GST Letter of Undertaking (LUT)

For an Indian exporter, the Letter of Undertaking (LUT) in Form GST RFD-11 is the single most cash-flow-friendly instrument available under GST. It permits export of goods or services without payment of integrated tax — under Rule 96A of the IGST Rules read with Section 16 of the IGST Act, 2017 — eliminating the working-capital lock-up that the alternative route (Rule 96 — export with payment of IGST followed by refund) imposes. By 2026, LUT issuance is fully online, auto-approved for clean exporters within 1-3 working days of filing, and valid for the entire financial year. Yet a meaningful percentage of exporters either fail to file in time, lose track of expiry, or pick the wrong export route for their cash-flow profile.

Rule 96A allows two alternative routes for export: Route A — export under LUT (no IGST paid, ITC accumulated, refund of unutilised ITC under Rule 89 quarterly); Route B — export with payment of IGST (IGST paid from cash / ITC, refund of IGST automatically processed by Customs through the shipping bill itself under Rule 96). The choice is not binary forever — exporters can switch between routes invoice-wise, but the operational discipline differs. Route A (LUT) is preferred by most service exporters and clean goods exporters because the ITC refund cycle, while quarterly, avoids the IGST cash outflow upfront. Route B (with payment) works for exporters with limited ITC accumulation or those whose principal supply is duty-paid imports.

We file annual LUTs, manage the FY validity, advise route selection, and run Rule 89 / Rule 96 refund claims end-to-end.

LUT Eligibility & Auto-Approval

Eligible: Any registered exporter who has not been prosecuted under CGST / IGST / earlier law for tax evasion of ₹2.5 crore or more. The earlier requirements (specified turnover thresholds, payment of foreign currency) were removed by Notification 37/2017-CT — LUT is now widely available.

Auto-Approval: The portal-based LUT under Form RFD-11 is auto-approved for clean exporters within 1-3 working days. Where prosecution flag is raised, manual verification by the jurisdictional officer follows.

Validity: Full financial year (1 April to 31 March). Fresh LUT must be filed before 1 April for the next FY. Late filing means exports during the gap have to be on payment of IGST (Route B) or held back.

Rule 89 ITC Refund — The LUT Cash-Flow Closer

Exports under LUT accumulate unutilised ITC. Rule 89 of the CGST Rules permits refund of accumulated ITC on a quarterly basis, computed by the formula: (Turnover of zero-rated supply / Adjusted total turnover) × Net ITC. Refund application is Form GST RFD-01, supported by Statement 3 / 3A, FIRC / BRC, shipping bill, and reconciliation. Refund is processed within 60 days of filing under the statute; the practical timeline ranges from 30-120 days depending on jurisdiction. We run the quarterly refund cycle as a clockwork process so that LUT users don't see ITC balloon in the credit ledger.

LUT vs Payment-of-IGST Route — Choosing on Cash Flow

LUT (Rule 96A) preferred when: Service exports (low input ITC), goods exports with high ITC accumulation, exporters who want zero working capital lock-up on tax, exporters comfortable with quarterly Rule 89 refund cycle.

Payment-of-IGST (Rule 96) preferred when: Limited ITC accumulation, exporters who want refund automated by Customs (no separate RFD-01), exporters with capital goods imports where IGST credit is being used to discharge IGST on exports, exporters with high refund-rejection history at field level for ITC refunds.