In order to give boost to exports, the government provided certain facilities to the exporters under GST. As per section 16 of the IGST Act, 2017, export of goods and services is treated as Zero Rated Supply. This means that the GST would not be applicable to export of any kind of goods or services.
To understand how there is no incidence of tax in cases where goods or services are exported from India, you must know that exports under GST can be undertaken in the following two ways:
- Export under Bond/LUT without payment of IGST in which case the exporter can claim refund of the unutilized ITC
- Export along with the payment of IGST in which case the exporter claims refund for the IGST paid on such export of goods or services
Accordingly, zero rating means that the entire value chain of supply is exempt from GST. In this article, we will talk about LUT in GST, Form for LUT, Validity of LUT in GST and documents required for LUT in GST.[/vc_column_text]
What is LUT in GST?
In terms of export and import, a Letter of Undertaking is basically a guarantee that a bank provides to its customer (exporter in this case). Through this document of guarantee, the bank allows the customer to raise short – term credit from a foreign branch of any other Indian Bank. That is, the bank undertakes to repay such credit in foreign currency, in case its customer (or the exporter) fails to do so.
Under the GST regime, exporters fulfilling the requisite criteria need to file Letter of Undertaking for making exports without payment of IGST. As per Rule 96(A) of the CGST Rules, 2017, registered persons exporting goods and services without the payment of IGST must file Bond or LUT in Form GST RFD-11 prior to such exports.
Furthermore, exporters who do not meet the eligibility criteria for filing LUT are required to submit a Bond in place of an LUT for undertaking exports without the payment of IGST.
In addition to this, if such an exporter exporting goods or services without the payment of IGST fails to:
export goods within a prescribed time period or
receive remittance in convertible foreign exchange for export of goods or services within the prescribed time period
such an exporter is liable to pay IGST along with interest.
Who Can File LUT in GST?
Earlier, the government via Notification No. 16/2017 dated July 7th, 2017 rolled out the conditions for filing of LUT in place of a Bond for registered persons intending to supply goods and services for export without the payment of IGST.
These were, however, amended by the government by making changes in Notification No. 37/2017 – Central Tax dated October 4th, 2017. According to this notification, any registered person intending to supply goods or services for export without the payment of IGST can file an LUT in place of a Bond if the following conditions are filed.
Such a person has not been prosecuted under CGST or IGST Act, 2017 for evading tax of an amount more than Rs 2.50 Crore.
LUT must be filed in duplicate on the letter head of the registered person for the specific financial year in the Annexure to Form GST RFD-11 as mentioned in the sub-rule 1 of Rule 96A of CGST Rules 2017.
Furthermore, such an LUT must be executed by the working partner, company secretary, managing director, proprietor, person duly authorized by such working partner or board of directors of such a company.
The facility of exports under LUT without the payment of IGST would be withdrawn if the registered person fails to:
- pay tax with interest for either not exporting the goods and services within the prescribed time period or
- receive remittance in convertible foreign exchange for exports within the prescribed time period as mentioned in sub-rule 1 of Rule 96A of the CGST Rules, 2017.
However, if such a registered person pays tax due along with interest, such a facility of export without the payment of IGST would be restored.
Validity of LUT
As per Circular No. 4/4/2017 – GST dated July 7th, 2017, the LUT furnished for exports under GST would remain valid for a period of 12 months.
Furthermore, if the registered person choosing to file LUT for exports fails to comply with the conditions of furnishing LUT, he would be asked to file a Bond in place of LUT.
Time for Acceptance of LUT/Bond
Filing of LUT/Bond is a prerequisite for undertaking export of goods or services without the payment of IGST as per the GST Law. Therefore, LUT/Bond must be processed on priority basis.
Accordingly, the LUT/Bond must be accepted within a period of three working days from the date of filing of LUT/Bond along with the requisite documents by the exporter.
Documents for LUT
Every registered person intending to export under LUT without the payment of IGST needs to provide a self-declaration at the time of furnishing LUT. Such a self-declaration must state that the registered person has not been prosecuted for any offence under CGST or SGST Act with regards to the evasion of tax exceeding Rs 2.50 Crores.
This Self-Declaration may be accepted unless there is some additional information that is otherwise needed as evidence. Furthermore, Verification may be undertaken on a post-facto basis.
Purchase From Manufacturers
As per the previous Indirect Tax regime, a merchant exporter could purchase goods from a manufacturer without the payment of Central Excise Duty via CT-1 Form.
However, under the GST Regime, the transaction between the merchant exporter and the manufacturer is treated as supply and therefore attracts GST even on the submission of LUT or Bond. It must be noted that Zero Rated Supplies include only the supplies made by the actual exporter either under LUT/Bond or payment of IGST.
