GST LUT filing or Export Bond filing

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Export sales are considered as a case of Inter-state sale under GST and is therefore covered under IGST Act. As per IGST Act, export of goods and services can be conducted under the following two possible ways:

[1] Submit LUT and then export without payment of IGST;
[2] Pay IGST at the time of export and then claim refund of IGST.
LUT or the Letter of Undertaking or Export Bond is paramount for Goods and Service exporters.

Which option is better- “Submit LUT” or “Pay GST and then claim Refund”?
If you opt for the 1st option- i.e. Submission of LUT, you will have to submit this LUT only once in a year and no other additional compliances are there. Also, there is no money involved in this process of submission of LUT.

However, if the 2nd option is opted i.e.-pay GST first and then claim refund, your money gets blocked from the date of payment till the date of refund as you would first be required to deposit GST and afterwards claim refund. Also, an additional form is required to be filed every month for claiming the refund so the compliance increases.

Hence the 1st option of submitting LUT is better than the 2nd option of paying GST first and then claiming refund.

Export under LUT
Any registered person availing the option to supply goods 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 Bond and LUT Format to the jurisdictional officer. This is also required in the case of provision of goods or services to SEZ Units/ Developer.

Initially online filing of LUT was not enabled but the option of filing of LUT online has been enabled by CBEC from end of Feb’2018.

Eligibility for Export under LUT
All Goods and Service exporters are eligible to submit LUT except the exporters who have been prosecuted and the amount of tax evaded exceeds Rs.2.50 crores (or say 250 lakhs) under:

[1] CGST Act, or
[2] IGST Act, or
[3] Any of the existing laws

These exporters who are not eligible to submit LUT can opt the option to “Pay GST and then claim Refund” or can “Submit Bond with Bank Guarantee and export without payment of GST”.

Conditions to be filled by Exporter under LUT
An exporter submitting LUT have to fulfil following conditions at all times :

  • In case of Export of goods : Export of goods should be completed within three months from the date of issue of an invoice for the same;
  • In case of Export of services : Payment against an invoice of service should be received by such exporter within one year from the date of issue of such invoice for export. And, furthermore, such payment should be received in convertible foreign exchange.

In case of failure to comply with Rule 96A, such exporter will have to pay IGST tax himself along with interest as specified in Section 50(1) of CGST Act. Further, his LUT shall also be withdrawn which will be restored only after payment of such tax.

Validity of LUT
LUT remains valid for a single Financial Year. Every exporter has to submit LUT for every financial year.

Submission of LUT online
GSTN has enabled the service of submission of LUT in GST RFD-11 through online mode. User has to login to his account on GST portal and choose ‘File Letter of Undertaking (LUT)’ under ‘USER Services’.

After submission of LUT through online portal, there is no requirement to file physical documents of such LUT with GST department. Once ARN gets generated after submission of LUT online, it will be deemed as accepted.

Documents required for submission of LUT Online
There is no requirement of any documents to upload with online application. However, to complete the application, following documents/ information must be available:

  1. Detail of witnesses along with their identity and address proofs;
  2. Consent letter of witnesses for such LUT;
  3. Acceptance letter from department acknowledging LUT of any previous year;
  4. Although, there is no document required to submit manually to department, it is advisable to create a proper file with all documents as required in manual mode of submission of LUT.

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This information is in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Mind Sync does not accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any information provided herein. On any specific matter, reference should be made to the appropriate advisor.