Letter of Undertaking (LUT) under GST: A Complete Guide for Exporters in 2025

Introduction Under the Goods and Services Tax (GST) regime, the Indian government has aimed to make exports more competitive and efficient. One of the crucial benefits provided to exporters under GST is the facility to export goods and services without the payment of Integrated Goods and Services Tax (IGST), provided they furnish a Letter of Undertaking (LUT). This guide dives deep into everything an exporter needs to know about LUT, including what it is, how it benefits businesses, who is eligible, the exact step-by-step process to file it, documentation required, renewal and compliance expectations, and consequences of non-compliance.

Exporters often face challenges in maintaining cash flow due to taxes locked in the system. The LUT facility under GST addresses this issue by allowing eligible exporters to avoid upfront tax payments and the cumbersome refund process. This in-depth guide is your go-to resource for mastering the LUT process.

What is a Letter of Undertaking (LUT)? A Letter of Undertaking (LUT) is a document that allows exporters to export goods or services without paying IGST. In simpler terms, when a taxpayer wishes to export without paying taxes at the time of dispatch and doesn’t want to go through the refund process, they must furnish a LUT to the GST department. The LUT is filed using Form GST RFD-11 on the GST portal.

The LUT is essentially a declaration to the government that the exporter will fulfill all obligations regarding exports, including ensuring that the goods or services will be exported within the prescribed time limit and payments will be received in convertible foreign exchange (or Indian rupees, wherever permitted by the Reserve Bank of India).

Legal Framework Governing LUT The legal provision for LUT is covered under Rule 96A of the Central Goods and Services Tax Rules, 2017. According to Rule 96A:

• Any registered person availing the benefit of zero-rated supplies without payment of tax must furnish a Letter of Undertaking.

• The LUT must be submitted before making such exports.

• The LUT should be furnished electronically on the GST portal.

• If the conditions of the LUT are not fulfilled, the exporter will be liable to pay IGST along with 18% interest.

Rule 96A gives the legal backing necessary for the tax authorities to ensure that the exporter is bound by the commitments made in the LUT.

Who Can File LUT? (Eligibility Criteria) Not every GST-registered taxpayer is allowed to file a LUT. The following criteria must be fulfilled:

• The exporter must be registered under GST.

• The exporter must be engaged in the export of goods or services.

• The exporter should not have been prosecuted for any offence under the CGST Act, SGST Act, or any previous law involving tax evasion of more than Rs. 2.5 crore.

Businesses that do not meet the above conditions have to submit a bond along with a bank guarantee instead of LUT, which is a more cumbersome and expensive process.

Why File LUT? (Benefits) Filing LUT is not just a regulatory requirement but a significant financial advantage. Some of the main benefits include:

• No IGST payment required upfront: This frees up working capital for the business.

  
  

• Avoid refund delays: When IGST is paid, exporters must later apply for a refund, which can take weeks or even months.

  
  

• Simplified compliance: Filing LUT means one less process to worry about.

  
  

• Cash flow optimization: With no tax locked in, businesses can operate more freely.

  
  

• Global competitiveness: Lower operating costs allow exporters to price more competitively in international markets. Documents Required for LUT Filing To ensure a smooth filing process, the following documents are generally required:
  

• GST Registration Certificate
  

• PAN Card of the business
  

• Import Export Code (IEC)
  

• KYC documents of the authorized signatory
  

• Authorization letter for the person filing the LUT
  

• Cancelled cheque for bank verification
  

• Names, addresses, and occupations of two independent witnesses
  

• Having these documents ready in advance can significantly speed up the LUT filing process.

  Step-by-Step Guide to File LUT Online on GST Portal Filing a LUT is a completely online process. Follow these steps:
  

• Login to the official GST portal using your credentials.

  

  
  

• Navigate to Services > User Services > Furnish Letter of Undertaking (LUT).
  

  
  

  

  
  

• Select the financial year for which the LUT is being filed.
  

  

  Note: If Letter of undertaking has been already furnished manually for any of the previous periods, then please upload the same by Clicking on ‘Choose File’ option on the same window. Fill up the necessary details on the Letter of Undertaking Form/ GST RFD-11 that appears on the screen The following needs to be done on the form:
  

  (a) Self-Declaration: Tick mark by clicking against each of the three boxes  

  By doing this, Exporter undertakes the following : 

  • Export of goods/services will be completed within a period of three months from the date of issue of Export invoice or further period allowed by the Commissioner if any.

  • To abide by GST law in respect of exports

  • To pay IGST along with Interest* if failed to Export
    

  *Interest must be paid at the rate of 18% per annum for the period From date of issue of export invoice upto date of Payment of IGST. Ensure the following:

  • Only PDF or JPEG file formats are allowed.

  • Maximum file size for upload is 2 MB
    

• Read and accept the three declarations.

  

• Enter the details of two independent witnesses including name, address, and occupation.
  

  

• Submit the form using DSC (Digital Signature Certificate) or EVC (Electronic Verification Code).
  

  

• Upon successful submission, an Application Reference Number (ARN) is generated. You can download the acknowledgment for future reference.

  
  

  

  
  

• Note: Make sure your DSC or EVC is valid and correctly mapped to your GST account.
  

  Validity and Renewal of LUT The LUT is valid for the entire financial year in which it is filed. Exporters must file a fresh LUT for every new financial year.
  

  For example, if you filed an LUT on April 10, 2024, it will be valid until March 31, 2025. From April 1, 2025, onward, a new LUT needs to be submitted.
  

  It is advisable to file the new LUT well in advance to ensure that there are no disruptions in the export process. What Happens If You Don't File LUT? If an exporter does not file a LUT and still exports goods or services, they must pay IGST and later claim a refund. This is not only a time-consuming process but also affects the business's cash flow. Additionally:
  

• You may be liable to pay IGST along with 18% interest from the date of export.
  

• GST authorities may issue notices for non-compliance.
  

• Repeated non-compliance can result in denial of LUT benefit in the future. Common Mistakes to Avoid
  

• Not renewing LUT on time: Always file a new LUT at the start of each financial year.
  

• Incorrect details of witnesses: Inaccurate names or addresses can lead to rejection.
  

• Not saving the ARN: Always download and store the acknowledgment for audit and reference.
  

• Ignoring email/SMS alerts from GST portal: These may contain updates on your application status.
  

  LUT Filing for Service Exporters Many freelancers, software developers, and digital marketing consultants provide services to clients outside India. These services are considered zero-rated under GST. If you fall into this category:
  

• You are eligible to file LUT.
  

• You can export services without paying IGST.
  

• You must receive the payment in convertible foreign exchange or INR (as allowed by RBI).
  

  LUT vs. Bond with Bank Guarantee If you are not eligible to file LUT, you must submit a bond with a bank guarantee.

Criteria	LUT	Bond with Bank Guarantee
Eligibility	Clean compliance record	Prosecution under tax laws
Bank Guarantee Required	No	Yes
Filing Process	Simple, online	Offline + approval needed
Financial Burden	None	High

Conclusion Filing a Letter of Undertaking (LUT) is not only a compliance requirement under GST for exporters but also a smart financial move. It enables businesses to save time, money, and avoid the hassles of refund claims. By understanding the process thoroughly, preparing the right documents, and filing on time, exporters can ensure uninterrupted, compliant, and smooth export operations.

Make it a practice to file your LUT at the beginning of every financial year, stay updated with GST notifications, and keep proper records. Export with ease, grow globally, and let LUT under GST work to your advantage.