Export of Goods And Services against lut

LUT and bonds are instruments that evidence an undertaking by the taxpayer for exports. Here we give an insight into the details about when to opt for LUT and when to opt for Bond. Not only this but also how to claim the refund of IGST paid on exports in simple steps.

Export is a significant term for multinational trade. It includes the sale of goods/ services from one country to another. In India, there are various rules, regulations, and procedures have been introduced to promote exports by the Indian Government. It makes the procedure simple for exporters. One such regulation is the exporting of goods and services against a Letter of Undertaking (hereinafter referred to as LUT)The GST LUT Form is an essential document that enables you to seamlessly conduct your export transactions without paying Integrated Goods and Services Tax (IGST) at the time of supply.

The concept of LUT under Export of Goods and Service against Letter of Undertaking

LUT is a document that works as a guarantee by an exporter. That they will fulfill their obligations of paying customs duty, if applicable, on their exported goods or services. It is a binding commitment to a government that exporters will comply with all the applicable laws and regulations regarding exports.

The LUT introduce by the exporter and submits to the jurisdictional Assistant Commissioner of Customs or Deputy Commissioner of Customs. It is a document that exporters can file to export their goods/services without paying taxes. As per the new GST regime, all exports are under the IGST that later can be reclaimed as a refund against the tax payment.

LUT gives exporters the effort of having a refund and terminates the funds blocking through the payments of tax. In accordance with CGST Rules, 2017 any registered person can have LUT in form of GST RFD-11 and export goods/ services without tax payment.

Who can apply for LUT under Export of Goods and Service against Letter of Undertaking?

Any person can apply for LUT if in case: –

Are registered under GST;
Intention to export goods/ services; and
Wish to export goods/services without any payment of an integrated tax.

When to apply for a LUT?

It is significant to have all necessary documents with exporters. While filing LUT, is filed by an exporter before the shipment of goods and services. The exporter must apply for LUT before the start of the financial year for which they wish to export. The exporter must renew the LUT annually before the expiry date. Prior to the implementation of the GST regime, exporters had to manually file and signed RFD-11 on business letterhead in duplicate-

One has given to the Assistant Commissioner/ Jurisdictional Deputy having jurisdiction over their principal place of business where the verification of the export documents happens by ICEGATE way.
Another one is with the export documents to the customs clearing authority.

Documents required at the time of filing LUT

Application Form: An application form for obtaining a LUT must be submitted online using the Digital Signature Certificate (DSC) of the authorized signatory of the company.
PAN Card: A copy of the PAN card of the company must be submitted as proof of identity.
GST Registration Certificate: A copy of the GST Registration certificate of the company must be submitted to prove that the company is registered under the Goods and Services Tax (GST) regime.
Bank Details: Details of the company’s bank account, including the name of the bank, branch, and account number must be submitted.
Export Order: A copy of the export order or contract must be submitted to show the details of the goods or services that will be exported.
Invoice: A copy of the commercial invoice must be submitted to show the value of the goods or services that will be exported.
Incorporation Documents: Incorporation documents of the company, such as the Memorandum of Association (MOA) and Article of Association (AOA), must be submitted.
Authorized Signatory Letter: A letter from the authorized signatory of the company must be submitted, authorizing the person submitting the LUT application on behalf of the company.
Digital Signature Certificate: The DSC of the authorized signatory of the company must be submitted as part of the online LUT application process.
Business Proof: Proof of the company’s business, such as a certificate of incorporation, certificate of business registration, or trade license, must be submitted.
Declaration: A declaration must be submitted by the authorized signatory of the company, stating that the information submitted in the LUT application is true and correct.

Eligibility to export under LUT

Export under LUT are extending to all registered persons who intend to supply goods/ services. For export without payment of integrated tax, apart from those who are prosecuted for any offense under the IGST Act/ CGST Act, 2017, or any other existing laws. The tax evaded amount in such circumstances exceeds INR 250 Lakhs.

Benefits of Export of Goods and Services against Letter of Undertaking

Exemption from Furnishing a Bank Guarantee: The biggest advantage of exporting against LUT is that it exempts the exporter from furnishing a bank guarantee for customs duty, if applicable. This saves the exporter a significant amount of money and effort that would otherwise be required to obtain a bank guarantee.
Streamlined Exportation Process: Exporting against a LUT simplifies the export process, as the exporter does not have to provide any additional security or collateral. These speed up the export process and allow the exporter to focus on the other important aspects of their business.
Increased Confidence: Exporters who have a good track record of compliance with the regulations and laws regarding exports can increase their confidence in their ability to compete in the global marketplace by obtaining a LUT.
Improved Reputation: Exporters who export against a LUT are seen as trustworthy and reliable, which can improve their reputation and help them attract new business.

