LUT (Letter of Undertaking) is a document submitted by an exporter to comply with the GST requirements for zero-rated exports. LUT allows registered businesses in India to export goods or services without paying IGST upfront.
An LUT is generally valid for a financial year and must be furnished electronically on the GST portal. It helps exporters avoid blocking working capital in IGST payments while completing their export transactions.
How It Works:
- Exporters file the LUT on the GST portal.
- LUT is accepted for the financial year.
- The exporter exports goods or services without IGST.
- Export details are reported in GST returns.
- Exporters follow the applicable LUT conditions.
Benefits:
- Avoids upfront IGST payment
- Improves export cash flow
- Reduces working capital pressure
- Simplifies eligible export transactions
Example:
An Indian exporter ships goods worth ₹10 lakh to a US buyer under LUT. The exporter does not pay IGST upfront and completes the required export and GST compliance.