GST Tip of the Day: Renew Your LUT Every Year — or Pay IGST on Exports You Could Have Shipped Tax-Free

The one form exporters forget every April

If you export goods or services — or supply to an SEZ — you have two ways to do it under GST. You can pay IGST and claim a refund later, or you can export under a Letter of Undertaking (LUT) and ship without paying any tax at all.

The second option is almost always better for cash flow. But there is a catch most small exporters miss: an LUT is valid only for one financial year. It does not roll over. A fresh LUT must be filed for every new financial year, ideally before you raise your first export invoice of that year.

What happens if your LUT lapses

If your LUT for the year has expired (or you never filed one) and you continue exporting, you lose the right to export tax-free for those supplies. In practice that means:

• You should charge and pay IGST on the export invoice.
• You then have to file a refund claim to get that tax back — blocking your working capital for weeks or months.
• Exports to SEZ units without a valid LUT face the same problem.

For a small business shipping regularly, that is a real cash crunch created purely by a missed administrative step.

Who can file an LUT

The facility is broad. Almost any registered exporter can furnish an LUT instead of paying IGST, except those who have been prosecuted for tax evasion above the prescribed threshold under the GST law or earlier laws. If you have a clean compliance record, you qualify.

The LUT covers:

• Export of goods
• Export of services
• Supplies to a Special Economic Zone (SEZ) developer or unit

These are all zero-rated supplies — meaning the output is taxed at zero, but you still keep your input tax credit.

How to file it (it takes minutes)

The LUT is filed entirely online on the GST portal. There is no need to print, sign on stamp paper, and submit physically the way the old regime required.

1. Log in to the GST portal and go to Services → User Services → Furnish Letter of Undertaking (RFD-11).
2. Select the relevant financial year.
3. Accept the standard undertakings (you commit to completing exports within the prescribed time and to paying tax with interest if you fail).
4. Enter details of two independent witnesses.
5. Sign with DSC or EVC and submit.

Keep the acknowledgement and the ARN safely. Your accountant and your billing software both need to know a valid LUT is in place so export invoices are raised at zero tax.

Put the LUT reference on your export invoices

A common documentation slip: forgetting to mention on the invoice that the supply is made under LUT without payment of IGST. Your export and SEZ invoices should carry an endorsement such as "Supply meant for export / SEZ under LUT without payment of integrated tax". This keeps your paperwork clean if the supply is ever scrutinised.

Don't break the export timeline

Filing the LUT is a promise. For goods, you are expected to actually export within three months of the invoice date (extendable for genuine reasons). For services, payment in convertible foreign exchange should be received within one year. If you don't meet these conditions, you may have to pay the IGST along with interest. So the LUT is not a loophole — it is a facility that assumes you really are exporting.

Your action for today

Check whether you have a valid LUT for the current financial year. If you export or supply to SEZ and the answer is no, file RFD-11 today before your next invoice goes out. It is free, fast, and protects your cash flow for the entire year.

If you're not yet exporting but plan to, file the LUT before that first overseas order lands — so you never have to choose between delaying a shipment and locking up tax in a refund queue.