GST LUT for Exporters: Export Without Payment of IGST

GST LUT for Exporters: Complete Guide to Export Without Payment of IGST

Exporters in India can make eligible exports without paying Integrated Goods and Services Tax (IGST) upfront by furnishing a Letter of Undertaking (LUT) under the GST law. This mechanism is particularly useful for businesses that regularly export goods or services because it can reduce the need to block working capital in the form of IGST payments.

Under the GST framework, exports are treated as zero-rated supplies. An exporter generally has the option to export under a bond or LUT without payment of IGST and claim a refund of eligible accumulated input tax credit, or, where permitted, export on payment of IGST and claim refund of the tax paid. The GST framework and CBIC's sectoral guidance recognise both routes.

This guide explains GST LUT in simple terms, including who can use it, how LUT filing works, its validity, export invoice requirements, ITC refunds, compliance requirements, common mistakes and important points for exporters of goods and services.

What is LUT under GST?

LUT stands for Letter of Undertaking. It is an undertaking furnished by an eligible registered taxpayer who wants to supply goods or services for export without payment of IGST.

The LUT mechanism is provided under Rule 96A of the CGST Rules, 2017, read with the provisions governing zero-rated supplies under the IGST Act.

Instead of paying IGST on an eligible export transaction and subsequently seeking a refund of that IGST, the exporter can furnish an LUT and make the export without payment of IGST, subject to the applicable conditions.

In simple terms:

LUT → Export without payment of IGST → Preserve working capital → Claim eligible refund of accumulated ITC, where applicable

Why is LUT important for exporters?

Exports often involve significant purchases of raw materials, services, software, packaging materials, professional services, freight-related services and other business inputs. GST may be paid on these inputs, resulting in accumulated input tax credit.

If the exporter has to pay IGST on every export transaction, substantial funds may remain blocked until the corresponding refund is processed.

Using LUT can allow an eligible exporter to make the export without paying IGST upfront.

This can be particularly useful for:

Manufacturers exporting goods outside India.
Merchant exporters.
IT and software companies.
Consulting and professional service providers.
Digital service businesses exporting eligible services.
Engineering and design companies.
Export-oriented businesses with regular overseas customers.

What is zero-rated supply under GST?

Exports are treated as zero-rated supplies under the IGST framework, subject to the statutory conditions.

The important point is that zero-rated does not simply mean exempt from GST.

Zero-rated supplies receive a different treatment under GST because the law allows specified exporters to claim refunds of eligible input tax credit or, where applicable, IGST paid on exports.

For exporters, this distinction is important because an exporter may incur GST on purchases even though the final export is made without charging GST to the overseas customer.

What are the two main ways to export under GST?

Broadly, eligible exporters can use one of two routes for zero-rated supplies, subject to the applicable law and conditions.

Option 1: Export under LUT without payment of IGST

The exporter furnishes an LUT and exports without charging IGST on the export supply.

Where eligible, the exporter can subsequently claim a refund of accumulated unutilised ITC attributable to zero-rated supplies, following the applicable refund procedure.

Option 2: Export on payment of IGST

Where the applicable provisions permit, an exporter can pay IGST on the export supply and claim refund of the IGST paid after satisfying the applicable requirements.

The choice between the available routes depends on the taxpayer's circumstances, transaction type, refund position and applicable GST provisions.

Who can furnish an LUT?

The GST LUT facility has evolved since GST was introduced. The original conditions were subsequently relaxed, and the facility was extended to exporters subject to the applicable safeguards.

Today, exporters should verify the current eligibility conditions before filing their LUT rather than relying on older articles that reproduce the original 2017 eligibility restrictions.

A registered person intending to export goods or services without payment of IGST generally uses the LUT mechanism under Rule 96A, subject to the applicable conditions.

Is GST registration required for LUT?

Yes. LUT is a GST compliance facility available to a registered person making eligible zero-rated supplies.

