GST Letter of Undertaking (LUT)

If you export goods or services—or supply to a Special Economic Zone—you can invoice zero-rated GST under the Letter of Undertaking (LUT) route. Your buyer receives zero-rated invoice immediately. You refund accumulated input tax quarterly under Rule 89. But filing wrong or missing the FEMA realisation window can trap you in IGST recovery, 18% interest, and reinstatement delays. Legal Suvidha handles RFD-11 filing before 1 April, FEMA tracking for every consignment, and quarterly Rule 89 ITC refunds.

The LUT is not a once-a-year task. It's a 12-month compliance rhythm anchored to quarterly refund windows, monthly FEMA realisation tracking, and prompt reinstatement if withdrawn. We manage all three, so your zero-rated supply never breaks and your cash-flow stays intact from day one.

At a Glance

• Who needs it: Exporters of goods and services, SEZ suppliers, and deemed export operations under Rule 96A.
• Governing law: Rule 96A (Letter of Undertaking), Form RFD-11, and Rule 89 ITC refund under CGST Rules 2017.
• LUT in force from: Date of RFD-11 filing on GST portal. Best practice: file before 1 April for full FY coverage.
• Export zero-rating: No IGST charged on export invoice. Buyer receives zero-rated invoice under Section 16(1)(c).
• ITC refund route: Quarterly Rule 89 refund of accumulated input tax, with 90% provisional refund within 7 days.
• FEMA realisation window: 9 months from date of export, with possible AD-bank extension. Non-realisation triggers automatic LUT withdrawal.
• Non-eligible class: Persons prosecuted for tax evasion involving ₹2.5 crore or more; with FEMA realisation defaults.

What's New for FY 2026-27

GST LUT compliance has evolved with the introduction of new e-invoicing requirements, real-time ITC validation, and mandatory export-to-shipping-bill reconciliation. Here are the key changes.

• GSTR-1A export matching mandatory: New GSTR-1A introduced for FY 2026-27. Export invoices must precisely match shipping bill details, FOB values, and buyer codes in real-time for LUT to remain valid.
• E-invoice IRN embedded in LUT: All export invoices (₹5 crore threshold) must have IRN embedded. LUT reference number must be cited in the e-invoice line-item details.
• Rule 89 refund validated against ITC ledger live: IMS (Invoice Management System) now validates ITC availability in real-time against GSTR-1B. Flagged mismatches delay Rule 89 refund acknowledgement by 15-30 days.
• FEMA tracking integrated with GST portal: AD-bank realisation tracking now available through GST portal dashboard. No separate offline request for extension—coordinate digitally.
• GSTR-9 and LUT reconciliation critical: Year-end GSTR-9 annual return (due 31 December) must reconcile all exports filed under LUT against all Rule 89 refunds claimed. Any gap blocks next-FY LUT filing.

Why LUT for Your Exports

• Zero IGST invoice from day one: Under Rule 96A, your buyer receives zero-rated invoice immediately. No IGST payment, no post-supply invoice correction or buyer push-back.
• Quarterly ITC refund, not blocked input: Unlike Rule 96 export-with-payment (where IGST is paid and later refunded), LUT preserves ITC as a refund asset from invoice date.
• No IGST working capital lock-up: When using Rule 96, you pay IGST upfront and wait for shipping-bill refund match. With LUT, zero IGST is due—no cash outflow at all.
• Automatic refund route under Rule 89: Accumulated ITC on inputs and input services is refunded quarterly in a formula-driven process. Not a discretionary assessment—predictable cash-flow.
• FEMA realisation flexibility: 9-month FEMA window means you manage currency exposure and repatriation timing without immediate tax impact or forced early collection.
• One LUT covers the entire FY: File RFD-11 once before 1 April. All exports from 1 April to 31 March qualify for zero-rating without repeat filing or compliance resets.

How It Actually Works

The LUT process is six linked steps: eligibility validation, RFD-11 filing, portal integration, monthly FEMA tracking, quarterly refund claims, and year-end renewal. Here's the sequence.

Step 1: Eligibility Check & Route Selection (1-2 Days)

We review your registration history, past GST filings, and FEMA conduct. We check if you've been prosecuted for tax evasion ₹2.5 crore or above (disqualifying). We pull your GSTR-1 and GSTR-3B for the last 12 months to ensure no red flags in export reporting or ITC claims. Finally, we model two cash-flow scenarios: LUT + Rule 89 quarterly refund, versus Rule 96 export-with-payment + shipping-bill refund. We pick the route that optimizes your cash-flow and meets your buyer's zero-rating requirements.

