GST Letter of Undertaking (LUT)

If your business exports goods or services — or supplies to a Special Economic Zone — you can ship without paying Integrated GST upfront, provided a Letter of Undertaking (LUT) is active on your GSTIN. That one document, filed annually in Form RFD-11 under Rule 96A of the IGST Rules 2017, is the difference between locking up working capital in IGST outflows and keeping that cash free for operations.

LUT is not complicated, but timing and the profile check matter. A gap between financial years, a prosecution flag in your records, or a wrong ARN on your shipping bills can stop your zero-rated exports cold. This service covers the annual RFD-11 filing, acceptance tracking, and the quarterly Rule 89 refund cycle — so your export cash flow stays intact throughout FY 2026-27.

At a Glance

• Who needs it: Any GST-registered exporter of goods or services, or supplier to SEZ units or developers, who wants to export without paying IGST upfront.
• Governing law: Section 16, IGST Act 2017; Rule 96A, IGST Rules 2017; Form RFD-11; Notification 37/2017-CT.
• Validity: 1 April 2026 to 31 March 2027 — covers FY 2026-27 only. A fresh LUT is required for each financial year.
• Eligibility bar: Not under prosecution for tax evasion of ₹2.5 crore or more. Bond with bank guarantee is the fallback where a prosecution flag exists.
• Turnaround: 1-3 working days for auto-approval on a clean profile; up to 7 days if the jurisdictional officer calls for manual verification.
• IGST saved: Full IGST on every export invoice — 18% on services, and 5% to 28% on goods depending on HSN classification.
• Alternative route: Rule 96 (pay IGST upfront, claim refund from Customs) — usable but ties up working capital for 60-120 days per cycle.

What's New for FY 2026-27

Several GST system changes in FY 2026-27 directly affect how LUT applications are processed and how Rule 89 refunds flow.

• IMS live from October 2025: The Invoice Management System (IMS) flags ITC mismatches in real time. A clean IMS dashboard signals to the jurisdictional officer that your export profile is reliable — this is meaningful when your application lands in manual verification.
• GSTR-1A introduced: Amendments to outward supply invoices now flow through GSTR-1A before the return locks for the period. Export invoice corrections — wrong invoice number, wrong currency, wrong HSN — must follow this path, not a direct GSTR-1 amendment.
• QRMP filers and IFF: Exporters on the Quarterly Return Monthly Payment (QRMP) scheme must report export invoices through the Invoice Furnishing Facility (IFF) each month. Skipping IFF delays the Rule 89 refund by a full quarter — a cash-flow cost that compounds quickly.
• E-invoicing threshold at ₹5 crore: If your aggregate annual turnover (AATO) exceeds ₹5 crore, every export invoice must carry an IRN generated through the Invoice Registration Portal (IRP). Customs rejects shipping bills where the IRN is missing or mismatched with the invoice.
• AIS and TIS cross-validation: Foreign remittance data from AD banks now feeds into the Annual Information Statement (AIS) and Tax Information Summary (TIS). BRC and FIRC reconciliation errors surface earlier — before they block the Rule 89 refund application.
• Form 10F for NRI and foreign entity exporters: Foreign companies and NRIs providing services under LUT must maintain a current Form 10F filing for AY 2027-28 to support withholding tax position on cross-border payments.

Who Needs a GST LUT

• Goods exporters: Any manufacturer or trading company exporting physical goods under shipping bills — LUT removes IGST from the export leg, keeping the full invoice value available as working capital rather than a refund receivable.
• Service exporters: IT companies, BPO firms, SaaS businesses, consultants, and designers billing foreign clients — LUT applies to every foreign-currency invoice raised during FY 2026-27.
• SEZ suppliers: Businesses supplying goods or services to SEZ units or developers are treated as zero-rated under Section 16(1)(b), IGST Act. LUT is typically better than the payment-plus-refund route for SEZ supply chains.
• E-commerce exporters: Sellers on Amazon Global, Shopify, or other cross-border platforms exporting directly to overseas customers — your cross-border shipments are zero-rated and covered under the same LUT.
• Startups and SaaS companies: Recurring SaaS subscriptions billed in USD, GBP, or EUR qualify as export of services under GST. One LUT covers all such invoices for the full financial year — no per-invoice tax outflow.
• Not applicable to deemed exports: Supplies to EOU, EPCG holders, or Advance Authorisation holders under Notification 48/2017-CT are deemed exports — IGST is paid and refunded under a separate notification. LUT does not extend to these transactions.

How It Actually Works

From eligibility check to quarterly refund, here is the complete sequence for FY 2026-27.

