GST Letter of Undertaking (LUT)

A GST Letter of Undertaking (LUT) in India puts the writer's position in formal terms, setting out the facts relied on and the response or action it seeks.

Under the GST framework, exports are 'zero-rated supplies' under Section 16(1) of the IGST Act 2017 — they are taxable at 0% GST. However, the exporter must still account for the GST on inputs used in producing the exported goods or services. Section 16(3) of the IGST Act provides two alternative mechanisms for zero-rated exporters to address the accumulated Input Tax Credit (ITC): (a) export under LUT without payment of IGST and claim refund of accumulated ITC; or (b) export with payment of IGST at the applicable rate and claim refund of the IGST paid. The LUT route is almost universally preferred because it avoids the cash flow burden of paying IGST upfront.

The GST LUT framework was significantly simplified by the Central Board of Indirect Taxes and Customs (CBIC) through Circular No. 40/14/2018-GST dated 6 April 2018 and subsequent notifications, removing the requirement for a physical bond with bank guarantee for most exporters and replacing it with a self-certified online undertaking. The LUT is now auto-approved immediately upon submission on the GST portal (gst.gov.in) — there is no manual processing or approval waiting period.

An LUT, once filed, is valid for the entire financial year (1 April to 31 March). A new LUT must be filed for each financial year before the first export of that year. LUTs can be filed with retrospective effect from 1 April of the current financial year even if filed later in the year — enabling exporters who missed the beginning of the year filing to regularise their position retroactively.

The LUT mechanism covers not only physical export of goods out of India but also supply of goods and services to SEZ units and SEZ developers (treated as deemed exports for GST purposes under Section 16(1)(b) of the IGST Act), and supply of services where payment is received in convertible foreign exchange. India's IT/ITES sector, business process outsourcing companies, engineering consultancies, and all exporters of services benefit significantly from the LUT framework.

The legal framework governing the GST Letter of Undertaking (LUT) in India draws on several key statutes and regulatory bodies. Under Indian law, the Indian Contract Act 1872 governs contractual obligations, with Section 10 setting essential requirements for valid agreements. The Companies Act 2013 regulates corporate entities through the Registrar of Companies (ROC) and Ministry of Corporate Affairs (MCA). The Industrial Disputes Act 1947 and state labour commissioners govern employment disputes. The Information Technology Act 2000 and IT (Reasonable Security Practices) Rules 2011 protect personal data. The Income Tax Act 1961 and Goods and Services Tax Act 2017 govern tax obligations through the Central Board of Direct Taxes (CBDT) and GST Council. Parties executing a GST Letter of Undertaking (LUT) in India should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Central Goods and Services Tax Act, 2017 sets the foundational requirements.

A GST Letter of Undertaking must be filed on the GST portal before an exporter begins exporting goods or services without payment of IGST for any financial year, and must be renewed at the start of each new financial year.

An Indian manufacturer, trader, or service provider who exports goods out of India under a shipping bill must file a LUT before the first shipment of each financial year to export without paying IGST. Without a valid LUT on file, the exporter must either pay IGST on the export invoice (and later claim a refund) or furnish a bond with security — both are commercially disadvantageous compared to the LUT route.

An Indian IT company, software development firm, or ITES provider that exports software, technology services, or business process services and receives payment in US dollars, Euros, or other convertible foreign exchange must file a LUT to export services without IGST liability. Under Section 16(1) of the IGST Act 2017, export of services where payment is received in foreign exchange qualifies as a zero-rated supply.

A supplier to Special Economic Zone (SEZ) units or SEZ developers must file a LUT before making zero-rated SEZ supplies without IGST payment. SEZ supplies are treated as zero-rated under Section 16(1)(b) of the IGST Act — the LUT enables the supplier to sell to the SEZ unit or developer without charging IGST, with the right to claim ITC refund on inputs used.

An exporter who previously exported under a bond with security — typically those who were prosecuted for tax evasion above the ₹2.5 crore threshold and were ineligible for LUT — but has now cleared their prosecution status can switch to the LUT route for subsequent financial years by filing a fresh LUT declaration.

At the start of every new financial year (from 1 April), all exporters must renew their LUT for the new year. The LUT filed for FY 2024-25 is not valid for FY 2025-26. CBIC's circulars confirm that LUTs for the new financial year can be filed from 1 April onward and are immediately valid. Exporters who miss filing at the start of the year must confirm they file before any shipment is made — shipments made before LUT filing without IGST payment are technically non-compliant.

A GST Letter of Undertaking (Form GST RFD-11) must contain specific information and undertakings as prescribed by Rule 96A of the CGST Rules 2017 to be valid for zero-rated exports.

Exporter's GSTIN and registration details must accurately reflect the 15-digit Goods and Services Tax Identification Number of the exporter, the legal name as registered with GSTN, and the registered office address. The GSTIN must be active and in 'Regular' taxpayer status — composition taxpayers cannot file an LUT or export under it.

Financial year specification must clearly state the financial year for which the LUT is being filed (e.g., FY 2025-26 running from 1 April 2025 to 31 March 2026). An LUT is valid only for the specified financial year — filing for the wrong year is a common error that requires correction.

Witness details are a mandatory field in Form GST RFD-11. Two independent witnesses must be identified: their full names, addresses, designations, and relationship to the exporter. Witnesses must be adult individuals — they cannot be employees of the exporter for this purpose (in practice, business associates, chartered accountants, or other professionals are used as witnesses). The witnesses must be present at the time of filing.

Authorised signatory details must include the name, designation, and Aadhaar-linked mobile number of the person authorised to file the LUT on behalf of the exporter. For companies, this is typically the Director, CFO, or GST-authorised signatory registered with GSTN. The authorised signatory's Aadhaar OTP authentication completes the online filing process.

Export proceeds realisation undertaking is the core substantive commitment in the LUT: the exporter undertakes to realise the export proceeds in convertible foreign exchange within the period prescribed by the Reserve Bank of India under the Foreign Exchange Management Act 1999 — currently 9 months for goods exports (extendable by authorised dealer banks) and 1 year for services exports. If proceeds are not realised within the prescribed period, the exporter becomes liable to pay the IGST that would have been payable on the export, along with interest at 18% per annum from the date of export.

Non-prosecution declaration must confirm that the exporter has not been prosecuted for any offence under the CGST Act 2017, IGST Act 2017, or any predecessor indirect tax law for an amount above ₹2.5 crore. An exporter with a prosecution on record above this threshold is not eligible to file a LUT and must use the bond-with-security route instead.

Annual renewal process should be noted in the documentation: the LUT must be filed freshly for each financial year. A convenient practice is to calendar the LUT renewal for the last week of March each year, so the new year's LUT is filed and active from 1 April. The renewal on the GST portal (gst.gov.in) under Services > Refunds > Furnish Letter of Undertaking takes approximately 10 minutes. The forms-legal.com GST Letter of Undertaking (LUT) template covers the mandatory elements under Central Goods and Services Tax Act, 2017.