Step 2: RFD-11 Drafting with Witness Coordination (1 Day)

RFD-11 is a short undertaking form that you declare under Rule 96A. We draft the text with your GSTIN, IEC (Importer-Exporter Code), and business details. We identify two witnesses—typically your directors or authorised signatories—and collect their PAN, Aadhaar, and DSC (Digital Signature Certificate) details. We obtain a board resolution or partnership deed confirming authority. All documents are organized and ready for filing.

Step 3: RFD-11 Filing on GST Portal (Same Day)

Your authorised signatory logs into the GST portal, navigates to the RFD module, and uploads the RFD-11 undertaking text. The form is signed using the signatory's DSC or EVC (electronic verification code). The portal generates an ARN (Acknowledgement Reference Number) and acknowledgement receipt. We capture the ARN, print the receipt, and maintain it as your official LUT document for the FY.

Step 4: LUT Integration into Invoice & Export Flow (1 Day)

Your sales team receives the LUT reference number (ARN) and updates all export invoicing templates. Every export invoice cites the LUT ARN in the notes field. For e-invoices, the IRN (Invoice Reference Number) is generated with the LUT ARN embedded. Shipping bills, GSTR-1 export schedules, and customs documentation all reference the same LUT ARN—so the export is traceable end-to-end.

Step 5: Quarterly Rule 89 Refund Filing (Ongoing)

At the end of each quarter (30 June, 30 September, 31 December, 31 March), we compute your refund entitlement using the Rule 89 formula: (Zero-Rated Turnover × Net ITC) ÷ Adjusted Total Turnover. We prepare Form GST RFD-01 with supporting schedules from your GSTR-1, GSTR-3B, and ITC ledger. We file RFD-01 on the GST portal. Within 7 days, 90% provisional refund hits your bank. Within 60 days, the remaining balance is credited.

Step 6: FEMA Realisation Tracking & Year-End Renewal (Ongoing)

We track each export's FEMA realisation status monthly using the RBI 9-month window from export date. We pull your eBRC (Electronic Bank Realisation Certificate) and FIRC (Foreign Inward Remittance Certificate) from your AD bank monthly. At-risk consignments—those nearing the 9-month deadline—are flagged 30 days in advance. We coordinate with your AD bank for extension if needed. Before 31 March, we prepare next-FY RFD-11 and file it before 1 April, ensuring zero gap in LUT coverage.

A Real Example: Zero-Rated Export with LUT & Rule 89 Refund

Let's walk through a concrete export scenario using the LUT route versus export-with-payment, so you can see the cash-flow and timeline difference.

• Exporter profile: ABC Exports Pvt Ltd, ₹50 crore annual turnover, 40% from exports, registered for GST since FY 2023-24.
• Export transaction: Export of ₹10 lakh apparels FOB Singapore on 15 May 2026. Buyer requires zero-rated invoice. Input ITC available: ₹1.5 lakh (15% effective).
• LUT approach (Rule 96A): LUT filed 31 March 2026. Invoice dated 15 May 2026 with zero IGST. ITC flows to refund ledger. FEMA realised 20 July 2026 (within 9 months). Q1 Rule 89 RFD-01 filed 30 June: ₹1.5 lakh refund claimed. 90% (₹1.35 lakh) in bank by 7 July; balance 25 July.
• Rule 96 approach (export-with-payment): Invoice dated 15 May 2026 with IGST of ₹1.8 lakh (18% on ₹10 lakh). Shipping bill filed 25 May. Bank holds ₹1.8 lakh as tax. Refund on shipping-bill match filed 30 June. 90% refund (₹1.62 lakh) in bank by 15 July. Delay: 8 additional days.
• Cash-flow comparison: LUT saves ₹1.8 lakh working capital and refund cycles faster (7 days vs 15 days). Rule 96 refund is automatic on shipping-bill match, whereas Rule 89 requires quarterly filing discipline and real-time ITC validation.

For high-ITC exporters with monthly export cycles, LUT's quarterly refund discipline saves significant working capital. For sporadic exporters, Rule 96's automatic shipping-bill refund may be simpler, though working capital is locked temporarily.

Annual Compliance & Post-Refund Tracking

After your RFD-11 is filed and refunds are rolling in, three ongoing compliance tasks keep your LUT alive and refund-ready throughout the FY.

