against service exporters who missed LUT filing is less aggressive than for goods exporters (where customs documentation and shipping bills provide a clear audit trail). However, businesses should not rely on enforcement leniency — filing LUT annually is a simple, free, 15-minute process that protects the entire year's export revenue from potential GST demands. For businesses that have been exporting without LUT for prior years and are now aware of the requirement, filing LUT prospectively and consulting a CA about regularising the past position is the recommended course of action.
