What is a LUT or Bond Under GST?
Under GST, exporters have two options for exporting goods or services: export with payment of IGST or export without payment of IGST. To export without paying IGST, the exporter must furnish a Bond or Letter of Undertaking (LUT) to the tax authorities, confirming that the prescribed export conditions will be fulfilled.
When is a Bond or LUT Filed Under GST?
The requirement to furnish a Bond or LUT depends on the exporter’s eligibility and the applicable GST provisions. A Bond may be required in the following situations:
First-Time Exporter: If you are exporting goods or services for the first time and do not have export receipts from the previous financial year, you may need to furnish a bond along with the prescribed bank guarantee.
Foreign Receipts Below ₹1 Crore: If your foreign exchange receipts in the previous year are below ₹1 crore, you may be required to furnish a bond instead of an LUT, along with the applicable bank guarantee.
Foreign Receipts Below the Prescribed Percentage: If your foreign exchange receipts are below the prescribed percentage of total turnover, a bond may be required instead of an LUT. For example, if your total foreign exchange receipts are ₹2 crore against a turnover of ₹50 crore, the applicable requirements may require you to furnish a bond rather than an LUT.
Documents Required for LUT/Bond Filing Under GST
Business-Related Documents
- GST Registration Certificate
- PAN Card and Import Export Code (IEC) Certificate
- VAT Returns and Export Bills
- Bank details for the required Bank Guarantee
Personal Documents
- PAN Card and Aadhaar Card of the proprietor/owner
- Letter of Authorization
- Identity proof of two witnesses
LUT/Bond Filing Procedure for Exports Under GST
Filing an LUT or Bond is required when you want to export goods or services without payment of IGST. As per Rule 96A, where a bond is applicable, it is generally furnished along with the prescribed bank guarantee. The basic procedure is as follows:
Step 1 – Arrange the Required Documents
The first step is to collect all the necessary documents and share them with us by email. We will review the documents, and once everything is in order, you will need to pay the applicable professional fees.
Step 2 – Signing and Submission
After receiving the required documents and payment, we will begin the filing process. The necessary documents will be prepared, signed, and submitted to the tax department.
Step 3 – Letter of Acceptance
Once the application is approved, the tax department will issue the Letter of Acceptance confirming the successful submission.
Time & Cost for LUT and Bond Filing Under GST
LUT/Bond Cost in Delhi
| Particulars | Amount |
|---|---|
| Consultancy | Free |
| Professional Fee | ₹9,999 |
| GST | ₹1,800 |
| Total LUT/Bond Filing Cost in Delhi | ₹11,799 |
LUT/Bond Cost Outside Delhi
| Particulars | Amount |
|---|---|
| Consultancy | Free |
| Professional Fee | ₹3,389 |
| GST | ₹610 |
| Total LUT/Bond Filing Cost | ₹3,999 |
Note: For Delhi-based filings, document submission is also handled from our side, so the customer does not need to visit the tax department.
Is a Bond/LUT Required for Export of Services?
Under GST, exports of services are treated similarly to exports of goods. Therefore, if you wish to export services without paying IGST, you must either pay GST upfront or submit a bond or Letter of Undertaking (LUT) to the tax authorities.
In simple terms, there are two options for exporting goods or services from India:
- Export without payment of GST
- Export with payment of GST
If a taxpayer chooses to export without paying IGST, a bond or LUT must be furnished with the department. A Letter of Undertaking (LUT) is prescribed in Form GST RFD-11 under Rule 96A.
Simply put, an LUT is a declaration by the taxpayer confirming that all GST-related export conditions will be complied with.
Bank Guarantee Requirement Under Bond
When a bond is furnished, a bank guarantee equivalent to 15% of the bond amount is generally required. The bond amount is based on the GST liability applicable to the total export turnover.
Example
Mr. A incorporates a company to start an import-export business and expects a turnover of ₹50 lakh. Assuming a GST rate of 18%, the bond amount and bank guarantee would be calculated as follows:
- Bond Amount: ₹9 lakh
- Bank Guarantee: ₹1.35 lakh
Is There Any Other Route Available for Exports?
Under GST, exporters have two options. The first is to pay IGST on exports and subsequently claim a refund. The second is to export without payment of GST by furnishing an LUT or bond.
If you choose to export after paying IGST, the tax paid on each shipment can be claimed as a refund. The refund may be claimed through the applicable GST return process or by filing Form GST RFD-01, as applicable.
