Export of goods and services is the focus area of the government. India is a member of the World trade organization (WTO) since January 1995. India being a member of WTO has promised to provide a concessional rate or tax-free goods and services for exporters of goods and services. The concessions are in two forms under the GST law as set out below:
- Exporter under the bond or LUT
- Pay IGST on Exported services and claim refund
We will restrict our discussion to the ‘’Letter of Undertaking’’ (LUT) since the purpose of this article to let you understand the clear position of LUT under the GST, how LUT is filed, What is LUT is not filed and so many questions that registered person asks about LUT.
- Who can file LUT
LUT is submitted by the exporter of goods and services who is registered under the GST act. The purpose of the LUT is to export goods and services without payment of GST. A person who has been prosecuted for offence under any law where tax evaded exceeds Rs. 250 lakhs cannot execute or file LUT.
For Example: Atul has GST registration in Gurgaon and he wants to export goods and services without payment of tax. How can he do so?
Atul has GST registration in Gurgaon, so first, he has to apply for LUT. Once the acknowledgement is generated, then he can export without payment of IGST.
2. Period of Validity of LUT
LUT is filed for a financial year i.e. it is valid for 12 months.
3. Refund of ITC is available even if the export is made without LUT/Bond
Under the GST act exporter is required to submit LUT before making an export of goods or services. Since the export of goods and services is a zero-rated supply and to get the refund of input tax credit laying the electronic credit ledger LUT is to be submitted. In some case, GST officer rejects your refund application on the ground that LUT was not submitted or late submitted which is legally incorrect. Since the GST is a consumption-based tax and it is a well-known statement that ‘Goods are exported, taxes are not exported’ hence to give relief to the exporter government issued a circular no 125/44/2019 dated 18-11-2019 specified that delay in furnishing of LUT may be condoned and it shall be allowed on the facts and circumstances of the case.
It is to be noted benefit of that zero-rated supplies may not be denied on the basis of non-submission of LUT even though goods are exported.
4. GST is not payable even if goods are not exported within 3 months and Payment is not received within 1 year in foreign currency in case of Services
Any registered person availing the option to supply goods and/or services for export without payment of integrated tax shall furnish, prior to export, a bond or a Letter of Undertaking in FORM GST RFD-11
Conditions of LUT–
The registered person shall bind himself to pay the tax due along with the interest
- If the goods are not exported out of India within 15 days after the expiry of 3 months,
- if the payment of such services is not received by the exporter in convertible foreign exchange within 15 days after the expiry of 1 year.
If the goods are not exported within the time specified above and the registered person fails to pay the IGST amount, the export as allowed under bond or Letter of Undertaking shall be withdrawn forthwith and the said amount shall be recovered from the registered person in accordance with the provisions of section 79. Bond or Letter of Undertaking shall be restored immediately after the registered person pays the amount due.
5. Document and details required to file LUT
The facility to file FORM GST RFD-11 is available online. If you are a registered person, holding GST registration You can go to the https://www.gst.gov.in/ . In the ‘User Service’ tab, you will find the ‘Furnish Letter of Undertaking’ option. Upon clicking, it will ask the year for which LUT is being applied and two witnesses’ details. The LUT shall be deemed to be accepted as soon as an acknowledgement for the same, bearing the Application Reference Number (ARN), is generated online.
About the author: Nitin Bhatia is a qualified chartered accountant practising in Delhi/NCR. He is the best CA in Gurgaon. During his professional journey, he has gained advanced experience in International Taxation, Transfer Pricing, Expatriate Taxation, Corporate Taxation, Domestic Taxation and litigation matters. International Taxation and Domestic taxation are his study topic, and he is deeply involved and updated with the recent judicial pronouncements. It helps him to give efficient and legitimate tax planning to his clients.
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