Export Without Paying IGST: How Letter of Undertaking Helps Save Tax

Are you an Indian exporter concerned with paying IGST before exporting goods overseas? Do you want to know a legal method of avoiding this tax and enhancing your cash flow? The solution is in the Letter of Undertaking under GST. It is a brief undertaking wherein exporters are allowed to export goods or provide services without the payment of IGST.

In this blog, we will describe what a Letter of Undertaking is, who requires it, when to apply for it, and how to apply for it online.

Overview of Letter of Undertaking Under GST

A Letter of Undertaking (LUT) is a declaration submitted in Form GST RFD-11. It enables exporters to supply without the payment of Integrated Goods and Services Tax (IGST) on the export, while making zero-rated supplies.

Instead of paying the tax and then claiming a refund, the exporters can export goods or services without paying any tax at all if they have an approved LUT.

The GST law gives two options for exporters:

1. Export with payment of IGST and later claim a refund.
2. Export without payment of IGST by furnishing a LUT.

Most exporters choose the second option because it saves time, paperwork, and most importantly, money that would otherwise be stuck waiting for refunds.

This system is very useful for regular exporters and companies working with international clients. The LUT must be filed once every financial year through the GST portal.

Why Is a Letter of Undertaking Important?

A Letter of Undertaking is significant because:

• No Payment of IGST: You are not required to make payment of IGST on exports in the event of submitting an LUT.
• Better Cash Flow: You do not have to wait for refund claims; money will be saved for business purposes.
• No Cease in Shipping: You do not have to encounter customs clearance issues for non-payment of tax.
• Smoother Export Process: Freight agents and banks usually request LUT to make the shipping process smoother in less time.
• No Cost: No cost is involved in submitting LUT on the GST portal.

Without an LUT, exporters must follow the refund method, which involves more paperwork and longer waiting times. For this reason, LUT is the smarter choice.

Who Is Eligible to Apply for LUT?

Not every exporter is eligible to file an LUT under GST. You are eligible if:

• You are a registered taxpayer under GST law.
• You are selling goods or services or both outside your own country or to a Special Economic Zone (SEZ).
• You have not faced any legal action under any tax law where the tax amount involved is ₹2.5 crore or more.
• You are exporting under a zero-rated supply.

Earlier, only specific groups, such as status holders or large corporations, could apply. But now, any registered taxpayer who exports goods or services is allowed to use the LUT system if they follow the rules.

If you are not eligible for LUT, you will need to file a bond with a bank security instead, which is more complex and involves extra costs.

When to Use a LUT

The LUT is valid for one financial year. You have to file it before exporting or offering services abroad. Once it is submitted and accepted, it applies to all your exports for the rest of that financial year.

If you don’t submit an LUT on time, you will have to pay IGST on exports. That means more paperwork and waiting for refunds. Any delay in the exports or payment may require you to pay IGST later with 18% interest.

So, to keep your export process smooth and improve your cash flow, make sure you submit the LUT well before you export the order.

Documents Required for LUT Under GST

To file your LUT online, you will need to collect and submit the following:

1. GSTIN Certificate: Proof of registration under GST.
2. Business PAN and address proof.
3. Export invoices or proof of past exports (if available).
4. Bank account details of the exporter.
5. Authorisation letter in case someone else is filing it on your behalf.
6. Two Witness Details: Full name, address, and occupation.
7. Self-Declaration: Agreeing to follow all GST rules and conditions.

If you have already submitted a previous LUT, uploading the previous LUT certificate speeds up processing. In some cases, the department may also ask for bank details or past export invoices. Be sure all records are clear and match your GST filings.

How to File LUT Online Under GST?

The government has simplified the LUT filing process by making it online. Here is how you can file a Letter of Undertaking on the GST portal. Follow these steps on the GST portal:

1. Log in to the official GST portal.
2. Go to Services, then click User Services, and then Furnish LUT.
3. Choose the financial year for which you want to apply the LUT.
4. Fill in your business name, address, and details of two witnesses.
5. Tick the self-declaration boxes confirming that you will comply with export rules and timelines.
6. Upload supporting documents, such as export proofs or past LUTs (if required).
7. Once submitted, you will get an Acknowledge Reference Number (ARN).
8. Submit the application using your Digital Signature Certificate (DSC) or EVC (OTP on mobile).

If every document is proper, the LUT will be approved within three working days. After approval, you can download the LUT certificate, which remains valid for the full financial year. Your LUT becomes active instantly after submission.

End Note

A Letter of Undertaking offers a simple and strong way for exporters to ship goods or services without paying IGST upfront, saving working capital and avoiding refund delays. It also reduces paperwork and avoids the need for bank pledges, making export tasks flow more smoothly.

If you need help using LUT, filing it on time, and taking advantage of its benefits. We guide you through the process, help you with GST compliance, and provide valuable advice as you expand your export business. Start today with our GST-experienced support and make your exports smoother. Act now and simplify your tax-free export with the Letter of Undertaking.