What is Letter of Undertaking: Meaning, Process, Format
What is Letter of Undertaking (LUT) in GST?
A Letter of Undertaking, commonly referred to as LUT, is a document that exporters are required to submit under the GST regime. It allows them to make exports without payment of IGST, provided they undertake to comply with all conditions prescribed under GST law. An LUT is filed online through the GST portal and is governed by Rule 96A of the Central Goods and Services Tax Rules, 2017.
The primary purpose of LUT is to ease the export process by avoiding the need for upfront tax payment. Instead of paying IGST and then claiming a refund, exporters can directly export goods or services tax-free, thereby saving time and improving working capital efficiency. This improved cash flow can be further supported by Business Loan solutions, helping exporters manage operational expenses, expand production, or invest in new markets more efficiently. You can also use Business Loan EMI calculator before applying for the loan to plan your finances.
Also Read: Everything you need to know about Business Loan
Importance and Benefits of Filing LUT under GST
Filing an LUT offers several advantages to exporters. It allows them to export without payment of IGST, which directly improves cash flow as no upfront tax is required. The process also ensures quicker clearance of export consignments and reduces dependence on the refund mechanism. By lowering the compliance burden through simplified paperwork, filing an LUT makes the overall export process more efficient. These benefits collectively enhance the competitiveness of Indian exporters in the global market.
Checklist for Filing Letter of Undertaking (LUT)
Exporters must meet certain conditions to file an LUT under GST:
• The exporter should be GST registered
• The exporter must not be prosecuted for tax evasion exceeding ₹2.5 Cr
• A valid Import Export Code (IEC) is required
• Authorised signatory details must be provided
• LUT must be filed before undertaking export transactions
Step-by-Step Process to File Letter of Undertaking Online on GST Portal
Exporters can file an LUT on the GST portal by following these steps:
- Log in to the GST portal with your credentials
- Navigate to ‘Services’ → ‘User Services’ → ‘Furnish Letter of Undertaking (LUT)’
- Select the financial year for which the LUT is being filed
- Fill in the required details in Form GST RFD-11
- Enter witness information and submit the declaration
- Sign the form using a Digital Signature Certificate (DSC) or Electronic Verification Code (EVC)
- Upon successful submission, an Application Reference Number (ARN) will be generated
- Download and keep a copy of the acknowledgement for records
- UTs are valid for one financial year and must be renewed annually
Also Read: What is GST in India? Indirect Tax Law Explained Simply
Sample Format of Letter of Undertaking (LUT)
Below is a simplified sample format of LUT for exporters to understand the structure:
FORM GST RFD-11
I/We (name of exporter) having GSTIN (number) hereby undertake to export goods/services without payment of integrated tax in accordance with provisions of the GST law.
Signature of Authorised Signatory
Name: ____________
Designation: ____________
Date: ____________
Place: ____________
Witnesses:
1. Name & Address
2. Name & Address
Documents Required to File LUT in GST
The following documents are usually required to file an LUT:
• GST registration certificate
• PAN card of the business or proprietor
• Import Export Code (IEC)
• Aadhaar and address proof of authorised signatory
• Witness details including name and address
• Authorisation letter or board resolution for the authorised signatory
• Duly filled Form GST RFD-11
Key Points and Compliance Tips for LUT Bond in GST
Exporters should note that an LUT is valid for one financial year only and must be filed before commencing any export transactions. Any default in the prescribed conditions may result in the withdrawal of the LUT facility, so maintaining proper documentation for audit purposes is essential. Refund claims, if applicable, should be submitted within the prescribed time and exporters must ensure timely renewal of the LUT each financial year to continue availing the benefits under GST.
What Happens if Export is Made Without LUT?
If an exporter fails to file an LUT, they must pay IGST at the time of export. Subsequently, they can claim a refund of the tax paid. However, this process may take time and could block working capital. Non-compliance can also attract legal implications, interest or penalties depending on the case. Filing LUT before exporting is therefore highly recommended. While filing an LUT is free and helps exporters avoid upfront IGST, they may still consider a Business Loan to manage operational expenses or expand production efficiently.
Apply now for a Business Loan.
FAQs
Q.1. What is the full meaning of overdraft in banking?
A. The overdraft facility meaning in banking, refers to a credit arrangement where the bank allows you to withdraw more money than what is available in your account. It acts as a short-term loan that helps you cover urgent expenses when your balance is insufficient.
Q.2. How is an overdraft loan different from a personal loan?
A. A personal loan is a fixed-term loan with EMIs, interest on the total amount, and a defined repayment schedule. An overdraft loan, on the other hand, offers flexible borrowing; interest is charged only on the amount actually used, and there are no fixed repayment amounts.
Q.3. Can individuals apply for an overdraft facility?
A. Yes, individuals can apply for an overdraft facility if they meet the bank’s eligibility criteria. Salaried professionals, business owners, and self-employed individuals with a stable income or financial security, such as fixed deposits, can avail themselves of overdraft facilities.
Q.4. Is overdraft a type of credit facility?
A. Yes, an overdraft is a credit facility provided by banks. It allows account holders to borrow money up to a set limit when their balance is low or zero, functioning like a short-term line of credit.
Q.5. Are there charges on overdraft usage?
A. Yes, overdraft usage typically attracts interest and may also incur processing fees, renewal charges, or penalties for exceeding the limit. Charges vary by bank and whether the overdraft facility is secured or unsecured.
Q.6. What is the interest rate on an overdraft loan?
A. The interest rate on an overdraft loan depends on the type of security offered, borrower profile, and bank policies. Rates are usually lower for secured overdrafts and can range between 8% to 18% annually. Interest is charged only on the amount drawn, not the full limit.
Q.7. How can I apply for an overdraft loan online?
A. To apply for an overdraft loan online, visit your bank’s official website or use its mobile banking app. Fill in the required details, upload necessary documents, and submit the application. You can also contact us for support in applying for an overdraft facility.
Disclaimer:
The content presented on this page, including images and factual information, is intended solely as a summary derived from publicly available sources. GHFL/GFL (“Company”) does not claim ownership of such information, nor does it represent that the Companies have exclusive knowledge of the same. While efforts are made to ensure accuracy, there may be inadvertent errors, omissions, or delays in updating the content. Users are strongly encouraged to independently verify all information and seek expert advice where necessary. Any decisions made based on this content are solely at the discretion and responsibility of the user. Godrej Capital and its affiliates assume no responsibility for any loss or damage that may result from the use of or reliance on the information provided herein.
Connect with Our Customer Support Team
Customer Support