A person who is not registered under GST cannot simply furnish an LUT to obtain the benefits available to a GST-registered exporter.

Therefore, businesses planning regular exports should first determine whether GST registration is required and whether their transactions qualify as exports or other zero-rated supplies.

Does LUT apply to export of goods?

Yes. An eligible registered person can furnish an LUT for exporting goods without payment of IGST, subject to the applicable conditions.

For goods exports, the exporter must also complete the applicable customs and export documentation requirements.

Important documents can include:

Tax invoice.
Shipping bill.
Export documentation.
E-way bill, where applicable.
GST return details.
Banking and foreign remittance records.
Other supporting documents required for the particular transaction.

Does LUT apply to export of services?

Yes. Eligible export of services can also be supplied without payment of IGST under an LUT, subject to satisfying the statutory definition and conditions for export of services.

Businesses providing software development, consulting, design, engineering, accounting, marketing, IT-enabled and other services to overseas customers should carefully verify whether their transactions qualify as export of services under the IGST Act.

What are the conditions for export of services?

For a transaction to qualify as export of services, the statutory conditions relating to the supplier, recipient, place of supply and other requirements must be examined.

In general, the export-of-services framework requires consideration of matters such as:

The supplier being located in India.
The recipient being located outside India.
The place of supply being outside India, subject to the statutory provisions.
Payment being received in accordance with the applicable foreign exchange and RBI requirements, including permitted INR situations where applicable.
The supplier and recipient not merely being establishments of the same person in circumstances excluded by the law.

Therefore, simply receiving money from a foreign customer does not automatically make every service transaction an export of services.

Is LUT required every financial year?

LUT is generally furnished for the relevant financial year. Exporters who want to continue making exports without payment of IGST should furnish a fresh LUT for the new financial year.

For example, an exporter using LUT for FY 2026-27 should ensure that the LUT for that financial year has been furnished before making relevant exports under the LUT route.

Businesses should avoid assuming that an LUT furnished for one financial year automatically covers every subsequent financial year.

When should an LUT be filed?

The safest compliance approach is to furnish the LUT before making the relevant zero-rated supplies under the LUT route.

Exporters should therefore include LUT renewal in their annual GST compliance calendar rather than waiting until the first export transaction of the new financial year.

For businesses with continuous exports, completing the annual LUT process at the beginning of the financial year can help avoid unnecessary compliance issues.

How to file LUT on the GST portal?

The LUT filing process is generally completed electronically through the GST portal.

The commonly used portal route is:

GST Portal → Services → User Services → Furnish Letter of Undertaking (LUT)

The taxpayer should log in using the appropriate GST credentials and select the relevant financial year.

Step-by-step GST LUT filing process

Log in to the GST portal.
Open the Services section.
Go to User Services.
Select the option for furnishing the Letter of Undertaking.
Select the applicable financial year.
Enter or verify the required details.
Provide the details of the authorised signatory.
Complete the declaration and undertaking.
Sign the application using the permitted electronic authentication method.
Submit the LUT.
Save the acknowledgement/reference number generated by the portal.

GST portal functionality and authentication options can change, so taxpayers should follow the options displayed on the portal when filing.

What is Form GST RFD-11?

Form GST RFD-11 is associated with the Letter of Undertaking for exports without payment of integrated tax.

Rule 96A provides the statutory framework for furnishing the bond or LUT, and the GST system provides an online process for furnishing the LUT.

Exporters should retain evidence of the LUT filing and acknowledgement for their records.

What information is required for LUT filing?

The exact fields presented by the GST portal may vary based on the taxpayer and portal updates. Typically, the exporter needs information relating to:

GSTIN.
Legal name of the business.
Financial year.
Authorised signatory.
Witness details, where required by the form.
Declarations and undertakings prescribed under the applicable framework.

Businesses should ensure that the authorised signatory has appropriate authority to submit the undertaking on behalf of the entity.

