What is Letter of Undertaking (LUT) ?
A Letter of Undertaking is an undertaking by authorized persons of an entity that they will not pay tax on their export sales and will always abide by GST laws at all times. In case of any default, all the undertakers will jointly or severally be liable for any penalty or other consequences.
Under GST, there are two options being provided to exporters of goods or services or both for effecting such supplies :-
- Pay IGST on exports and then after claim refund for the same; or
- Submit an LUT or Bond (as applicable) to Commissioner of GST. In this case, there is no need to pay tax on exports and assessee can claim refund of GST paid on its inward supplies.
Before 04 October 2017, only those persons were eligible for Letter of Undertaking who fulfilled both of following conditions:
- A person who has not been prosecuted for any offence under the Central Goods and Services Tax Act, 2017 (12 of 2017) or under any of the existing laws for any amount of tax evasion. and
- A person should fall under one of following situations :
- a status holder as specified in paragraph 5 of the Foreign Trade Policy 2015-2020; or
- who has received the due foreign inward remittances amounting to a minimum of 10% of the export turnover, which should not be less than one crore rupees, in the preceding financial year.
However, w.e.f. 04 October 2017, government has open LUT route for all exporters without considering any turnover limit. CBEC has issued Notification CGST-37/2017 to allow all exporters to export their goods or services or both without payment of IGST by submitting LUT to department.
Submission of LUT online
GSTN has enabled the service of submission of LUT in GST RFD-11 through online mode. User has to login to his account at GST portal and choose ‘File Letter of Undertaking (LUT)’ under ‘USER Services’.
After submission of LUT through online portal, there in no requirement to file physical documents of such LUT with GST department. Once ARN generated after submission of LUT online, it will be deemed as accepted.
On 6th April 2018, CBIC has issued a Circular- CIR-40/14/2018-GST to provide clarity on this matter. Followings are key notes of this Circular :-
Form for LUT: The registered person (exporters) shall fill and submit FORM GST RFD-11 on the common portal. An LUT shall be deemed to be accepted as soon as an acknowledgement for the same, bearing the Application Reference Number (ARN), is generated online.
Documents for LUT: No document needs to be physically submitted to the jurisdictional office for acceptance of LUT.
Acceptance of LUT/bond: An LUT shall be deemed to have been accepted as soon as an acknowledgement for the same, bearing the Application Reference Number (ARN), is generated online. If, it is discovered that an exporter whose LUT has been so accepted, was ineligible to furnish an LUT in place of bond as per Notification No. 37/2017-Central Tax, then the exporter’s LUT will be liable for rejection. In case of rejection, the LUT shall be deemed to have been rejected ab initio.
Documents required for submission of LUT thru Online mode:-
Basically, there is no requirement of any documents to upload with online application. However, to complete the application, following documents/ information must be available :-
- Detail of witnesses along with their identity and address proofs
- Consent letter of witnesses for such LUT
- Acceptance letter from department acknowledging LUT of any previous year
- Although, there is no document required to submit manually to department, it is advisable to create a proper file with all documents as required in manual mode of submission of LUT.
Documents required for LUT (Manual)
Application for Letter of Undertaking (LUT) to be submitted in duplicate. Such application should have following documents:
- Cover Letter requesting acceptance of LUT: A cover letter addressing to Assistant/Deputy Commissioner of GST of respective division required on the top of application.
- A copy of GST Registration Certificate
- Form GST-RFD-11- Original Two Set
- Original Two Sets of Annexure of Letter of Undertaking (LUT) on Letter Head of entity. Signatures of all undertaker (s) should be verified by Bank Manager. It also require two witnesses.
- Such annexure of LUT should be notarized.
- Attach personal IDs of both witnesses. Ensure that name and address on personal IDs must match with the detail mentioned in LUT.
- Attach personal IDs and PAN of all undertakers.
- Attach Incorporation documents of entity. (e.g. Partnership deed for Partnership firm, Certificate of Incorporation for Company/LLP, etc.)
- PAN of Entity
- Copy of Board Resolution/Authorization Letter authorizing director/ partner to file application.
- Self-Declaration on letter head for eligibility of LUT that :
- Entity has not been prosecuted for any offence under the Central Goods and Services Tax Act, 2017 (12 of 2017) or under any of the existing laws for any amount of tax evasion.
- It’s eligible for LUT in terms of export sales and corresponding collections during the previous year. (This is not required after 04.10.2017 wherein turnover requirements waived off for exporters)
- Prepare a summary of invoices raised against export sales and get it certified from Chartered Accountant. Attach all invoices of export sales (This is not required after 04.10.2017 wherein turnover requirements waived off for exporters)
- Prepare a summary of collections against export sales during the year and get it certified from Chartered Accountant. Attach all evidences for such collections (e-brc or bank statement). (This is not required after 04.10.2017 wherein turnover requirements waived off for exporters)
- Copy of IEC code, if available.
Word Formatted files :
- LUT Format- Word file
- GST RFD-11- Word file
- Cover Letter – LUT – Word File
- Board resolution authorising Director to apply LUT-Word File
- LUT- Self declaration – a declaration in respect of non-prosecution