All you need to know about GST LUT

Introduction

The Goods and Services Tax (GST) is a value-added tax that is levied on goods and services sold in India. The GST was implemented on July 1, 2017, with the aim of simplifying the indirect tax system in India. One of the important components of GST compliance is the Letter of Undertaking (LUT). In this article, we will explain what GST LUT is and its significance.

What is GST LUT?

A Letter of Undertaking (LUT) is a document that is required for GST-registered businesses that export goods or services without payment of IGST (Integrated Goods and Services Tax). LUT is essentially a bond that an exporter gives to the government to guarantee that they will fulfill their export obligations and pay any taxes due. LUT is a legal document, and once it is issued, the exporter is required to comply with the terms and conditions mentioned in the document.

Who can apply for GST LUT?

All GST-registered exporters who intend to export goods or services without payment of IGST are eligible to apply for LUT. The LUT is applicable only for the current financial year, and the exporter needs to apply for a new LUT every financial year. It is important to note that LUT is not applicable for those who export goods or services on payment of IGST.

How to apply for GST LUT?

To apply for LUT, the exporter needs to:

1. log in to the GST portal using their registered username and password.
2. Once logged in, they need to go to the Services tab and select the User Services option. Under User Services, they need to select the option to furnish a Letter of Undertaking (LUT).
3. The exporter needs to then fill out the LUT application form with the required details and submit it online.
4. Once the application is submitted, it will be processed by the GST department, and if all the details are correct, the LUT will be issued to the exporter.

What are the benefits of GST LUT?

The main benefit of GST LUT is that it allows exporters to export goods or services without paying IGST. This helps reduce the cost of exports and makes Indian goods more competitive in the international market. The LUT also helps in simplifying the compliance process for exporters, as they do not have to pay IGST and then claim a refund for the same. This results in faster processing of exports and helps exporters save time and money. There are many benefits of GST LUT that can be taken by the exporter.

What are the documents required for GST LUT?

To apply for LUT, the exporter needs to submit the following documents:

• A self-declaration form
• A copy of the GST registration certificate
• A copy of the IEC (Import Export Code) certificate
• A copy of the bank statement for the previous year
• It is important to note that the exporter needs to have a clean track record with the GST department, and there should not be any pending GST payments or returns before applying for LUT.

What happens if the exporter fails to comply with the terms of LUT?

If the exporter fails to comply with the terms and conditions mentioned in the LUT, then the bond will be encased, and the exporter will be liable to pay the tax due along with the penalty. The exporter may also lose the privilege of exporting without payment of IGST in the future.

Conclusion

In conclusion, GST LUT is an important component of GST compliance for exporters in India. It allows exporters to export goods or services without payment of IGST, which helps in reducing the cost of exports and makes Indian goods more competitive in the international market. The LUT also simplifies the compliance process for exporters and helps in faster processing of exports. However, it is important for exporters to comply with the terms and conditions mentioned in the LUT, as failure to do so can result in penalties and loss of privileges. Hence, it is advisable for exporters to carefully read and understand the terms and conditions mentioned in the LUT before applying for it.