Is a bank guarantee required for LUT?

The LUT mechanism is intended to provide an undertaking in place of a bond where the applicable conditions are satisfied. The exporter using the LUT route should therefore distinguish between an LUT and a bond.

The specific requirements applicable to the taxpayer should always be checked against the current GST rules and portal procedure.

LUT vs Bond under GST

Particular	LUT	Bond
Purpose	Export without payment of IGST	Export without payment of IGST
Nature	Letter of Undertaking	Bond
Filing	Generally furnished electronically through GST portal	May involve additional documentation and applicable procedures
Working capital	Allows eligible export without upfront IGST payment	Also facilitates export without upfront IGST subject to bond conditions
Use	Commonly used by eligible exporters	Used where LUT facility is not available or where applicable requirements call for a bond

What should be written on an export invoice under LUT?

When exporting under LUT without payment of IGST, the export invoice should carry the appropriate prescribed endorsement indicating that the supply is meant for export without payment of integrated tax.

A commonly used wording is:

“SUPPLY MEANT FOR EXPORT/SUPPLY TO SEZ UNIT OR SEZ DEVELOPER FOR AUTHORISED OPERATIONS UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF INTEGRATED TAX.”

The exact wording and applicability should be checked against the current invoice rules and the nature of the supply.

Can an exporter claim ITC while exporting under LUT?

Yes, eligible input tax credit can generally be availed in accordance with the GST law even when the exporter makes zero-rated supplies under LUT.

For eligible zero-rated supplies made under LUT without payment of IGST, the exporter may claim a refund of eligible accumulated unutilised ITC, subject to the applicable refund provisions, formula and conditions.

This is one of the major benefits of the LUT mechanism.

How does an exporter claim an ITC refund after LUT exports?

Exporting under LUT does not automatically result in a bank refund of the accumulated ITC. The exporter generally needs to make a separate refund application through the GST system and satisfy the applicable requirements.

The process involves activities such as:

Completing the export transaction.
Reporting the export correctly in GST returns.
Maintaining eligible ITC records.
Reconciliation of export invoices.
Determining the eligible refund amount.
Filing the applicable refund application.
Providing supporting documentation where required.
Responding to any clarification or deficiency memo issued by the department.

What is the relationship between LUT and ITC refund?

LUT and ITC refund are related but separate compliance activities.

LUT allows an eligible exporter to make the zero-rated supply without payment of IGST.

ITC refund is the mechanism through which eligible accumulated input tax credit attributable to zero-rated supplies may be refunded, subject to the statutory conditions.

Therefore, filing an LUT does not itself constitute a refund application.

Can an exporter export without LUT?

An exporter may have other legally available routes for zero-rated exports, including the payment-of-IGST route where permitted.

However, if the exporter intends to export without payment of IGST under Rule 96A, the required bond or LUT should be furnished in accordance with the applicable rules.

Exporters should not assume that an export made without payment of IGST is automatically covered simply because an LUT was intended to be filed later.

What happens if an exporter does not file LUT?

If a business intends to export without payment of IGST but has not completed the required LUT/bond compliance, it can create a compliance issue.

The appropriate corrective action depends on the facts, timing, export documents, tax treatment and applicable GST provisions.

Businesses should therefore avoid postponing LUT filing when they already know that exports will be made under the LUT route.

What is Rule 96A of the CGST Rules?

Rule 96A deals with the export of goods or services under bond or Letter of Undertaking without payment of integrated tax.

The rule also contains conditions relating to the time within which the export must be completed or export proceeds received in the case of services, along with consequences where the specified conditions are not fulfilled.

Under the rule, where goods are not exported within the prescribed period, or where payment for exported services is not received within the prescribed period, the taxpayer may become liable for tax and applicable interest in accordance with the rule, subject to extensions and other applicable provisions.