• Monthly FEMA realisation tracking: Pull eBRC and FIRC from AD bank by the 5th of each month. Verify each export's realisation status against the 9-month FEMA window. Flag any non-realised or at-risk consignments. If the 9-month deadline crosses without realisation, LUT is automatically withdrawn on that date.
• Quarterly GSTR-1A reconciliation: After filing GSTR-1 and GSTR-3B each month, review the new GSTR-1A (export schedule reconciliation report). Ensure export invoices match shipping bills, IEC codes, and FOB values line-by-line. Mismatches in GSTR-1A delay the next quarter's Rule 89 refund acknowledgement.
• Rule 89 RFD-01 filing discipline: Don't wait until Q2 to file Q1 refund. File RFD-01 by the last date of the current quarter (30 June, 30 Sept, 31 Dec, 31 March). This keeps refunds flowing and prevents ITC from accumulating as a credit for 12 months.
• Year-end GSTR-9 reconciliation: GSTR-9 annual return (due 31 December) must reconcile all exports filed under LUT in GSTR-1 against all Rule 89 refunds claimed in RFD-01. Any gap is flagged by the system and delays next-FY LUT filing.
• Next-FY LUT renewal planning: RFD-11 for next FY must be filed before 1 April. Start the process in February so there's no break in LUT coverage between FY boundaries.

Where It Goes Wrong: Common LUT Mistakes

LUT looks simple, but missed compliance steps trigger automatic withdrawal, interest recovery, and reinstatement delays. Here are the five most common pitfalls we see and how to avoid them.

• Filing LUT after 1 April (export gap): Exports invoiced between 1 April and the date of LUT filing cannot use the LUT route. They must be invoiced under Rule 96 (with IGST) or left pending. We see exporters wait until May or June to file RFD-11, then realize January exports cannot be zero-rated retroactively.
• FEMA non-realisation (automatic withdrawal): You file RFD-11, invoice zero-rated, but the buyer delays payment. 9 months pass. Your LUT is automatically withdrawn, and you owe IGST + 18% interest on that export. No notice, no grace. AD bank extension is your only remedy—requires pre-planning.
• Shipping bill not filed within 3 months (goods never export): You invoice zero-rated under LUT on 15 May, but the buyer delays pickup. Shipping bill is filed only on 20 August (97 days later, past the 3-month window). The 15 May export is withdrawn, and IGST + interest becomes due. Rule 96A is zero-rated only if goods actually export within 3 months.
• Missing quarterly RFD-01 (ITC trapped): You file RFD-11 and think you're done. You don't file RFD-01 quarterly. Your ITC sits on the refund register for 12 months, blocking cash. At end-of-FY, you file an annual RFD-01, but 11 months of interest cost is your loss.
• GSTR-1A mismatch blocking refund approval: Your export invoice shows FOB ₹10 lakh, but shipping bill shows CIF ₹11 lakh. GSTR-1A flags the mismatch. When you file RFD-01, the portal rejects the claim because line-item values don't align. Refund is delayed 30-60 days pending clarification.

What You Receive at the End

• RFD-11 acknowledgement receipt (ARN) — official LUT reference for the FY
• Signed and portal-verified RFD-11 document (PDF) for your records and audit trail
• LUT validity summary, including any mid-FY extensions or reinstatements
• Integration guide: LUT reference to be cited in every export invoice, e-invoice, and shipping bill
• Quarterly Rule 89 refund tracker with timeline, expected refund amount, and bank details
• FEMA realisation checklist and monthly tracking template for eBRC/FIRC collection
• Next-FY renewal reminder 60 days before 1 April with pre-filing checklist
• Post-filing support for any portal corrections, witness re-coordination, or emergency reinstatement

How to Get Started

Send us your GST registration certificate, your GSTR-1 and GSTR-3B for the last 12 months, and the names, PAN, and Aadhaar of two witnesses (typically internal directors or signatories). We'll run the eligibility check in 1-2 days and confirm if any disqualifiers exist or if Rule 96 modelling suggests an alternative. Most exporters hear back within 48 hours.

Once you've approved the route and witnesses, we draft RFD-11, coordinate DSC signing with your witnesses, and file on the GST portal same-day. Your LUT is live within hours. We then set up your FEMA tracker, quarterly refund calendar, and next-FY renewal reminder so compliance never lapses. Most filings close end-to-end within 3-5 working days.