LUT (Letter of Undertaking) Complete Guide for Indian Exporters & Freelancers

Introduction: The ₹18,000 Tax Trap You're Probably Paying

Imagine this: You're a freelance software developer in Mumbai. You invoice a US client for ₹1,00,000. Without an LUT, you'd have to pay ₹18,000 as IGST upfront, wait 2-3 months for a refund, and explain to your bank why you're short on working capital .

With an LUT? Zero upfront tax. The entire ₹1,00,000 stays in your account. Your cash flow remains intact. And you avoid the bureaucratic nightmare of refund claims.

This is the power of the Letter of Undertaking (LUT) under GST—a document most exporters don't know exists, but should be filing as soon as they start their business.

What is an LUT in GST?

A Letter of Undertaking (LUT) is a formal declaration filed with GST authorities that allows registered taxpayers to export goods or services without paying Integrated GST (IGST) upfront .

Under GST law, exports are considered "zero-rated supplies" . This means they're exempt from GST, but you have two ways to claim this benefit:

Why Do Exporters Need an LUT?

1. No Upfront IGST Payment
The biggest benefit—you don't pay IGST at the time of export. This prevents funds from being tied up in tax payments .

2. Better Working Capital Management
Since you don't have to arrange funds for IGST, more money stays available for inventory, supplier payments, and day-to-day expenses .

3. No Bank Guarantee Required
Unlike the Bond route, LUT requires no security, no bank guarantee, and no collateral . It's based purely on your promise of compliance.

4. One Filing for the Entire Year
An LUT remains valid for one full financial year (April 1 to March 31). You only need to file it once to cover all your export transactions for that period .

5. Competitive Pricing
By removing the tax cost from your exports, you can offer more competitive pricing to international buyers .

Who Can File an LUT?

✅ Eligibility Criteria
You can file an LUT if you meet these conditions :

Registered under GST in India

Engaged in export of goods or services

No prosecution history for tax evasion exceeding ₹2.5 crore under GST or any existing law

Valid Import Export Code (IEC) for goods exporters

❌ ## Who Cannot File an LUT?
Exporters who have been prosecuted for tax evasion of ₹2.5 crore or more

Those who have defaulted on previous LUT conditions (privilege may be withdrawn)

LUT vs Bond: What's the Difference?
If your business doesn't qualify for an LUT, you must furnish a Bond to export without paying IGST . Here's how they compare:

Step-by-Step LUT Filing Process

The entire process is now fully digital on the GST portal and completely free .

Step 1: Log in to the GST Portal
Go to www.gst.gov.in and log in with your GST credentials .

Step 2: Navigate to LUT Filing
Go to: Services → User Services → Furnish Letter of Undertaking (LUT) .

Step 3: Select the Financial Year
Choose the financial year for which you're filing the LUT .

Step 4: Fill Form GST RFD-11
Enter the required details:

GSTIN and legal name of the taxpayer

Financial year

Details of two independent witnesses (names, occupations, addresses)

Self-declaration statements

Step 5: Sign and Submit
Authenticate using either:

Digital Signature Certificate (DSC) - Mandatory for companies and LLPs

Electronic Verification Code (EVC) - For proprietors and partnerships

Step 6: Download Acknowledgement
Upon successful submission, an Application Reference Number (ARN) is generated. Download the acknowledgement for your records .

Documents Required for LUT Filing
Unlike many GST processes, LUT filing does not require uploading a set of supporting documents . The system relies on your GST registration details and compliance history already available.

However, keep these ready before starting :

GSTIN and GST portal login credentials

PAN card of the business or proprietor

Import Export Code (IEC) for goods exporters

Details of authorised signatory

Two witnesses (name and address)

Digital Signature Certificate (DSC) or EVC access

Validity and Renewal
⏰ When Does LUT Expire?
An LUT is valid only for the specific financial year it was filed for :

Valid from the date of filing until March 31 of that financial year

Does NOT automatically extend to the next year

Expires at 12:00 AM on April 1

📅 When to File?
File your LUT at the beginning of each financial year (April 1 onwards), before issuing your first export invoice of the year .

Important: Many exporters complete this in April itself to avoid tax blocks on their first shipment .

