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What is LUT and why it matters
LUT (Letter of Undertaking) is a self-declaration by exporters allowing them to export goods or services without paying IGST. Filed online via Form GST RFD-11. Without LUT, exporters have two options:
- Pay IGST at the time of export, then claim refund (cashflow gets blocked)
- File LUT and export without paying IGST (cashflow-friendly)
LUT is the preferred mechanism for regular exporters as it avoids IGST blockage on every export transaction.
Eligibility for LUT
Any GST-registered exporter can file LUT if:
- Not been prosecuted for tax evasion involving ≥ ₹2.5 crore under GST
- Has not been blacklisted by GST authorities
If you don't qualify (rare), you must file a BOND with bank guarantee (15% of bond value) for security. LUT is simpler and cheaper than bond.
Filing process — annual
- Login to gst.gov.in
- Services → User Services → Furnishing of LUT
- Select FY
- Fill RFD-11 with:
- Two witnesses (their name, occupation, address)
- Self-declaration that you'll fulfill export conditions
- Submit (no fee)
- Acknowledgment generated immediately — LUT is active for the FY
- Re-file every FY (typically in April for new FY)
Free, no government fee. Professional fee ₹500-2,000 if outsourcing to CA.
Conditions to fulfill under LUT
Once LUT is filed, exporter must:
- Export within 3 months of issuing invoice (extendable by 3 months in special cases by commissioner)
- Receive payment in convertible foreign exchange within 1 year of invoice (for services) or per FEMA timeline (for goods)
- Not divert goods/services for non-export purposes
- Maintain export documents — shipping bills, BRC, FIRCs
Failure to meet conditions: Liable to pay IGST + interest on those specific exports.
LUT vs Bond — When bond is required
If LUT eligibility is rejected, file Bond instead:
- Bond amount: Equal to estimated tax liability for export
- Bank guarantee: 15% of bond value
- Cost: ₹3,000-15,000 for bank guarantee charges per year
- Renewal: Every year, similar to LUT
Bond is operationally more cumbersome (involves bank, BG renewal, etc.). Strive for LUT eligibility — clean compliance history helps.