Step 1: Eligibility and Profile Check

Before touching the GST portal, we check prosecution status via your GSTIN profile, return-filing compliance (GSTR-1 and GSTR-3B must be current), ITC ledger balance, and export history. An exporter with a prosecution flag or pending returns goes into a different route — bond with bank guarantee rather than LUT. This check happens on the same day you engage, so there are no surprises at the filing stage.

Step 2: RFD-11 Drafting

Form RFD-11 carries your self-declaration that you will export within the stipulated time — three months from invoice date for goods, one year for services — and will pay IGST plus 18% interest if you do not. We prepare the declaration, collect two witness names with addresses from your side, and prepare the authorised signatory letter. Every field is reviewed before the form is uploaded to the GST portal.

Step 3: DSC Signing and ARN Generation

The form is signed using a Class-3 Digital Signature Certificate (DSC) of the authorised signatory registered on the GST portal. On submission, an Application Reference Number (ARN) is generated immediately. You can quote this ARN on export invoices from that point — you do not need to wait for the formal acceptance letter before raising the next export invoice.

Step 4: Auto-Approval or Jurisdictional Verification

Exporters with a clean compliance profile typically receive auto-approval within 24 to 72 hours — no officer involvement. Where the system flags the application for manual review, the jurisdictional GST officer may request clarifications. We track application status every working day and respond to any officer queries within one day to prevent the review from stalling.

Step 5: Acceptance Letter and Invoice Integration

Once accepted, the LUT acceptance letter — a PDF with ARN and validity period — is downloaded from the GST portal. This reference goes onto every export invoice and shipping bill for FY 2026-27 in the format required by Customs: 'Supply meant for export under LUT vide ARN [number] — no IGST payable.' ICEGATE cross-checks this reference before processing the shipping bill at the port.

Step 6: Quarterly Rule 89 Refund Cycle

With LUT in place, your zero-rated exports accumulate ITC on inputs without any IGST outflow. Each quarter, we file RFD-01 under Rule 89 of CGST Rules with Statement 3/3A, Bank Realisation Certificates (BRC), Foreign Inward Remittance Certificates (FIRC), and shipping bill details. The refund formula: (Zero-rated turnover / Adjusted total turnover) × Net ITC. Statute requires the refund to be processed within 60 days of a complete application.

Step 7: Annual Renewal in March

The FY 2026-27 LUT is valid only until 31 March 2027. We file the fresh LUT for FY 2027-28 in late March so there is no gap day on 1 April where exports default to the IGST-payment route. Export invoice templates and shipping bill references are updated with the new ARN simultaneously, before your first April shipment goes out.

A Real Example: SaaS Startup, FY 2026-27

A Pune-based SaaS company bills USD 15,000 per month to 12 US-based clients — approximately ₹1.5 crore in foreign currency receipts for the year. Their GST profile: 18% on software services; ITC on cloud hosting, software licences, and office expenses accumulates each month.

• Without LUT: 18% IGST paid on every invoice = ₹27 lakh tied up annually. Refund under Rule 96 from Customs: 60-120 days per batch. A significant working-capital cost on the float.
• With LUT: Zero IGST outflow on every invoice. ITC on inputs accumulates in the credit ledger. Quarterly RFD-01 refund under Rule 89: approximately ₹6-8 lakh recovered per quarter.
• Reconciliation required: FIRC from the AD bank, EDPMS realisation confirmation, and GSTR-1 export invoice entries must all match before the refund is processed. We run this reconciliation before each quarterly RFD-01 filing.
• Net result: ₹27 lakh freed from IGST outflow; quarterly recovery of accumulated ITC; a working-capital position materially better than the Rule 96 alternative.

The LUT filing cost is recovered entirely from the first month's IGST saving. The ongoing value is the quarterly refund cycle keeping the ITC ledger clean rather than accumulating to a level that attracts officer scrutiny.

Annual Compliance: Keeping the LUT Active

An accepted LUT is not a set-and-forget document. Four ongoing obligations run through the entire financial year and must be tracked alongside the quarterly refund cycle.

