LUT

Why it matters to your business

Exports are zero-rated under GST: no tax should stay in the price your foreign buyer pays. You can reach that in two ways. Pay IGST on the export and claim it back, or file an LUT and export without paying it at all. For most exporters the LUT is better for cash flow, because no money is locked up waiting for a refund.

How it works

As of October 2026:

• You file Form GST RFD-11 on the GST portal, under Services → User Services → Furnish Letter of Undertaking. It needs no bank guarantee and is accepted online.
• The LUT covers one financial year. Many exporters file it in March for the year that starts on 1 April.
• Each export invoice under LUT states that it is a supply meant for export under a Letter of Undertaking without payment of integrated tax.
• Goods must leave India within three months of the invoice date, and payment for services must be received within the time the law allows. If not, the tax becomes payable with interest.
• The invoice is reported in GSTR-1 as an export without payment of tax, with the shipping bill details for goods.

An example

A Tiruppur garment exporter ships an order worth USD 20,000 to a buyer in Germany. With an LUT on file, the invoice carries no IGST. The exporter claims a refund of the input tax credit on fabric and other purchases. Without the LUT, the exporter would first pay IGST on the full value and wait for it to come back.

Common mistakes

• Forgetting to renew the LUT in April and exporting on last year’s.
• Charging no IGST on an invoice without an LUT in force.
• Leaving the shipping bill details off the return, which holds up the refund.