LUT

LUT stands for Letter of Undertaking. It is a declaration filed by a GST-registered taxpayer on the GST portal that allows them to export goods or services — or supply to a Special Economic Zone (SEZ) — without paying IGST upfront. Instead of paying GST and then claiming a refund, the exporter undertakes to fulfil export obligations and receive payment in foreign exchange within the prescribed time.

The LUT facility is available under Rule 96A of the CGST Rules, 2017 and is the most preferred route for Indian exporters, particularly self-employed professionals and IT businesses supplying services to overseas clients.

Why LUT Is Important

Without an LUT, an exporter must pay IGST on the export invoice and then apply for a GST refund — which locks up working capital until the refund is processed. The LUT route eliminates this cash flow burden entirely by allowing the export to proceed with zero GST charged.

For freelancers and small businesses exporting services, LUT is essential to avoid unnecessarily blocking funds in the GST refund cycle.

Who Can File an LUT?

Any GST-registered taxpayer who intends to export goods or services or make zero-rated supplies to SEZ units can file an LUT, provided they have not been prosecuted for tax evasion of ₹2.5 crore or more under the CGST Act or any other law. Taxpayers with such prosecution history must pay IGST and claim a refund instead.

How to File an LUT

LUTs are filed online on the GST portal (www.gst.gov.in) and must be filed before making the first export supply of the financial year. The process involves:

1. Log in to the GST portal and navigate to Services > Returns > Furnish Letter of Undertaking (LUT)
2. Select the relevant financial year
3. Fill in the required details and upload the LUT form (Form RFD-11)
4. Submit with a digital signature or EVC (Electronic Verification Code)

Once approved, the LUT is valid for the entire financial year and must be renewed at the start of each new financial year.

LUT Conditions and Obligations

By filing an LUT, the exporter undertakes two key obligations:

Export realisation: Payment for the exported service must be received in convertible foreign exchange (as required under FEMA) within one year from the date of export invoice. For goods, the export must be completed within 3 months.

Consequence of non-fulfilment: If the conditions are not met — i.e., payment is not received within the time limit — the exporter must pay the IGST that would have been applicable along with interest, effectively treating the supply as a non-export taxable transaction.

LUT on an Export Invoice

When issuing an export invoice under the LUT route, the invoice must carry the following declaration:

"Supply meant for export under LUT without payment of Integrated Tax"

The invoice must also mention the LUT reference number (ARN — Acknowledgement Reference Number) generated at the time of filing.

LUT vs. IGST Payment Route

LUT and FIRC

After receiving payment from the overseas client, the exporter's bank issues a FIRC (Foreign Inward Remittance Certificate), which serves as proof of receipt of foreign exchange. The FIRC is required when GST authorities verify that LUT conditions have been fulfilled, and is also needed for any future GST refund claims.

Exporting services to overseas clients? Use JetInvoice's free GST Invoice Generator to create LUT-compliant export invoices with the correct declaration, zero-GST marking, and foreign currency support.