How to get LUT, and how will it benefit an exporter?

About How to get LUT

LUT or Letter of Undertaking is a document that is to be furnished by the registered taxpayers who export items. Exporters submit this document in order to export goods and services without paying taxes. If LUT is not filed, the exporter while making exports has to first pay the required tax and then the exporter can claim for refund of the tax paid. It’s more convenient to file for LUT than wait for a refund as the department can delay the refund of the tax paid. As exporters don’t want to get indulged in the blockage of refunds so filing for LUT helps them in operating their business without any barriers. 

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LUT Eligibility

Letter of Undertaking or LUT can be used by any registered taxpayers who are into exporting business. Under Integrated Goods and Service Act, 2017 a person who has evaded a tax amount of Rs. 250 lakh or above and has been prosecuted is not eligible for LUT. 

The validity of LUT is one year, so after the end of the year, an exporter has to renew it and furnish a new LUT for another year. LUT can be also revoked, in case the conditions are not satisfied within the specified time limit, then the exporter’s LUT privileges will be revoked, and the exporter has to furnish bonds. 

Furthermore, if the exports are being made without IGST payment then in this case the exporter has to furnish bonds. LUTs are used for:

  • SEZ was given a zero-rated supply without IGST payment being made. 
  • Export of items to a foreign nation without IGST payment being made.
  • Providing client services in a foreign nation without paying IGST. 

Read More: What are licenses needed for import-export business in India?

Documents Required for LUT

Any registered individual who exports goods and services can submit a LUT, but an individual who has not paid tax and has exceeded Rs. 250 lakhs or is held in any other offense can not submit a LUT. Below mentioned documents can help you in the registration process for LUT or Letter of Undertaking in GST

  • Cover letter of LUT requesting for acceptance- cover letter signed by an authorized person of GST. 
  • GST registration certificate copy.
  • Entities PAN card – legal PAN card of the exporter entity. 
  • Authorized persons KYC – PAN card and Aadhar card Copy of the authorized directors. 
  • GST-RFD-11 form.
  • IEC code Copy – submission of IEC certificate. 
  • Canceled cheque – canceled cheque copy of the current account. 
  • Letter of Authorisation. 

GST-RFD-11 form filling 

The GST-RFD-11 form needs to be filled according to the below-mentioned format:

  • Name and address that is registered or as per PAN. 
  • Goods and Services Tax number.
  • Date of furnishing.
  • Date, Place, and Signature.
  • Information of the witnesses like name, address, and profession. 
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Steps of Getting LUT

If you want to get LUT and are looking to file for LUT at the GST portal, then you need to follow the below-mentioned procedure: 

  • Click www.gst.gov.in, the home page of GST will be displayed, and login to the GST portal. 
  • Next, click on the ‘Services’ tab, which will display 6 different options click on ‘User Services’ and select ‘Furnish Letter of Undertaking(LUT) from the list.
  • A page of the GST RFD-11 form will be displayed, select the financial year for which you are applying LUT. Click on the ‘Choose file’ and upload your previous year’s LUT in PDF or JPEG file formats. 
  • Tick the Self-Declaration checkboxes, scroll down, and add the information of 2 witnesses. Fill the boxes highlighted in red color with their name, address, and occupation. 
  • Select the name of ‘authorized signatory’ from the drop-down list and in the ‘Place’ section add the place where the form is filed.
  • Click on the save option and if you want to review your form, give it double-check and verify the information in the form. You will get a confirmation message regarding the application’s success. 
  • Select Sign And File With DSC or Sign And File With EVC. 

Sign And File With DSC: sign and file with Digital Signature Certificate option selection will display a warning message, click ‘Proceed’ and the system will generate a unique Application reference number. (Note: This option is for companies and LLPs)

Sign And File With EVC: once you select this option an OTP will be sent to your registered phone number and e-mail address. Enter OTP, and a warning message will be displayed, click ‘proceed’ and the system will generate a unique Application reference number.

  • Once you will get a confirmation message, the GST portal will send ARN to Taxpayer’s registered email and mobile. If you want to download the acknowledgement you can click on the download option. 

Read More: What is the professional tax registration process?

Benefits of LUT on Exporter 

The Letter of Undertaking benefits exporters in many different ways case as lowering the prices of their exports, helping them in exporting goods and services without any tax payment, it is easy to process and available online, it’s valid for a whole Fiscal Year. 

Lowers the Exports Price: 

Letter of Undertaking helps the exporters in lowering the price of exports, this way the exporter gets more profit and keeps exporting more and more. LUT greatly benefits the exporters, the exporters can use fee capital for important purposes. 

Exporting without tax: 

The LUT benefits exporters in tax payments, with the help of a Letter of Understanding the exporter can export items to foreign nations without paying any kind of taxes. If any exporter has not filed for LUT, the exporter has to pay the tax payment at first on its exporting goods and services, and only then the exporter can claim for refund. So sometimes the department takes time in refunding, hence it’s best to file for LUT to enjoy exporting without tax payment.

Easy Online Processing: 

As everything has become now available online, LUT filling and its acceptance can be done online since April 2018. In 2018 LUT filling procedure was made online by the government of India for exporters. Now the exporters need not waste their time and money by visiting different offices for filing and acceptance of LUT. The whole LUT process can be completed from your comfort zone by posting its required documents online. 

Whole Fiscal Year Validity:

The exporters can enjoy the Letter of Undertaking for an entire financial year, they can take many different benefits from it for the whole fiscal year. Hence an exporter need not worry about its renewal or updating and furthermore it stops the exporter from going through the procedural requirements every time whenever an export consignment is completed.

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Refund of IGST

The exporters who pay Integrated Goods and Service Tax on exports can claim for refund of IGST under the law of GST legislation. This refund process for export dealers has been simplified by the government. The exporters who don’t have access to LUT can request for refund of the IGST paid at the time of export. For the export of items or for both goods and services, there is no need to file a separate refund application. 

The exporters can claim for a refund with the help of the exporter’s shipping bill, this bill is in itself a refund claim. The IGST varies and the exporter charges the rates according to the specified goods and services that are exported. Exporters can claim for refund on two items after paying the Integrated Goods and Service Tax. 

  • Exporters can claim a refund on the input tax credits. These credits are for the items that were not used. 
  • Exporters can seek a refund on Integrated Goods and Service Tax or IGST that has been paid at the time of export of goods and services.

Conclusion 

LUT or Letter of Undertaking is very beneficial for the exporters, as it helps them in exporting items without paying any kind of taxes. The exporters need to file for LUT and only in 8 steps an exporter can get its LUT. After an exporter gets access to LUT, its exporting business gets easy and the exporters can enjoy many different benefits with the help of LUT. 

FAQ’s

What will happen at the time of export if LUT is not filed by the exporter?

What is the validity of the Letter of Undertaking?

Which bill helps the exporters in claiming their refund of IGST? 

How can an exporter, export goods, and services without paying taxes?

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