⚠️ What Happens If You Don't Renew?
Your exports will attract IGST (18% or applicable rate)

You must pay tax upfront and claim refund later

You face compliance issues and potential penalties

What Happens After Filing the LUT?
Export Compliance Conditions Under Rule 96A
Once you have an LUT, you must fulfill these conditions :

For Goods: Export must occur within 3 months of the invoice date

For Services: Payment must be received within 1 year of the invoice date

If these timelines aren't met, IGST with interest @18% must be paid within 15 days of expiry

The 5 Conditions for Export of Services
For a service to be treated as a zero-rated export under LUT :

Supplier is located in India

Recipient is located outside India

Place of supply is outside India

Payment received in convertible foreign exchange

No ownership relationship between supplier and recipient

LUT for Freelancers and Service Exporters
Good news: Freelancers, consultants, and independent professionals can use LUT just like product exporters .

Key requirements for freelancers:

GST registration (mandatory even if turnover is below ₹20 lakh for exports, as exports are inter-State supplies under Section 7 of the IGST Act)

Services must meet the 5 conditions above

Payment must be received in convertible foreign exchange

Common Mistakes Exporters Make

1. Filing for the Wrong Financial Year
Since LUT is strictly year-specific, selecting the wrong year renders it ineffective. Check twice before submitting .

2. Not Renewing at Year Start
Many exporters assume LUT is a one-time filing. It's not—you must file every year .

3. Exporting Without a Valid LUT
If you export in the new year before filing a fresh LUT, you must pay IGST and claim a refund .

4. Misspelled Witness Details
Form GST RFD-11 requires two independent witnesses. Ensure details are accurate and valid .

LUT vs Paying IGST and Claiming Refund
For most regular exporters and freelancers, LUT is the better choice :

Factor LUT Route Pay IGST & Claim Refund
Upfront tax outflow None IGST paid on every export invoice
Working capital impact Cash stays with business Cash blocked until refund processed
Compliance One form per year Refund application after every export
Best suited for Regular exporters, SaaS, freelancers Occasional exporters, those ineligible for LUT
How Zoffs Can Help You with LUT Compliance
Managing LUT compliance, export invoices, and GST returns manually is tedious. With Zoffs, you can:

✅ Track LUT & ARN Numbers - Store and display LUT/ARN on all export invoices
✅ Generate Export Invoices - Professional invoices with zero-rated IGST and LUT details
✅ Automatic GST Calculation - IGST vs CGST/SGST based on export status
✅ FIRC Tracking - Upload and manage Foreign Inward Remittance Certificates
✅ GSTR-1 / GSTR-3B Automation - Auto-generate returns with export and domestic breakup
✅ HSN/SAC Summaries - Code-wise breakdown for easy filing
✅ Real-time Exchange Rates - Accurate INR conversion for foreign income

Frequently Asked Questions

Q1: Is an LUT mandatory for exporting services under GST?
Yes. You must file an LUT if you want to export services without paying IGST. Without it, you must pay IGST and claim a refund .

Q2: How often must I renew an LUT?
You must file a fresh LUT every financial year (April 1 to March 31). It cannot be filed once and forgotten .

Q3: What is Form GST RFD-11?
It's the official form used to file an LUT on the GST portal. It includes GSTIN, financial year details, witness information, and self-declarations .

Q4: Can I file an LUT if I'm a freelancer?
Yes. Freelancers and service providers can file LUT if they have GST registration and meet the export of services conditions .

Q5: What is the due date for filing LUT?
There's no fixed "due date" per se, but you should file before making any export in a financial year. Most exporters file in April .

Q6: Do I need a bank guarantee for LUT?
No. LUT requires NO bank guarantee, unlike Bond. It's based purely on your promise of compliance .

Q7: What happens if I don't receive export payment within 1 year?
You must pay IGST with interest @18% within 15 days of the expiry of the 1-year period. Once paid, LUT status is restored .

Conclusion: Start Exporting Tax-Free Today
A Letter of Undertaking (LUT) is one of the most powerful compliance tools for Indian exporters. It allows you to:

✅ Export without paying IGST upfront

✅ Keep your working capital intact

✅ Avoid the hassle of refund claims

✅ File just ONE online form per year

If you're exporting goods or services from India, you should be filing an LUT. It's free, it's simple, and it saves you thousands in blocked taxes.

Start Your Export Compliance Journey with Zoffs

Ready to simplify your export invoicing and GST compliance? With Zoffs, you can:

✅ Generate professional export invoices with LUT/ARN details
✅ Auto-calculate IGST (0% for exports)
✅ Track FIRC documents
✅ Auto-generate GSTR-1, GSTR-3B, and GSTR-9
✅ Manage HSN/SAC summaries for export transactions

Try Zoffs today and focus on growing your export business.

This response is AI-generated and for reference purposes only.