LUT in GST, LUT under GST, Bond for Export, What is LUT in GST, Ebizfiling

GST LUT vs. Bond: Which One is More Suitable for Your Business


In the realm of tax compliance, businesses in many countries encounter various procedures and requirements. In India, the Goods and Services Tax (GST) has revolutionized the tax landscape, streamlining multiple indirect taxes into one comprehensive system. As part of GST compliance, businesses may need to furnish certain guarantees to the authorities, such as a Letter of Undertaking (LUT) or a Bond. These instruments enable businesses to avail of certain benefits and exemptions under GST. In this article, we will explore the concepts of GST LUT and Bond, highlighting their differences and helping you determine which option is more suitable for your business.

What is GST LUT?

A Letter of Undertaking (LUT) is a legal document filed by a registered GST taxpayer to export goods or services without paying integrated tax (IGST). It acts as a guarantee to the government that the business will comply with all export-related requirements and fulfill its tax obligations. The LUT simplifies the export process by eliminating the need to pay upfront taxes and then claim refunds later, which can lead to cash flow challenges.

What is a Bond?

A Bond, on the other hand, is a financial guarantee provided by the exporter to the customs department, assuring that any potential tax liabilities will be paid promptly. Under GST, businesses may be required to furnish a Bond if they do not qualify for or choose not to opt for the LUT facility. The Bond ensures that the government has recourse to recover any unpaid taxes or other dues.

What are the Differences between GST LUT and Bond?

To better understand the distinctions between GST LUT and Bond, let’s examine their key differences in the following table:





Exporting goods/services without paying IGST

Assuring payment of potential tax liabilities


Available to eligible registered taxpayers

Required for businesses not eligible for LUT

Application Process

Filing an online LUT form with the GST department

Submission of a Bond to the customs department

Financial Obligation

No financial outlay or deposit required

Financial guarantee involving a deposit or bank guarantee

Validity Period

One financial year (generally April to March)

As determined by the customs department

Compliance Monitoring

Self-monitoring with regular GST compliance

Regular scrutiny by customs and tax authorities

Penalty for Non-Compliance

GST liability, interest, and penalties

Forfeiture of the Bond amount and potential legal consequences

Administrative Overhead

Minimal paperwork and compliance requirements

Extensive paperwork and record-keeping obligations



Both GST LUT and Bond are mechanisms designed to facilitate businesses in their export activities while ensuring compliance with GST regulations. The choice between LUT and Bond depends on the eligibility of the taxpayer and their specific requirements. GST LUT offers a convenient option for eligible taxpayers by enabling them to export goods and services without upfront payment of IGST, thereby minimizing cash flow challenges. On the other hand, a Bond provides assurance to the customs department regarding the payment of taxes, making it a viable alternative for businesses not eligible for or opting not to use the LUT facility.

About Ebizfiling -

EbizFiling is a concept that emerged with the progressive and intellectual mindset of like-minded people. It aims at delivering the end-to-end incorporation, compliance, advisory, and management consultancy services to clients in India and abroad in all the best possible ways.
To know more about our services and for a free consultation, get in touch with our team on or call 9643203209.

Author: pallavi-dadhich

Pallavi is an ambitious English Literature student with a profound knowledge of content writing. Her SEO skills complement her content writing profile. She has a strong interest in expanding her set of skills by reading and learning. She is eager to experiment with creative writing styles while maintaining strong and informational content.

Follow Author

Leave a Reply

Your email address will not be published. Required fields are marked *


  • Deepika Khan

    29 Sep 2018

    I would rate 5/5 for their services, pricing and transparency.

  • Client review, Ebizfiling

    Neeta Vakhariya

    09 Mar 2018

    Delighted to work with them. Very efficient and hardworking staff.

  • Client review, Ebizfiling

    Sagar Mehra

    12 Dec 2017

    Kudos to the kind of services you are providing and the staff is helpful too.

Hi, Welcome to EbizFiling!

Hello there!!! Let us know if you have any Questions.

Thank you for your message.

whatsapp Call Now Button