• Export realisation deadline: Goods must be physically exported within 3 months of invoice date; services revenue must be realised in foreign exchange within 1 year. Miss either deadline and IGST becomes payable on that invoice with 18% interest under Section 50, CGST Act — from the original invoice date.
• GSTR-1 and GSTR-3B flagging: Every export invoice must be marked zero-rated in GSTR-1 (IGST = 0, LUT = yes). GSTR-3B Table 3.1(b) must capture zero-rated turnover correctly. A mismatch between GSTR-1, GSTR-3B, and the shipping bill at ICEGATE is the most common reason Rule 89 refunds are rejected.
• BRC and FIRC tracking: Each export invoice must eventually be matched to a Bank Realisation Certificate (BRC) or Foreign Inward Remittance Certificate (FIRC) from your Authorised Dealer (AD) bank, confirmed in EDPMS. Gaps accumulate silently and surface only when a refund application is filed — at which point the entire quarter's claim may be held back.
• Annual renewal before 1 April: File the FY 2027-28 LUT before 1 April 2027. Any gap between the old LUT expiry and new LUT acceptance creates a period where exports must either be held or made under Rule 96 with IGST payment — reversing the working-capital benefit for those shipments.

LUT compliance is a year-round discipline, not a one-time filing. The quarterly Rule 89 refund cycle is where most exporters either recover money efficiently or lose it to processing delays caused by earlier documentation gaps.

Where It Goes Wrong: Common LUT Mistakes

These are the recurring errors that delay Rule 89 refunds, create unexpected IGST liability, or cause Customs to flag shipping bills at the port.

• Filing LUT after 1 April: Exporters who file in April instead of March face a gap period. Any shipment dispatched before the new LUT is accepted must be processed under Rule 96 with IGST payment — creating a separate refund claim for those specific invoices that could have been avoided.
• Skipping the prosecution check: If a prosecution is registered — even for a different GSTIN within the same group — the LUT application may be rejected on filing. A rejected application wastes time and triggers the bond-plus-bank-guarantee requirement. Checking first costs nothing.
• Wrong GSTR-1 export flags: Export invoices tagged as 'with IGST' in GSTR-1 while being shipped under LUT create a mismatch that Customs cannot resolve automatically. The shipping bill fails to match the return, and Rule 89 refunds stall until a GSTR-1A amendment is filed and the next return cycle completes.
• IEC not linked to GSTIN: Goods exporters need an Import Export Code (IEC) linked to the correct GSTIN in the system. If the IEC is in the proprietor's name but the GSTIN belongs to a Pvt Ltd entity, ICEGATE rejects the shipping bill — exports are held at the port until the linkage is corrected.
• BRC delay beyond RBI deadline: Foreign exchange realisation for goods must typically occur within 9 months of shipment (extendable by the AD bank with RBI approval). If BRC is not submitted within this window, both the RFD-01 refund and the next LUT renewal are affected.
• QRMP filers skipping IFF: Quarterly filers who miss the monthly Invoice Furnishing Facility for export invoices find Rule 89 refunds delayed by a full quarter — a recurring cash-flow penalty that compounds over a year if the pattern continues.
• Using the previous year's ARN: Quoting a FY 2025-26 LUT ARN on an April 2026 invoice is a documentation error. Customs flags it during shipping bill processing, holds the clearance, and the associated refund is blocked until the invoice reference is corrected through the amendment route.
• DSC mismatch on RFD-11: The DSC used to sign Form RFD-11 must belong to the authorised signatory currently on record at the GST portal. A recently changed signatory whose DSC hasn't been updated on the portal causes submission failure at the final step — after all documents are already prepared.

What You Receive at the End

• LUT acceptance letter (PDF) with valid ARN and FY 2026-27 validity dates for your records
• Invoice wording template for export invoices and shipping bills referencing the LUT ARN in the Customs-required format
• Guidance on correct GSTR-1 and GSTR-3B flagging for zero-rated supplies under LUT
• Quarterly RFD-01 refund filing — Statement 3/3A, BRC and FIRC reconciliation, ITC formula computation
• EDPMS realisation tracking report matched invoice-wise each quarter
• Rule 89 refund formula computation with ITC ledger reconciliation
• Rejection appeal support under Section 107, CGST Act where a refund application is denied
• FY 2027-28 LUT renewal reminder and filing in late March 2027
• Compliance calendar for export realisation deadlines and BRC submission windows through FY 2026-27

How to Get Started

Share your GSTIN, PAN, IEC, and the name and designation of the authorised signatory. We run the eligibility check the same day and confirm whether you qualify for LUT or whether bond with bank guarantee is the required route. If LUT is the right path, we send a short checklist — Class-3 DSC of the signatory, two witness names with addresses, and the authorised signatory letter — and file RFD-11 within 24 to 48 hours of receiving the documents.

FY 2026-27 is already underway. Every export invoice raised without a valid LUT creates either an IGST payable position or a documentation gap that must be closed before the Rule 89 refund can be filed. Getting the LUT in place before your next export shipment eliminates both risks and keeps the quarterly refund cycle on track from the start of the year.