Because these timelines can directly affect the tax liability of an exporter, businesses should monitor outstanding export transactions rather than treating LUT as a one-time filing with no further compliance.

What happens if goods are not exported after issuing an LUT invoice?

An LUT is an undertaking to comply with the conditions attached to export without payment of IGST.

If goods are not exported within the period prescribed under Rule 96A, the taxpayer may be required to pay the applicable tax along with interest within the period specified by the rule, unless an applicable extension or other statutory relief applies.

This makes it important for businesses to monitor export orders that are cancelled, delayed, returned or otherwise not completed.

What happens if export proceeds for services are not received?

For export of services, the receipt of payment is an important part of the export framework.

If payment is not received within the prescribed period, the consequences under Rule 96A and other applicable provisions need to be examined.

Exporters should maintain proper records of invoices, foreign inward remittances, bank statements, contracts and correspondence with overseas customers.

Can LUT be used for supplies to SEZ?

The zero-rated supply framework can cover supplies to a Special Economic Zone unit or developer for authorised operations, subject to the applicable statutory conditions.

Businesses supplying goods or services to SEZ entities should verify whether the transaction qualifies as a zero-rated supply and maintain the required SEZ documentation and endorsements.

It is important to distinguish a genuine qualifying SEZ supply from an ordinary domestic supply to an entity that merely happens to have an SEZ registration.

Does LUT eliminate all GST compliance for exporters?

No.

LUT only addresses the mechanism for making eligible zero-rated supplies without payment of IGST. Exporters still have to comply with applicable GST return filing, invoice, accounting, ITC, refund, customs, foreign exchange and documentation requirements.

For example, an exporter may still need to:

File applicable GST returns.
Report export invoices correctly.
Maintain ITC documentation.
Reconcile GST records with books.
Complete customs procedures for goods.
Maintain evidence of export.
Track export proceeds.
File refund applications where applicable.

Common mistakes exporters make with LUT

1. Filing LUT after starting exports

Exporters should plan the annual LUT filing before beginning exports under the LUT route.

2. Assuming LUT is permanent

LUT is associated with the relevant financial year. A fresh LUT should be furnished for subsequent financial years when the exporter continues using the facility.

3. Incorrect export invoice endorsement

Export invoices should contain the applicable prescribed endorsement and other required details.

4. Mismatch between invoice and return data

Differences between export invoices, GSTR-1, GSTR-3B, shipping bills and refund applications can lead to reconciliation issues.

5. Claiming excess ITC refund

Refund calculations should be prepared using eligible ITC and the applicable statutory formula. Not every credit appearing in the electronic credit ledger necessarily becomes refundable.

6. Ignoring export proceeds

For export of services, exporters should monitor foreign remittance and other applicable payment requirements.

7. Not maintaining supporting documents

Export businesses should preserve invoices, contracts, shipping documents, bank records, GST returns and refund calculations.

LUT compliance checklist for exporters

Confirm active GST registration.
Determine whether the transaction qualifies as zero-rated supply.
File the LUT for the relevant financial year.
Keep the LUT acknowledgement safely.
Use the appropriate export invoice endorsement.
Report export transactions correctly in GST returns.
Maintain shipping and customs records for goods exports.
Maintain contracts and payment records for service exports.
Reconcile export invoices with GST returns.
Reconcile eligible ITC before filing refund claims.
Monitor delayed or cancelled export orders.
Track foreign remittances for export services.
Renew the LUT for each financial year when required.
Maintain documentation for departmental verification.

GST LUT example for a software exporter

Consider an Indian software company providing development services to a customer located outside India.

The company incurs GST on eligible domestic purchases such as professional services, software subscriptions, office services and other business inputs.

If the transaction qualifies as export of services and the company satisfies the applicable conditions, it can furnish an LUT and provide the service without charging IGST on the export supply.

The eligible ITC accumulated from domestic inputs may then be considered for refund under the applicable zero-rated supply refund provisions.

