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Letter of undertaking (LUT) is an undertaking to be given by Owner/Proprietor/Working Partner/Managing Director of an entity in case such entity is doing export business (i.e. export of goods or services or both) or supplying Zero rated goods or services to SEZ developer or SEZ unit.

As per Rule 96A read with CGST Notification No. CGST-37/2017 dated 04.10.2017, every exporter exporting goods or services or both can supply without payment of Integrated Tax (IGST) on such export invoice. For this, such exporter have to submit an undertaking addressed to ‘The President of India’ that the such exporter will be responsible/liable :-

  • To export the goods or services supplied without payment of integrated tax within time specified in sub-rule (1) of rule 96A ;
  • To observes all the provisions of the Goods and Services Act and rules made thereunder, in respect of export of goods or services;
  • Pay the integrated tax, thereon in the event of failure to export the goods or services, along with an amount equal to eighteen percent interest per annum on the amount of tax not paid, from the date of invoice till the date of payment.

Such undertaking is known as ‘LETTER OF UNDERTAKING’ or say ‘LUT’.

Sub rule (1) of Rule 96A provides that an exporter submitting LUT have to fulfill following conditions at all times:-

  • In case of Export of goods:- Export of goods should be completed within three months from the date of issue of an invoice for the same;
  • In case of Export of services:- Payment against an invoice of service should be received by such exporter within one year from the date of issue of such invoice for export. And, furthermore, such payment should be received in convertible foreign exchange.

In case of failure to comply with Rule 96A, such exporter will have to pay IGST tax himself along with interest as specified in Section 50(1) of CGST Act. Further, his LUT shall also be withdrawn which will be restored only after payment of such tax.

Relevancy of Letter of Undertaking (Synopsis of above)

Under GST, there are two options being provided to exporters of “goods or services or both” for payment and refund of tax :

  • Pay IGST on exports and then after claim refund for the same; or
  • Submit an LUT to Commissioner of GST. In this case, there is no need to pay tax on exports and exporter can claim refund of GST paid on his inward supplies.

Who is eligible to submit/file a Letter of Undertaking (LUT) ?

As per Notification No. CGST-37/2017, following persons are eligible to file/submit undertaking in LUT:-

All registered persons who intend to supply goods or services for export without payment of integrated tax;


Such registered person should not be prosecuted for any offence under CGST Act 2017 or IGST Act 2017 or any of existing laws in force where the amount of tax evaded exceeds Rs 2.50 Crores (or say 250 Lakhs).

There is no restriction for small exporters to submit LUT. Now, every exporter can submit LUT subject to above-mentioned condition.

What is the periodicity of LUT ?

There are some other similar questions in respect of this like “What is the period being covered in LUT ?” or  “Whether LUT needs to be filed every year ?” or “Whether LUT filed once will remain valid till life time?”

Clause (ii) of Para 1 of Notification No. CGST-37/2017, LUT remains valid for a single Financial Year

Every exporter have to submit a LUT for every financial year.

What is the process to file LUT ?

Please refer our another detailed article on this :-Documents required for Letter of Undertaking in GST

In this article, we will also find answers to similar questions like:

  • What are the documents required to attach with LUT?
  • What are forms to submit LUT ?
  • To whom, file for LUT to be submitted?
  • or many more…..

What the provisions for LUT in case of supplier supplying Zero rated supplies to SEZ developer or SEZ Unit?

Provisions as discussed above shall mutatis mutandis  applicable for such supplies. Supplies to SEZ units are also treated like Exports. All safeguards, conditions, restrictions, rules (referred in above paras) will simultaneously applicable for such suppliers too.

Whether bond or Letter of Undertaking (LUT) is required in the case of zero rated supply of exempted or non-GST goods?

There is no requirement to furnish bond or LUT in case of zero rated supply of exempted or non-GST goods.

Bond/LUT is required only to protect the revenue of government in case of non-compliance of conditions applicable for allowing zero rated supply without payment of tax. However, where goods/services are exempted or of non-GST category, there is no such protection required by government.

What will be impact if Letter of Undertaking (LUT) submitted after effecting export of goods or services ?

As per GST Act and rules, LUT must be submitted before effecting export of “goods or services or both” to be eligible for making “Exports without payment of IGST”. Also, refund for unutilised accumulated ITC will be sanctioned against the supplies which are made after submission of LUT.

However, due to new systems, so many exporters were unaware about LUT and they had submitted LUT after affecting supplies without payment of taxes.

As a temporary measure, CBIC has issued a circular to condone such delay. Relevant extracts given below:-

“it is emphasised that the substantive benefits of zero rating may not be denied where it has been established that exports in terms of the relevant provisions have been made. The delay in furnishing of LUT in such cases may be condoned and the facility for export under LUT may be allowed on ex post facto basis taking into account the facts and circumstances of each case.”

Whether LUT is required  for exports to Nepal or Bhutan where export proceeds are realized in Indian Rupee?

It is hereby clarified that exports of goods means that taking goods out of India to a place outside India. As per Section 2(5) of IGST Act, export of goods do not require to pass any test in relation to realization.

Further, Attention is invited to para A (v) Part-I of RBI Master Circular No. 14/2015-16 dated 01st July, 2015 (updated as on 05th November, 2015), which states that “there is no restriction on invoicing of export contracts in Indian Rupees in terms of the Rules, Regulations, Notifications and Directions framed under the Foreign Exchange Management Act, 1999.

Further, in terms of Para 2.52 of the Foreign Trade Policy (2015-2020), all export contracts and invoices shall be denominated either in freely convertible currency or Indian rupees but export proceeds shall be realized in freely convertible currency. However, export proceeds against specific exports may also be realized in rupees, provided it is through a freely convertible Vostro account of a non-resident bank situated in any country other than a member country of Asian Clearing Union (ACU) or Nepal or Bhutan”.

Hence, LUT is permissible to be submitted before effecting supplies to Nepal or Bhutan notwithstanding the fact that realization is in Indian Rupee.

Export of Services :- As per Section 2(6) of IGST Act, to qualify a transaction as Export of services, it is necessary that the payment for such service has been received by the supplier of service in convertible foreign exchange.

Hence, The supply of services to Nepal or Bhutan will be deemed to be export of services only if the payment for such services is received by the supplier in convertible foreign exchange.

So, export benefits will not be available against supply of services to Nepal or Bhutan against realization in Indian Rupee. (However, this transaction is exempt under IGST Rate Notification No. 42/2017 (IGST-R-42-2017)


    1. You may have to pay GST on all export sales along with interest… However, you may still file LUT and apply to condone such delay at the time of filing of refund application.


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