Apart from these two options, there is no other general route for exporting goods or services from India under GST.
What Compliances Are Required After Submission of the Bond?
After the bond or LUT is accepted by the tax department, the exporter must maintain and submit the required export-related documents as applicable. These may need to be furnished periodically or as required by the department.
Since the bond or LUT is generally valid for one financial year, it needs to be renewed for the subsequent year.
If the bond or LUT is not renewed, the taxpayer may no longer be eligible to export without payment of tax.
Important Features of Bond and LUT Filing Under GST
There are several compliance requirements associated with bond and LUT filing. Some important points include:
No Tax Payment on Exports
When a valid LUT or bond is furnished, eligible exports can be made without payment of IGST.
Filing Requirements
The required bond or LUT must be submitted in the prescribed manner along with the necessary documents and declarations.
Annual Renewal
An LUT is generally required to be furnished for each financial year. Exporters must ensure timely renewal to continue making eligible exports without payment of IGST.
Advantages and Disadvantages of LUT/Bond Filing in India
Advantages of Bond/LUT Filing
- No upfront GST payment on eligible exports
- Improves working capital management
- Avoids the need for regular GST payments on export transactions
- Eliminates the need to claim refunds of IGST paid on exports
Disadvantages of Bond/LUT Filing
- Documentation and compliance requirements
- Periodic submission or maintenance of export documents
- Professional fees may apply for bond/LUT filing
- May involve additional procedural requirements and departmental compliance
FAQ’s
1. What is LUT under GST?
LUT, or Letter of Undertaking, is a declaration filed by eligible registered taxpayers to export goods or services without payment of IGST, subject to the conditions prescribed under GST law.
2. Who can file an LUT for GST exports?
A registered taxpayer who intends to export goods or services without payment of IGST can generally furnish an LUT, provided the applicable conditions are satisfied.
3. Is LUT mandatory for exporters under GST?
LUT is required when an exporter wants to make zero-rated supplies without payment of IGST. Alternatively, an eligible exporter may choose to export on payment of IGST and claim a refund, subject to the applicable provisions.
4. What is the difference between LUT and a bond under GST?
An LUT is generally available to eligible exporters who meet the prescribed conditions, while a bond may be required in situations where the taxpayer is not eligible to furnish an LUT or where the applicable GST provisions require a bond.
5. How can I file an LUT online under GST?
An LUT can generally be furnished electronically through the GST portal by logging into the registered taxpayer’s account and accessing the relevant LUT filing facility.
6. What documents are required for LUT filing?
The documents and details required can include the taxpayer’s GSTIN, details of witnesses, authorized signatory information, and other information prescribed on the GST portal. Additional documentation may be required depending on the circumstances.
7. Is LUT filing required every financial year?
Yes. An LUT is generally valid for the relevant financial year and needs to be furnished again for subsequent financial years if the taxpayer wishes to continue exporting without payment of IGST.
8. What is the validity period of an LUT?
An LUT furnished for exports without payment of IGST is generally valid for the financial year in which it is furnished, subject to the applicable GST provisions.
9. Can a new exporter file an LUT?
Yes. A registered taxpayer beginning export activities can furnish an LUT if the taxpayer satisfies the prescribed eligibility conditions.
10. Can an exporter file an LUT after starting exports?
Exporters should furnish the LUT before making the relevant zero-rated supplies without payment of IGST. Businesses should therefore complete the process before undertaking such exports.
11. Is a bond required if an exporter cannot file an LUT?
Where an exporter does not meet the conditions for furnishing an LUT, a bond may be required in accordance with the applicable GST provisions.
12. Can an exporter claim an input tax credit after filing an LUT?
Yes. Filing an LUT does not by itself prevent an eligible exporter from claiming input tax credit in accordance with GST law.
13. Can exporters claim a GST refund after filing an LUT?
Yes. An exporter who makes zero-rated supplies under LUT can generally claim a refund of eligible unutilized input tax credit, subject to the applicable conditions and refund procedures.
14. Does LUT apply to both goods and services?
Yes. LUT can be used for eligible exports of both goods and services without payment of IGST, provided the relevant conditions are satisfied.
15. Is LUT required for exports to all foreign countries?
LUT requirements depend on whether the transaction qualifies as a zero-rated export under GST. The location of the recipient and the nature of the supply must be evaluated.
