A Letter of Undertaking (LUT) is a document that exporters in India must file with the GST department to export goods or services without paying Integrated Goods and Services Tax (IGST). It is a simple declaration by the exporter, promising to comply with all GST rules while exporting without tax payment.
The LUT must be filed online through the GST portal and is valid for one financial year. Once approved, it allows businesses to make tax-free exports, reducing the burden on their working capital. This facility is especially useful for small businesses and service providers engaged in international trade, as it eliminates the need to pay IGST upfront and then claim a refund later.
Filing an LUT is crucial for businesses looking to stay GST-compliant while maximizing their cash flow. Not having a valid LUT means exporters must pay IGST on exports, which can delay refunds and tie up funds unnecessarily.
Every registered taxpayer who wants to export goods or services without payment of tax must submit an LUT—except those who have been prosecuted for tax evasion exceeding ₹2.5 crore.
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In summary, the LUT is a key requirement for tax-free exports under GST, saving time and money for exporters while ensuring they remain fully compliant with the law.