Transactions With EOUs
It must be noted that the Zero Rated supplies do not cover the supplies made to EOUs. Hence, the provisions of Zero Rated Supplies are not applicable to the goods and services supplied to the EOUs.
Accordingly, supplies made to EOUs are subject to GST, much like other taxable supplies. However, EOUs making exports are eligible for Zero Rating, much like any other exporter and are therefore covered under Zero Rated Supplies.
Jurisdiction For LUT Submission
The LUT/Bond issued for undertaking exports must be accepted by Jurisdictional Deputy or Assistant Commissioner having Jurisdiction over the Place of Business of the exporter.
The exporter has the freedom to file LUT/Bond with Central Tax or State Tax Authority until the process for assigning taxpayers to their respective authorities is put into force.
Process of Filing LUT
In order to file LUT for export of goods or services at the GST portal, you need to perform the following steps:
Access GST Portal
Visit gst.gov.in. On the Homepage, login to your account on the GST Portal by using your valid Login Credentials. Once logged in, click the ‘Services’ Tab, choose ‘User Services’ as the sub category and then select ‘Furnish Letter Of Undertaking (LUT)’ option from the drop down.
Fill Form GST RFD-11
On selecting the ‘Furnish Letter Of Undertaking (LUT)’ option, Form GST RFD-11 would be displayed on the screen. In the ‘LUT Applied For Financial Year’ field, choose the financial year for which LUT is to be applied from the drop down list.
Then, click the ‘Choose File’ button to upload the previous LUT. While uploading the previous LUT, remember, that only PDF or JPEG file formats are acceptable. And a maximum file size of 2MB can be uploaded.
Once this is done, select the ‘Declaration’ check boxes. Further, fill details in various fields such as name, address and occupation of the ‘Independent and Reliable Witnesses’ section.
One needs to enter the name and address of two witnesses in this section. Then, enter the ‘Place of Filing LUT’, ‘Name of Primary/Other Authorized Signatories and the ‘Place’ where the form is to be filed in the respective fields given in this section of the Form.
Save and Retrieve Later
Person filing LUT has an option to save this Form and retrieve it later. This can be done by clicking the ‘Save’ Button. Once, Form GST RFD-11 is saved, a confirmation message saying that the application is successfully saved is displayed on the screen.
Retrieving the Application Later
For retrieving the application on a later date, the person filing the application must click the ‘Services’ Tab, select ‘User Services’ as the sub-category and choose ‘My Saved Applications’ to retrieve the application on a later date.
GST RFD-11 Displayed in PDF
On choosing the specific GST RFD-11, complete Form would be displayed on the screen. People filing the application can click on the ‘Preview’ button to preview such a Form.
On doing so Form GST RFD-11 gets displayed in PDF Format.
Sign and File With DSC/EVC
In cases where the applicant saves the Form GST RFD-11 for retrieving it later, he must choose the name of the Authorized Signatory and enter the ‘Place’ where the Form is filed before going ahead with the filling of the Form.
He now has the option to sign and file with DSC or Sign and File with EVC.
Sign and File with DSC
If the applicant chooses this option, the applicant needs to sign the application via the registered Digital Signature Certificate (DSC) of the chosen authorized signatory.
Sign and File with EVC
If the applicant chooses this option, the system will send an OTP to the registered mobile number and email address of the authorized signatory. The applicant needs to enter the OTP in the pop up in order to sign the application.
For the purpose of this article, we will use the EVC option to generate the ARN number.
Accordingly, after filling the OTP, the GST portal will generate Application Reference Number (ARN) and will show the applicant a confirmation message. Further, it will send ARN on the registered email ID and the mobile number of the taxpayer.
Download the Acknowledgement
Then, the applicant must click the ‘Download’ button in order to download the Acknowledgment for LUT.
FAQs On LUT Under GST
1. Who has to furnish a Letter of Undertaking?
Any registered person availing the option to supply goods or services for export /SEZs without payment of integrated tax has to furnish a Letter of Undertaking (LUT) before making export/SEZs supply. Provided such a person has not been prosecuted for tax evasion for an amount of Rs 2.5 Crore or above under the CGST Act/IGST Act/Existing law.Following are the examples of transactions for which LUT can be used are:
- Zero rated supply to SEZ without payment of IGST.
- Export of goods to a country outside India without payment of IGST.
- Providing services to a client in a country outside India without payment of IGST.
2. How can I file LUT?
All registered taxpayers making zero-rated supply of goods or services have to furnish LUT in Form GST RFD-11 on the GST Portal before making such a supply. They need to access the GST portal and login using valid username and password.
Then, they need to click the ‘Services’ Tab on the homepage. Under ‘Services’ category, they need to select ‘User Services’ and then ‘Furnish Letter of Undertaking (LUT)’ sub-category to file LUT.
