Letter of Undertaking (LUT) is a document submitted by the exporter in order to export goods or services without payment of taxes under the Goods and Services Tax regime.
On due consideration of the difficulties faced by the exporters in submission of an LUT for exporting goods/services without payment of tax in the earlier tax regime, the Central Board of Excise and Customs vide Notification No. 37/2017 – Central Tax dated 4th October, 2017 extended the facility of LUT to all registered exporters subject to certain conditions and safeguards.
The following are to be noted upon furnishing an LUT:
1. Eligibility to export under an LUT:All registered suppliers who intend to export goods or services without payment of integrated tax except:
person(s) prosecuted for an offence under GST Act or any of the existing laws and
the amount of tax evaded in such cases exceeds Rs. 250 lakhs
2. Validity of an LUT:
An LUT shall be valid for the whole financial year in which it is tendered. It must be tendered fresh for every financial year.
3. How and when to furnish an LUT?
Through Form RFD-11 on GST portal (www.gst.gov.in), before exporting the goods/services. No document needs to be physically submitted to the jurisdictional office.
4. Time period for acceptance of an LUT
An LUT shall be deemed to have been accepted as soon as an acknowledgment bearing Application Reference Number (ARN) is generated on furnishing the same online.
5. Declarations given in an LUT
To export goods/services without payment of Integrated Goods and Service Tax (IGST) within the time specified in rule 96A(1) of CGST Rules
To observe all the provisions of the GST Act and Rules, in respect of export of goods/services
In the event of failure to export the goods/services, to pay IGST along with interest @ 18% p.a on the tax unpaid, from the date of invoice till the date of payment
6. Consequences of non-compliance of export within the specified time under rule 96A(1) of CGST Rules
An exporter has an option to export goods/services without payment of IGST under an LUT. However:
if the goods are not exported out of India within three months from the date of issue of invoice for export; or
if the exporter has not received payment for the services rendered, within one year from the date of issue of invoice for export
then such exporter shall be bound to pay IGST due along with interest @ 18% p.a within a period of 15 days.
Also where the goods/services are not exported within the time specified in rule 96A(1) of CGST Rules and the registered person fails to pay IGST along with interest, the facility of export without payment of tax under an LUT shall be deemed to have been withdrawn. Subsequently, post payment of IGST due along with interest, the facility of export under an LUT shall be restored.
7. Application to Special Economic Zone (SEZ):
All the above provisions with regards supply of goods and/or services without payment of IGST under an LUT shall apply in respect of supply of goods and/or services to SEZ developer or SEZ unit
Export of goods/services is an integral part of foreign currency inflow into the Indian economy. Relaxing the cumbersome and time-consuming process of manual application of LUT and extending the facility to all registered taxpayers is a welcome move which facilitates increasing the foreign currency inflow into the economy and availability of additional working capital to the individual exporter. Thus, a win-win situation to both the economy and the individual exporter.