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File the Letter of Undertaking that guarantees tax savings before the exports.
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Letter of Undertaking is abbreviated as LUT.
The Letter of Undertaking is a document submitted by the exporter in order to export goods or services without the payment of taxes.
In case the LUT is not filed, the exporter may export by payment of IGST and then claim the refund of tax paid.
The eligibility criteria to apply for LUT is comparatively relaxed than to the erstwhile system.
Filing LUT is convenient than refund mode as the exporters do not wish to indulge into hassles of refunds and block their funds.
Letter of Undertaking is filed online using the form GST RFD 11.
By filing LUT under GST, an exporter can export goods or services without paying the taxes. If LUT is not filed, the exporter must first pay the required tax while making exports and then claim a refund to avail benefit of zero-rated exports.
The regular exporters are at a huge benefit by filing LUT online as the refund process under another route is a time-consuming process. During which the bunch of capital is blocked in the form of a due refund. With this mode, the capital is free to be utilized for other necessary requirements. It also reduces the cost of exports.
The Letter of Undertaking, once filed is valid for the whole financial year in which it is filed. Hence, unlike refund process, an exporter does not need to go through the procedural requirements every time an export consignment is carried out.
The filing of LUT and its acceptance, both are made online since April, 2018. The applicant does not need to visit the officers for acceptance. The whole process can be completed online by submitting a few required documents.
Any registered exporter who had a prior fiscal year revenue of at least Rs. 2 crores is eligible to apply for a LUT.
By submitting Form GST RFD-11 through the GST portal, an exporter can apply for a LUT. A self-declaration of compliance or a bank guarantee, for example, must be submitted with the application.
A LUT is effective for one fiscal year. The exporter must submit a new LUT before the current one expires if they intend to continue exporting during the following fiscal year without paying any GST.
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