Understanding the basics of LUT under GST for Exporters


Understanding the basics of LUT under GST for Exporters

The “Letter of Undertaking,” or “LUT,” is an important document under India’s Goods and Services Tax (GST) regime. It empowers exporters by allowing them to export goods or services without immediate tax payments, with the option to obtain refunds later.

However, it is important to realize that simply creating a LUT does not automatically qualify you to zero-rated sales. Additional documentation is required to establish eligibility for such supplies.

๐—ฆ๐—ฎ๐—น๐—ฒ๐˜€ ๐˜๐—ผ ๐—ฆ๐—ฝ๐—ฒ๐—ฐ๐—ถ๐—ฎ๐—น ๐—˜๐—ฐ๐—ผ๐—ป๐—ผ๐—บ๐—ถ๐—ฐ ๐—ญ๐—ผ๐—ป๐—ฒ๐˜€ (๐—ฆ๐—˜๐—ญ):

ย Not all sales to SEZs qualify for zero-rated Supply. Only sales intended for authorized operations within SEZs are eligible for tax exemption. Moreover, invoices must be endorsed by specified officers. Failure to comply may result in disallowance during the evaluation process.

๐—˜๐˜…๐—ฝ๐—ผ๐—ฟ๐˜ ๐—ผ๐—ณ ๐—ฆ๐—ฒ๐—ฟ๐˜ƒ๐—ถ๐—ฐ๐—ฒ๐˜€ ๐—ผ๐˜‚๐˜๐˜€๐—ถ๐—ฑ๐—ฒ ๐—œ๐—ป๐—ฑ๐—ถ๐—ฎ:

To qualify for zero-rated status, export services must be used by clients outside India and not within the country. Receipts for such exports must also be received in foreign currency. FIRC / BRC Copy to be obtained from banks (sometimes this may pose as a challenge when dealing with traditional banks.

๐—˜๐˜…๐—ฝ๐—ผ๐—ฟ๐˜๐˜€ ๐—ผ๐—ณ ๐—š๐—ผ๐—ผ๐—ฑ๐˜€:

Validating exports of goods involves providing shipping bills or EGMs. It is vital to note that goods to be exported within 90 days of invoice issuance failing on which exports to be made with payment of taxes.

Furthermore, seasonal exporters frequently manage their cash flows successfully by dividing their sales between LUT-covered transactions and those liable to tax payment, which they declare on the shipping bill.

The filing a shipping bill serves as a refund application, with refunds typically processed automatically within 15-45 days post-export. This approach optimizes cash flow management and eliminates the blockage of working capital.

LUT for the year 2024-25 may be applied now to start making zero-rated sales from 01.04.24.



Krishnakant Jakhotia

Mobile No :-9422507911

Email Id :- taxtalknew@gmail.com