Process for obtaining a LUT

Apply for a PAN Number: To obtain a LUT, the first step is to apply for a Permanent Account Number (PAN) from the Income Tax Department. The PAN is a unique identifier that is required for various financial transactions, including exporting goods and services.
Register with the Director General of Foreign Trade (DGFT): The next step is to register with the Director General of Foreign Trade (DGFT). This can be done by filling out the application form available on the DGFT website and submitting it along with the required documents.
Obtain a Digital Signature Certificate (DSC): A Digital Signature Certificate (DSC) is required to complete the online application process for a LUT. The DSC is used to authenticate the identity of the applicant and ensure the security of online transactions.
Fill out the Online Application Form: Once the PAN, DGFT registration, and DSC are in place, the next step is to fill out the online application form for a LUT on the DGFT website. The form requires the exporter to provide details such as their PAN, DGFT registration number, and bank account details.
Submit the Application: After filling out the online application form, the exporter must submit it along with the required documents, such as the PAN card, DGFT registration certificate, and bank details.
Approval: The Assistant Commissioner of Customs or Deputy Commissioner of Customs will review the application and once satisfied with the information provided, will issue the LUT to the exporter. This process usually takes about 15-20 working days.
Use of LUT: Once the exporter has received the LUT, they can start exporting their goods or services without having to furnish a bank guarantee for the customs duty, if applicable. The LUT must be produced at the time of shipment, and the exporter must ensure that they comply with all the regulations and laws regarding exports.
Renewal of LUT: The LUT is valid for one financial year and must be renewed annually by the exporter. The renewal process is similar to the initial application process, and the exporter must ensure that they submit the renewal application before the expiry date of the current LUT.

Steps to furnish LUT on the GST Portal

The most significant and starting step is to log in to your profile on the GST for furnishing LUT in the GST refund process.
The next step is to go to “SERVICES TAB”, and then click on the “USER SERVICES” drop down there is an option of ‘Furnish LUT”.
Then choose the financial year for that LUT is applied from the ‘LUT applied for financial year”. If in case, there has been LUT already done manually for any of the previous years then upload the same by choosing the file option on the same window in form of JPEG/ PDF formats permitted; and the maximum size of the file will be 2 MB.
There need to be fill up the important details on the LUT form that is also known as GST RFD-11, which comes on the screen and following requirements have to be done on the form:
Self-declaration- Click against each of the three boxes, through this exporter are giving undertaking by following things such as to pay IGST along with interest if failed to export (interest should be paid at the rate of 18% a year for the time from the issue date of export invoices up to payment date of IGST; export of goods/ services will be accomplished within three months period from the issue date of export invoices or in additional period permitted through the Commissioner if any; and to abide by GST law in relation to exports.
Provide information of independent witnesses- There is a box in which you have to mention the name, address, and occupation of two independent witnesses is compulsory (witnesses mentioned in LUT are ones who declared on the current bond/ bank guarantee.
Enter the place of filing, once this process is done, you can check the form.
Sign and file the form, the signature has to be done with a registered digital signature certificate or by electronic verification code, these both options appear on the form. Once the form is signed and submitted then it cannot be edited.
The confirmation message sends to the registered contact no. and email of the Taxpayer by the GST Portal. Then you can download the LUT application from the portal.

LUT bond in GST- Necessary things to remember

LUT will be valid for 12 months from the date of its submission.
It is needed to be filed on the letterhead of the registered person whose intention is to supply goods/ services without the payment of integrated tax.
LUT shall be duly applied in the prescribed form i.e. GST RFD-11, which can be filed by the MD, CS, or another authorized person in the case of a company; partners if it is a partnership firm; and by the proprietor, if it is firm.
LUT is accepted in certain situations, failing to comply with these will cause revocation of privileges associated with the document. In such circumstances, the exporter will be needed to furnish a bond.
A bond can be furnished by entities, which are not eligible to apply for a LUT. For that, there are certain requirements it must be non-judicial stamp paper and accompanied by a guarantee from the bank. That bond must have an estimated tax liability depending on the assignment of the exporter.
The guarantee of the bank accompanying the bond should not exceed 15% of the bond amount, and that can be waived by the jurisdictional GST commissioner.

FAQs

What should be filed in the letter of undertaking?

GSTIN and Name (Legal Name) of the Taxpayer will be prefilled based on login. 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.

Is it mandatory to record them manually approved LUT in online records?

It is not mandatory, but if the Taxpayer wants to record the manually approved LUT to be available in online records, he can furnish it with the online application.

Who has to sign the LUT application?

Primary authorized signatory/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 operating partner or Board of Directors of such company or proprietor to execute the form.

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