when lut is applicable?

They can apply for LUT if: They intend to supply goods or services to India or overseas or SEZs. Are registered under GST. They wish to supply goods without paying the integrated tax.

LUT under GST: What does that mean?

LUT for GST Letter of Undertaking is its full name and meaning. Under rule 96 A, it must be provided in the form GST RFD 11, in which the exporter certifies that they will comply with all applicable GST requirements when exporting without paying IGST.

Who is required to submit LUT using GST RFD-11?

All GST-registered exporters of goods and services must file a GST LUT. Exporters who have been charged with a crime or committed tax evasions totaling more than Rs 250 lakhs under the CGST Act, the Integrated Goods and Services Act of 2017, or any other applicable legislation are ineligible to submit a GST LUT. They would need to provide an export bond in these circumstances.

In this case, the government wanted to increase the export base by granting export subsidies.

Any registered person may submit an export bond or LUT in GST RFD 11 in accordance with the CGST Rules, 2017 without having to pay the integrated tax. They may apply for LUT if They are GST-registered and plan to provide goods or services to India, other countries, or SEZs. They want to sell goods without having to pay the incorporated tax.

Required Documents for LUT under GST

Any person registered under GST who has not been executed for tax evasion exceeding Rs. 250 lakh or for any other felony may submit a LUT.

Request for acceptance in LUT in a cover letter – properly executed by an authorised party

Copy of the entity’s PAN card for GST registration and KYC for the authorised person/signer

GST RFD11 form

IEC code

Cancelled Cheque

Authentication letter

Who is eligible to use a Letter of Undertaking (LUT)?

The Letter of Undertaking is available to every registered taxpayer who exports goods and services. Anyone who has faced legal action for tax evasion involving Rs. 250 lakh or more is ineligible.

These LUTs are only valid for a year, and exporters must provide a new LUT for each fiscal year. The rights will be removed and the exporter will be required to post bonds if the conditions outlined in the LUTs are not met within the allotted time frame.

If the export is made without the IGST being paid, other assesses must provide bonds. Bonds and LUTs can be applied to:

Zero-rated supplies without IGST payments to SEZ

Exporting products to a nation outside of India without paying IGST

Without paying IGST, it provides services to a client in a non-Indian nation.

Submission of a Letter of Undertaking (FORM GST RFD-11)

The following format is used to file the Form RFD-11:

GST Number, Registered Name, and Date of Furnishing

Date, place, and signature

Witness information

Alternate possibilities might appear quite appealing given the problems many exporters encounter in receiving tax refunds. A LUT in GST saves exporters the time and effort of requesting a refund and the risk of cash being blocked due to tax payments. Its filing may be completed entirely online, making it extremely simple and quick.

Did you know?

Every certificate holder can submit a guarantee or LUT in GST quests Eleven and transport products, avoiding paying consolidated duty underneath the Rules Of civil procedure. Individuals can register under the LUT number in GST if they fulfil the specified criteria:

Being incorporated with VAT and proposing offering products and services to India, other countries or Special Economic Zone.

Desire to provide products while needing to pay an incorporated fee.

Also Read: How to do GST Number Search by PAN?

The abbreviation LUT stands for Letter of Undertaking. The statement of commitment is paperwork that the exporters submit to be able to distribute items and services without paying taxes. If the LUT is not submitted, the importer can spend the IGST and later obtain reimbursement of a taxable income. Because producers would not like to deal with blocked refunds and cash difficulties, filing LUT is more efficient than reimbursement mode. The qualifying conditions for applying for LUT are less stringent than under the old regime.

The entrepreneur can transfer merchandise avoiding tax payments if they file a LUT in GST. If the LUT isn't completed, the producer should first pay a valid VAT while exporting before claiming a reimbursement to be eligible for none whatsoever.

Frequent export markets profit greatly from filing LUT online because the reimbursement process via another way is time-consuming. During this time, the sum of money is held in reserve in the shape of the due reimbursement, and the money is available for other important purposes in this method.

Unless you have not been tried and convicted for evading taxes for just a value of ₹2.5 crores more than underneath the Central Goods and Services Legislation Conduct law. Whatever authorised user wishes to deliver high-quality products for extract without paying interconnected tax must provide a Letter of Undertaking (LUT) previous to extract supply. LUT in GST can be used in the period commencing:

For submitting a guarantee for LUT under GST with a government organisation, you require the essential papers below:

GST-compliant exporters will presently fill the 'LUT (Letter of Undertaking)' below the GST technique online. That is regularly a glorious revolution in automating the GST technique and decreasing the developing grievances of exporters.

Follow the steps beneath to document your LUT online.

Also Read: Types of GST in India - What is CGST, SGST and IGST?

Qualified customers that transport goods and services must submit a Letter of Undertaking (LUT) on the common portal in the GST RFD-11 form. This is to avoid having to pay the GST on exports.

Every listed payer with no sales of goods must provide LUT in GST form RFD-11 to the provided link.

The GST site may be accessed and logged onto using legitimate passwords.

Select Services > User Services > Furnish Letter of Undertaking.

