In this blog we described LUT meaning under GST. Exporters can avail a LUT registration under GST to export products or services without paying taxes. All exports are subject to pay IGST under the new GST system, which can then be reclaimed via a refund against the tax that was paid.
LUT full form in GST is Letter of Undertaking.
A Letter of Undertaking under GST spares exporters the hassle of requesting a refund and eliminates the blockage of cash through the payment of taxes as LUT registration avail exports without payment of taxes.
Under CGST Rules, 2017, According to rule 96A, any registered person may export goods or services without paying integrated tax by providing LUT registration in GST is done in form GST RFD 11. LUT in export helps entities to do export business without payment of taxes.
If exporter rights do not adhere to LUT criteria, they may be revoked and a deposit is needed. Please be aware that before exporting any goods or services, LUT for Export must be submitted online.
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Who is required to file LUT on Form GST RFD-11?
One may submit LUT application in GST if they
- Have a GST registration.
- Are providing goods or services to SEZs or to people outside of India.
- LUT required for export of Services or Goods without paying taxes.
The government’s goal in this case was to increase the export base by granting export subsidies.
Eligibility for Export in LUT under GST
Except for exporters who have been charged with a crime and whose tax evasion exceeds Rs. 250 lakhs under the CGST Act, the Integrated Goods and Services Tax Act, 2017, or any other applicable law, all GST-registered exporters of goods and services are eligible to submit LUT.
The exporter would be required to provide an export bond or LUT Bond in such circumstances if they are not qualified to file a LUT.
What is an Export Bond?
Entities that, due to the aforementioned requirements, are not qualified to submit a Letter of Undertaking must provide an export bond or LUT Bond and a bank guarantee. The applicant shall pay the amount of tax associated with the export based upon their expected tax payable from their own assessments.
On non-judicially stamped paper, with the proper value for the state in which they are being issued, LUT Bonds for export must be provided.
Moreover, exporters can provide a running bond, eliminating the requirement to execute an export bond for each export transaction.
If the unpaid tax on exports ever exceeds the bond amount, the exporter must submit a new bond to cover the additional liability.
It is possible to require both an export bond and a bank guarantee. Usually, the bank guarantee’s worth shouldn’t be more than 15% of the bond’s total value. The jurisdictional GST Commissioner, however, has the authority to waive the bank guarantee that must be submitted with the export bond depending on the exporter’s track record.
What are the Documents Required for LUT under GST?
In the event of a LUT
- Last Year’s LUT Certificate
- GST Login ID and Password
- Authorised Persons’ DSC
- Witness’ Details (Name, Occupation and Address)
In the event of a Bond
- GST Form RFD-11 on the organization’s letterhead
- A bond on stamp paper
- A Bank Guarantee
- GST Form RFD-11 on the organization’s letterhead
- An authority letter (Board resolution in case of company)
- IEC code (Not needed in case export of services) Cancelled Cheque
- Pan card
- Export Invoice or LUT Invoice
Within two to three days of receiving the paperwork, the department issues a signed letter approving the export without payment of taxes.
How to file LUT in GST? / LUT Registration Process:
In Case Of LUT
LUT filing in GST can be done in The Form RFD-11 in the format below:
- Name as per PAN
- Address of business place
- GST Registration No
- Signature, date, and place
- Witness Information (Name, address, and occupation)
Once all this done, Acknowledgment of form RFD-11 bearing ARN of LUT number in GST.
In Case Of Bond
- In the manner described above, file Form RFD-11
- To avoid any rejections, submit the documents to the department and have them checked by an appropriate officer
- An official letter acknowledging receipt of the document must be issued by the officer after it has been filed
What is the Time Limit for Letter of Undertaking (LUT)?
LUT for export of services or Goods have a one-year validity period, and exporters must provide new LUTs for each financial year as there is no provision of LUT renewal. If the requirements outlined in the LUTs are not met within the allotted time frame, the exporter’s privileges will be terminated and they will be required to post bonds.
Benefits of LUT and Bond
- Exporting of goods or services without paying taxes.
- Eliminate the hassle of requesting a refund if tax is paid on exports by exporting goods or services without paying taxes.
- Increases working capital.
- A LUT in GST Portal that has been submitted is valid for a year from the date of submission.
- LUT submission and departmental approval process can be completed online. Bond must be manually provided by submitting a hardcopy of the document to the department.