Complete GST LUT (Rule 96A) Guide for Exporters

1. What is a Letter of Undertaking (LUT)?

Under Section 16 of the Integrated Goods and Services Tax (IGST) Act, 2017, the export of goods or services outside India is treated as a "Zero-Rated Supply". Indian exporters have two legal routes to fulfill export tax obligations:

1. Export with payment of IGST: Pay 18% IGST upfront from working capital, then apply for a tax refund from the GST department (which can take 60–120 days).
2. Export under Letter of Undertaking (LUT) without payment of IGST: File Form GST RFD-11 annually on the GST portal to export at 0% tax upfront with zero cash blockage.

2. Who is Eligible to File Form GST RFD-11?

Any registered taxpayer in India who exports goods or services is eligible, provided:

• They possess an active GSTIN registration.
• They have not been prosecuted for any tax evasion offense exceeding ₹250 Lakhs under the CGST/IGST Act.
• The LUT is filed prior to the dispatch of goods or the issuance of service invoices for each financial year (April 1 to March 31).

3. Step-by-Step Procedure to File LUT on the GST Portal

4. Mandatory Invoice Text & Declarations

As per Rule 96A of the CGST Rules, every export invoice issued under an LUT must carry a specific statutory endorsement:

Additionally, you must print:

• Your LUT ARN number (e.g., AD270326001928K) and Date of Filing.
• Client's full foreign address and recipient country.
• Applicable SAC (Services Accounting Code) or HSN Code.
• Billed currency, foreign exchange conversion rate, and equivalent INR value.

5. Time Limit for Realization of Foreign Remittance

Under RBI FEMA guidelines and GST regulations, export proceeds for services must be realized in convertible foreign exchange (or permissible INR via Vostro accounts) within 9 months from the date of the invoice. Keep your Bank Inward Remittance Statements (FIRC / Advice) safe for CA audit.

6. Common Pitfalls in GST LUT Compliance & How to Avoid Tax Notices

While filing an LUT allows you to supply zero-rated services without paying 18% IGST upfront, tax officers strictly scrutinize cross-border transactions during GST audits. Avoid these common compliance mistakes:

• Missing the 1-Year Realization Window: Under Rule 96A(1)(b) of the CGST Rules, if inward remittance is not received within one year from the invoice date, you must deposit 18% IGST plus 18% per annum interest from the date of invoice issuance.
• Failing to Mention the Full Statutory Endorsement: Omitting the mandatory phrase "Supply Meant for Export Under Letter of Undertaking Without Payment of Integrated Tax" invalidates zero-rated treatment.
• Discrepancies Between Bank Inward Advice and Invoice Value: Bank intermediary deductions that result in lower realized sums must be accounted for with foreign exchange bank advices. Use our Forex Calculator to model typical spreads.

7. Annual Renewal Process: Form GST RFD-11

An approved Letter of Undertaking (LUT) is valid strictly for a single financial year (from April 1st to March 31st). To avoid tax disruptions:

1. Log in to the GST Portal in late March prior to the commencement of the new fiscal year.
2. Navigate to Services > User Services > Furnish Letter of Undertaking (LUT).
3. Select the upcoming financial year, declare two independent witnesses, and submit using your digital signature (DSC) or Electronic Verification Code (EVC).
4. Update your newly issued Application Reference Number (ARN) inside your Cod Xpert Invoicing Settings so all future invoices reflect the renewed compliance credentials.

8. Frequently Asked Questions on GST LUT