The exporters can use the LUT in GST to avoid paying taxes on export products and services. If the exporter does not choose this option, they will be required to pay tax on their exports and then claim compensation on the none whatsoever export.

The LUT under GST saves exporters the time and effort to file a reimbursement claim or report back to its division. By skipping the reimbursement path, you may save much time. Any payment made as taxation will be frozen until the reimbursement is collected. In the event of regular exports, a sum will be frozen in receiving tax refunds indefinitely. A LUT liberates this operating cash, which is especially significant for the exporter with finance and cash reserves difficulties.

Ordinary exporters will also benefit from the LUT number in GST. Once submitted, a LUT is valid for the whole fiscal year. The process of submitting the LUT and having it accepted by the institution has been simplified; you may now complete the full procedure online. A few corroborating papers, together with the required LUT form, are needed to get the process started and assist exporters in avoiding losing valuable investment money due to tax returns.

The GST bill and GST agreement can be in Indian Rupees or foreign currency. However, the export earnings must be achieved solely in foreign exchange. Yield and high against specified exports can be recovered in rupees if deposited in a freely usable level of cash and cash account maintained by a non-resident bank located in any nation besides an ACU single nation, Nepal or Bhutan.

Conclusion

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 :-

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 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.

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

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

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

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?”

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

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:

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.

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.

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.”

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.

LUTs (Letter of Undertaking) and bonds are documents that prove a taxpayer’s commitment to exports. We go over the specifics of when to use LUT and when to use Bond. In this article information on documents required for LUT under GST, validity of LUT under GST, where to submit LUT under GST, and information on LUT for export under GST.

Any government in a developing economy wants to broaden its export base. The rationale behind this is to keep the balance of payments in check, in encouraging economic growth, and for creating jobs. The government fosters trade by offering specific perks and relief’s on exports. Exporters can take advantage of these perks and relief’s, allowing for a free-flowing and advantageous trade. Similarly, the government provides exporters with various perks under the GST framework. When an exporter exports products or services from India, there is no tax incidence (net effect).

The exporter can choose between two choices under the GST regime:

The abbreviation LUT stands for Letter of Undertaking. The Letter of Undertaking is a document that the exporter submits to be able to export goods or services without paying taxes. In the event that the LUT is not filed, the exporter may pay the IGST and later obtain a refund of the tax paid. Because exporters do not want to deal with the difficulties of refunds and cash being blocked, filing LUT is more convenient than refund mode.

The eligibility conditions for applying for LUT are less stringent than in the previous system. The GST RFD 11 form is used to file the Letter of Undertaking. By submitting a LUT, the exporter guarantees that he will meet all of the standards for this route.

Regular exporters benefit greatly from filing LUT online because the reimbursement process via another way is time-consuming. During this time the sum of money is held in reserve in the shape of a due refund. The capital is free to be used for other important purposes in this method. It also lowers the price of exports.

Since April 2018, both the filing and acceptance of LUTs have been done online. It is not necessary for the applicant to appear in front of the officials for approval. The entire process can be completed by posting a few key documents to the internet.

If an exporter files a LUT under GST, they can export goods or services without paying taxes. To be eligible for zero-rated exports, the exporter must first pay the relevant tax while exporting before demanding a refund if the LUT is not filed.

The Letter of Undertaking is valid for the whole fiscal year in which it was filed. As a result, unlike the return procedure, an exporter does not have to go through all of the procedural requirements every time an export consignment is completed.

The exporter has the option of paying IGST on exports and then claiming a refund under GST legislation. The process of requesting a refund has been simplified for export dealers. There is no need to file a refund application (GST RFD-01) separately for the export of goods or services, or both.

The exporter’s shipping bill is a refund claim in and of itself. On the invoice for export, the exporter charges IGST at the applicable rate (rates specified for different goods and services). After paying the IGST, you can seek a refund for the following two items:

Read More: GST Returns on Exports & Refund Process

The legislation states that a shipping charge can be deemed a refund claim provided the following two conditions are met.

Documents required for LUT under GST

An LUT can be submitted by any GST-registered individual who has not been sentenced to death for tax evasion of more than Rs.250 lakh or any other felony.

Every financial year, the qualifying taxpayer must provide a LUT under GST. This means that a LUT issued under GST is only valid for one financial year. If the taxpayer fails to follow the terms and circumstances of the Letter of Undertaking, he or she must provide a bond instead of the LUT (LUT).

From the date of issuing of the export invoice to the date of IGST payment, the exporter must pay the applicable IGST plus interest at the rate of 18 percent per annum.

No, the obligation to post a bond is no longer in effect. A Letter of Undertaking must be filed online for exports that do not include the payment of taxes.

No, the obligation to post a bond is no longer in effect. A Letter of Undertaking must be filed online for exports that do not include the payment of taxes.

Letters of Undertaking can be used by any registered taxpayer who exports goods and services. Anyone who has been convicted of tax evasion for an amount above Rs. 250 lakh is ineligible.

• Access the GST Portal at www.gst.gov.in URL.
• Login to the GST Portal with valid credentials.
• Click the Services > User Services > View My Submitted LUTs command.