Who is Required to File a LUT in GST - Tax Rupees

How to file a Letter of Undertaking (LUT) in GST?

A Letter of Undertaking (LUT) is a written declaration submitted by an exporter to the authorities that declares that the exporter will not claim any tax benefits on the goods or services exported.

To file a LUT in GST, the exporter must first register with the GST system. After registration, the exporter can login to the GST portal and submit the LUT online. The Letter of Undertaking must be renewed every year on or before the 31st of March.

Who is required to file a LUT in GST?

All exporters who wish to avail the benefit of zero rating of GST on their exports are required to file a LUT.

The requirements for filing a LUT in GST

Online registration: The exporter must first register with the GST system. After registration, the exporter can login to the GST portal and submit the LUT online. The Letter of Undertaking must be renewed every year on or before the 31st of March. A LUT can be applied for by an exporter who is registered under the GST regime. The application must be made on the GST common portal in Form GST RFD-11. After logging into the portal, the taxpayer has to select the services tab and then go to registrations and click on ‘apply for registration’. A new page will open where the taxpayer has to select ‘exporter (LUT)’ as his/her registration type.

The following documents have to be submitted along with the form:

  1. A copy of PAN card;
  2. A copy of bank account statement or a cancelled cheque leaf;
  3. A self-declaration regarding turnover;
  4. A declaration regarding payment of taxes; and
  5. An affidavit declaring that the applicant is not declared as a defaulter under any other law

The procedure for filing a LUT in GST

The taxpayer has to select the services tab and then go to registrations and click on ‘apply for registration’. A new page will open where the taxpayer has to select ‘exporter (LUT)’ as his/her registration type. The taxpayer has to fill in the required details and upload the following documents-

  1. A copy of PAN card
  2. A cancelled cheque or bank account statement
  3. An authorization letter from the bank, if someone other than the applicant is operating the account
  4. A proof of business establishment, like a rent agreement, electricity bill, water bill, etc.
  5. In case of partnership firm – Partnership Deed
  6. In case of company – Certificate of Incorporation/Registration issued by Registrar of Companies/ROC

After filling in all the required details and uploading all the necessary documents, the taxpayer has to click on ‘submit’ button. An application reference number will be generated and the taxpayer will be required to pay the registration fee. After the payment is made, the LUT certificate will be issued by the GST authorities.

The benefits of filing a LUT in GST

The main benefit of filing a LUT in GST is that it allows the exporter to avail the benefit of zero rating of GST on their exports. This means that the exporter will not have to pay any taxes on the goods or services exported Another benefit of filing a LUT is that it helps the exporter to avoid reverse charge mechanism. Under this mechanism, the importer would have to pay GST on the imported goods or services. However, if the exporter has filed a LUT, then they will not be liable for any taxes on the exported goods or services. Lastly, filing a LUT can help the exporter in getting input tax credit. This means that the exporter can claim back any GST paid on inputs (e.g. raw materials) used in manufacturing the exported goods or providing the exported services. Overall, filing a LUT can help the exporter save on taxes and also improve their cash flow.
 

The consequences of not filing a LUT in GST

Default in filing of LUT:

  1. The exporter will not be able to avail the benefit of zero rating of GST on their exports. This means that the exporter will have to pay taxes on the goods or services exported.
  2. The exporter will not be able to avoid reverse charge mechanism. Under this mechanism, the exporter would have to pay GST on the imported goods or services.
  3. The exporter will also not be able to get input tax credit. This means that the exporter cannot claim back any GST paid on inputs (e.g. raw materials) used in manufacturing the exported goods or providing the exported services.
  4. The exporter will also be liable to pay a late filing fee of Rs. 100 per day (subject to maximum of 0.25% of the value of exports).
  5. The exporter will also be subject to interest and penalty for any defaults in payment of GST.

Conclusion

It is mandatory for all exporters who wish to avail the benefit of zero rating of GST on their exports to file a LUT. The Letter of Undertaking must be renewed every year on or before the 31st of March.

Filing a LUT can help the exporter save on taxes and also improve their cash flow. However, if the exporter does not file a LUT, then they will be liable to pay taxes on the exported goods or services. They will also be subject to interest and penalty for any defaults in payment of GST. It is advisable for the exporter to seek professional help in order to ensure that the LUT is filed correctly and on time.