3. What is to be filled in LUT?
Once a taxpayer gets logged in to the GST Portal, his GSTIN and Name (Legal Name) would get auto-populated. Then, the taxpayer needs to select the financial year for which LUT is being filed, enter the name, address and occupation details of two independent and reliable witnesses. Taxpayer also needs to select all the points of self-declaration before filing the LUT.
4. What if I have already furnished a LUT and also got approval for it?
There can be a case where a taxpayer has any LUT which was furnished manually and got approved by the Tax Authority for current Financial Year. In such a situation, the taxpayer can upload that LUT and file this online application for furnishing LUT in order to seek the online approval for that previous LUT.
5. Is it mandatory to record the manually approved LUT in online records?
It is not mandatory to record the manually approved LUT in online records. But if a taxpayer wants to record the manually approved LUT to be available in online records, then he can furnish it with online application.
6. Is there any limitation regarding the upload of previous LUT?
Yes! Only one previous LUT document not exceeding 2 MB in size can be uploaded in one application. In case the taxpayer wants to upload another LUT, he needs to file a new application.
7. Can I as a taxpayer save the LUT application during the process of filing?
Yes! The GST Portal offers the facility to the taxpayer to save the application at any stage for 15 days. The taxpayer can retrieve the saved application using the following navigation pathway: Dashboard > Services > User Services > My Saved Applications.
8. Can I preview the LUT application?
The GST Portal gives an option to the taxpayer to Preview the application and save it in PDF format before signing and filing the application.
9. Who has to sign the LUT application?
The Primary authorized signatory or Any other Authorized Signatory needs to sign and file the verification with DSC/EVC. The Authorized signatory can be the working partner, the managing director or the proprietor or by a person duly authorized by such working partner or Board of Directors of such company or proprietor to execute the form.
10. How would I know that the process of furnishing LUT has been completed?
The system will generate ARN and acknowledgement after successful filing of the LUT application by the taxpayer. The taxpayer will be informed about successful filing via SMS and Email. So, the taxpayer can also download the acknowledgement as PDF.
11. Can I view my LUT application after filing?
Yes! The taxpayer will be able to see his ARN. He needs to follow the following navigation pathway: Services > User Services > View My Submitted LUTs.
12. How would the LUT application be processed?
The processing of LUT is available online for Model 2 States. For Model 1 States, Tax Official may process LUT manually/ online, depending on the facility available at back end of Model 1 States to process the LUT.
13. From where can I reply to notice issued by Tax Official?
The taxpayer can follow the following navigation pathway to reply to the notice issued by the tax official: Dashboard > Services > User Services > View Additional Notices/Orders.
14. From where can I view the order issued by Tax Official?
To view the order issued by the tax official, you need to follow the following navigation pathway: Dashboard > Services > User Services > View Additional Notices/Orders.
15. What will happen if a Tax Official doesn’t process the LUT application?
In case the tax official does not process the LUT application or does not issue any notice for clarification within 3 working days, then the application shall be deemed approved. Furthermore, the status of LUT application will change to “Deemed Approved”.
Thus, when the application is deemed approved, then an order copy will be generated through the GST Portal. This order will be available to the taxpayer in the downloadable form under Dashboard > Services > User Services > View Additional Notices/Orders option.
16. What are the various status of the LUT application filed by the taxpayer?
Following list provides various types of statuses that are displayed while the taxpayer files LUT application in Form GST RFD-11:
1. Submitted: Taxpayer submits the application successfully
2. Pending for Clarification: LUT Processing officer issues notice for seeking clarification
3. Pending for Order: Taxpayer submits the reply for notice within 15 working days. Or Taxpayer does not submit the reply for notice after completion of 15 working days. Then the GST Portal changes the status from ‘pending for clarification’ to ‘pending for order’.
4. Approved: Tax Official accepts the undertaking furnished by Taxpayer
5. Rejected: Tax Official rejects the undertaking furnished by Taxpayer
6. Deemed Approved: Tax Official doesn’t take any action within 3 working days
7. Expired: The status of the LUT application will get changed to Expired at the end of the respective FY.
17. Can a Tax Official disable LUT filing by the taxpayer?
A Tax Official who is LUT Processing Officer, may disable LUT filing functionality for a taxpayer on the GST Portal. When Tax Official has disabled LUT filing for a taxpayer, taxpayer is intimated through SMS and email.
18. Can a taxpayer raise request from GST Portal to enable LUT?
There are cases where the LUT Processing Officer has disabled the furnishing of LUT for some taxpayers. In such scenarios, to enable the furnishing of LUT, the taxpayer has to communicate this request to LUT Processing Officer manually. From GST Portal, the taxpayer cannot raise the request to enable furnishing of LUT.