The company should maintain its service agreement, invoices, GST returns, bank records and foreign remittance documentation to establish the nature and completion of the export transaction.

GST LUT example for a manufacturer

Suppose an Indian manufacturer purchases raw materials on which GST is charged and manufactures products for an overseas customer.

The manufacturer can, subject to eligibility and compliance requirements, furnish an LUT and export the finished goods without payment of IGST.

The manufacturer can then examine its accumulated eligible ITC and apply for refund according to the applicable refund provisions.

The business must also complete the relevant customs export formalities and maintain the required shipping and tax records.

Advantages of using LUT for exporters

No upfront IGST payment on eligible exports made under LUT.
Can help reduce working-capital blockage.
Useful for regular exporters.
Can facilitate refund of eligible accumulated ITC.
Online filing makes annual LUT compliance more convenient.
Applicable to eligible exports of goods and services.

LUT and export refund: important distinction

One of the most common misunderstandings is that filing an LUT automatically results in a refund.

This is not the case.

The LUT permits the exporter to make the eligible zero-rated supply without paying IGST. If the exporter wants a refund of accumulated ITC, a separate refund process must generally be followed.

Therefore, exporters should think of the process as two separate compliance steps:

Step 1: LUT → Export without payment of IGST.

Step 2: Refund application → Claim eligible accumulated ITC.

Frequently Asked Questions about GST LUT

What does LUT stand for in GST?

LUT stands for Letter of Undertaking. It enables an eligible registered person to make specified exports without payment of IGST, subject to the applicable conditions.

Is LUT mandatory for every exporter?

No. LUT is relevant when an eligible exporter wants to make zero-rated supplies without payment of IGST under the applicable framework. Other legally available export tax-payment/refund routes may apply depending on the circumstances.

Is LUT applicable to services?

Yes. Eligible export of services can be made without payment of IGST under LUT, provided the transaction satisfies the statutory conditions for export of services.

Is LUT applicable to goods?

Yes. Eligible exporters can export goods without payment of IGST under LUT, subject to the applicable conditions and customs procedures.

How long is an LUT valid?

LUT is furnished for the relevant financial year. Exporters continuing the LUT route should furnish a fresh LUT for the subsequent financial year.

Can LUT be filed online?

Yes. The GST portal provides an online facility for furnishing LUT.

Can I claim ITC after exporting under LUT?

Eligible ITC can generally be availed subject to the GST law, and eligible accumulated unutilised ITC may be claimed as refund for qualifying zero-rated supplies subject to the applicable conditions.

Does LUT mean GST is completely waived?

No. LUT does not mean that all GST obligations disappear. It provides a mechanism to make eligible zero-rated exports without upfront payment of IGST.

Can LUT be used for exports to SEZ?

Eligible supplies to SEZ units or developers for authorised operations can fall within the zero-rated supply framework, subject to the applicable conditions and documentation.

What happens if export conditions are not fulfilled?

Rule 96A contains consequences where the specified export or payment conditions are not fulfilled within the prescribed period. The exporter may become liable for applicable tax and interest, subject to the law and any permitted extension.

Does LUT need to be renewed?

Exporters intending to continue making supplies without payment of IGST should furnish the LUT for the relevant new financial year.

Conclusion

GST LUT is an important compliance facility for Indian exporters. It allows eligible registered businesses to make qualifying zero-rated exports without paying IGST upfront, which can help reduce working-capital blockage.

The LUT mechanism is particularly relevant for exporters of goods, software, consulting services, professional services and other qualifying supplies. However, filing the LUT is only one part of export GST compliance.

Exporters must also ensure correct invoicing, GST return reporting, ITC documentation, refund calculations, customs compliance for goods and appropriate evidence of payment and export for services.

Businesses should also remember that GST export rules and portal procedures can change. The applicable provisions should therefore be verified for the relevant financial year before relying on an older LUT procedure.