Exporters in India may find themselves dealing with cash flow management and compliance difficulties, particularly when tax liability pertains to zero-rated supplies. The Letter of Undertaking (LUT) is a powerful tool that assists exporters with these issues.
If you are supplying/exporting goods/services and have opted to file an LUT, then you can export goods/services without paying the IGST, thus avoiding blocking of funds and long refund processing times. The intent of this guide is to provide a complete understanding of what you need to know regarding the LUT under the GST applicable for the fiscal years 2026/27, including the defined terms, who is eligible for the LUT, how to file and maintain compliance.
What is LUT Under GST?
Letter of Undertaking (LUT) is a document that Exporters file in order to certify that they will comply with GST obligations related to the exportation of goods and/or services without the payment of GST (i.e. the Integrated Goods and Services Tax – IGST).
The exportation of goods and services under GST will be classified as Zero Rated Supplies. Zero Rated Supplies mean:
- The end user will not be charged GST; and
- Exports will be eligible for Input Tax Credits (ITC).
Exporters will have two options available with respect to exportation:
Option 1 – Export with the Payment of IGST
- at the time of shipment
- and then apply for the refund
Option 2 – Export without paying GST – (i.e. LUT).
- No upfront tax payment
- No need to claim refund for IGST
Who Can File LUT?
A person who is an official taxpayer who is exporting goods or providing services may file LUT by meeting one of the following eligibility criteria..
Eligibility Requirement
You can file LUT if you:
- Are registered for GST
- Are exporting either goods or providing services
- Have not been prosecuted for a tax evasion of more than ₹2.5 crores.
Who Cannot File LUT?
- Taxpayers with serious tax offenses may not be eligible.
- In such cases, they may need to furnish a bond with bank guarantee.
Why should exporters consider using a LUT?
LUT is more than just a compliance requirement; it may also be a sound financial strategy.
The following are some of the major benefits of a LUT:
- No payment of Integrated Goods and Service Tax (IGST)
Export without paying taxes up front — this will reduce the exporters’ financial burden.
- Better cash flow management
No waiting for refunds – you can use the money you’ve saved on taxes for your company’s day-to-day operations.
- Simplified compliance
- Avoid lengthy and complicated refund procedures.
- Documentation to establish a claim for refunds is much greater than any documentation required to establish a claim for a LUT.
- Faster overall export process
Eliminate delays in exporting due to tax payment related issues.
Validity of LUT
One important point many taxpayers miss is that LUT is not permanent.
Key Rule
- LUT is valid for one financial year only
- It must be renewed every year before starting exports
For FY 2026–27
- LUT should be filed at the beginning of April 2026
- If not filed, exports may attract IGST liability
Filing LUT on time ensures uninterrupted export operations.
Step-by-Step Process to File LUT Online
Filing LUT is a simple online process through the GST portal.
Steps to File LUT
- Login to GST Portal
- Go to: Services > User Services > Furnish LUT
- Select the Financial Year (2026–27)
- Fill in required details
- Upload supporting documents (if required)
- Provide witness details
- Submit using DSC or EVC
Documents Required
- GST registration details
- PAN of the business
- IEC code (for exporters)
- Authorized signatory details
LUT filing is completely online—no physical submission required.
Key Conditions to Be Followed After Filing LUT
When you file a LUT, there are additional responsibilities that come along with it. Failure to meet these responsibilities will result in the cancellation of your LUT. Conditions Include:
- Exporting goods within three months of the invoice date.
- Exporting services within one year of the invoice date.
- Receiving payment in convertible foreign currency (for services).
- Meeting all obligations for filing GST Returns.
Common Mistakes Exporters Should Avoid
Even experienced exporters sometimes make errors with LUT compliance.
- Not renewing LUT at the start of the financial year
- Exporting without LUT and assuming exemption
- Delay in export timelines
- Incorrect invoice details
- Not maintaining proper documentation
- Ignoring GST return reconciliation
LUT vs. Bond :What’s the Difference?
Knowing this information will make it easier when choosing which option to use.
| Basis | LUT | BOND |
| Tax Payment | Not Required | Not Required |
| Bank Guarantee | Not Required | Not Required |
| Eligibility | Most Exporters | Restricted Cases |
| Compliance Burden | Low | High |
Practical guidance for 2026–27
Your best choices for ensuring that you comply with GST regulations while maximising benefits from them:
- File LUT Early
- File GST LUT before you export (not after).
- Best time to file GST LUT is April, before the beginning of the new GST year. This avoids issues on short notice.
- Maintain Proper Documentation
- Evidence of export sales must include a proper copy of invoices for export sales.
- Originals of shipping bills.
- Proof of foreign remittance.
- Monitor Export Timeline
- Be aware of and monitor Export timelines.
- Avoid paying penalties for delays on exports and services.
- Reconcile GST Returns
Reconcile the GSTR-1, GSTR-3B and Books of Accounts to each other (Ensure correct reporting of zero-rated supplies).
- Work with your Consultant
- Compliance review to be completed regularly.
- Address any correspondence or discrepancies immediately.
Current Emphasis of the GST Department
The GST department is paying more and more attention to exports.
Aspects of Concern
- Error in claiming ITCs
- Counterfeit export invoices
- Refund frauds
- Inaccurate export data
Conclusion: Use LUT as an Advantage for Compliance
LUT is much more than a required document; it provides exporters with a means to operate more efficiently, as well as without unnecessary taxes.
The FY 2026–27 audits will include more scrutiny because of increased levels of digital tracking. Exporters must remain compliant with deadlines by filing all necessary documents, keeping accurate records, and complying with all conditions of LUT, to avoid penalties and to facilitate smooth operations of your export business.
The best approach is to file early, be compliant, and continue to review regularly.
If LUT is properly utilised, it can provide your business with the cash flow you need and decrease your compliance stress, so that you can expand your business in today’s global, competitive markets.
