How to boost exports with government benefits?  Udaipur CA or expert GST consultant advice

Explore the government’s trade promotion benefits and reliefs for exports from the Udaipur CA or expert GST consultant in Udaipur

The government for promotion of trade or business of exports provides certain benefits and reliefs on exports. Under GST, the exporter can avail any one option from the following for availing benefit under GST regime.

  1. Export under bond without payment of tax (LUT-Letter of Undertaking )
  2. Export along with tax payment and claim refund later

Export under bond without payment of tax (LUT)

  1. What is LUT and why is it used?

LUT (Letter of Undertaking) holds significant relevance within the context of the Goods and Services Tax (GST) framework. This document serves as a powerful tool for exporters, allowing them to engage in the export of goods or services without the obligation of immediate tax payment.

All registered taxpayers who export the goods or services to a country outside India or to Special Economic Zones (SEZs) will have to furnish Letter of Undertaking (LUT) in GST RFD-11 form on the GST portal in order to make exports without payment of IGST.  Thus if any, any registered person intend to supply goods or services for export without payment of IGST needs to furnish, a bond or a LUT in Form GST RFD-11.

Filing Letter of Undertaking (LUT) in form RFD-11 has been made mandatory by the government as per rule 96A of CGST Rule-2017 notified by GST Notification No. 16/2017 dated 07-07-2017. LUT has to be filed /submitted online before exporting the goods/services.

2. Eligibility Criteria for LUT registration:-

The Letter of Undertaking (LUT) is available for registered taxpayer engaged in exporting goods and services. The Eligibility criteria to obtain a LUT certificate include the following:

  1. Intent to Supply: The applicant should have intention to supply goods or services, to foreign countries or to Special Economic Zones (SEZs).
  2. GST Registration:  The trade or business who intends to supply goods or services under LUT should be registered under the GST framework.
  3. Tax-Free Supply: The trade or business should have desire to supply goods without the imposition of integrated tax is an essential requirement for LUT application.

*However, individuals facing prosecution for tax evasion exceeding Rs. 250 lakh or more are ineligible to benefit from this option.

3. Benefits of LUT

A business or trade who choose to file a Letter of Undertaking (LUT) have the following benefits:-

  1. Tax-Free Export: Opting for the LUT certificate enables exporters to carry out their export transactions without the burden of immediate tax payment.
  2. Simplified Process:  Exporters avoid the complexities of claiming tax refunds or engaging in follow-ups with the tax authorities. Thus he saves the time which can be utilised for business expansion. .
  3. Unblocked Working Capital: Funds that would have been otherwise locked for tax payments can be utilised for business. And the business or trade will have financial strength and have more working capital constraints.
  4. Liberated Resources: Regular exporters find a consistent advantage with the LUT. Once filed, the LUT remains valid for the entire financial year hence it allows exporters to focus on their core activities.
  5. Efficiency and flexibility: By leveraging the benefits of the LUT certificate, exporters can navigate the realm of international trade with greater efficiency and flexibility.
  6. Streamlining their  export activities and optimizing their financial operations:

4. Validity of LUT (Letter of Undertaking):-

The LUT is valid for the whole financial year in which it is submitted. A new LUT is required to submit each new financial year

5. Consequences if goods are not exported:  

  • If the goods for export are not exported within three months of Date of Invoice issue, then the Exporter is liable to pay GST along with 18% interest within 15 days according to Section 50 (1).
  • In case of payment for services are not received within one year for which the LUT has been submitted, the exporter is liable to pay GST @ 18% within 15 days. Failing to do so will lead to withdrawal of LUT facility and on subsequent payments, it can again be restored.
  • 6. Time for acceptance of LUT:-

LUT is mandatory for export to foreign nation or exports to an SEZ unit, hence Government   have made a time schedule to accept the LUT.  The LUT should be accepted within three working days after it has been received along with the self-declaration by the exporter as mentioned above. If LUT is not accepted within three working days, then it shall be considered as accepted.

7. Mentioning of  LUT number on invoice

There is mandatory requirement to mention LUT number on invoice of export of goods or service.   It should be mentioned on the invoice as “Supply meant for export under LUT without payment of IGST.

8. When a business man should apply/file an LUT?

Letter of undertaking should be applied or filed /submitted online before exporting the goods/ services

9. Consequences of LUT is not applied or filed.

If LUT is not filed, then the exporter will have to first pay the required tax while making exports and then claim a refund to avail benefit of zero-rated exports.

10. How to check LUT status?

a. Visit the GST Portal at URL. …

b. Login to the GST Portal with valid credentials.

c. Click the Services > User Services > View My Submitted LUTs command.

11. LUT Circular no.

    The LUT Circular no is. 8/8/2017-GST F. No. 349/74/2017-GST (Pt.) Vol.-II Government of India Ministry of Finance Department of Revenue Central Board of Excise and Customs GST Policy Wing New Delhi, Dated the 4 th October, 2017

    12. Documents required for GST LUT registration:-

      To apply for a Letter of Undertaking (LUT) under GST, following documents required:

      1. LUT Cover Letter: A request letter signed by an authorized person.
      2. Copy of GST Registration: Proof of your GST registration.
      3. PAN Card of Entity: Identification using PAN card.
      4. KYC of Authorized Person: ID and address proof of authorized person.
      5. GST RFD 11 Form: Application form for LUT.
      6. Copy of IEC Code: If involved in exports.
      7. Cancelled Cheque: From your associated bank account.
      8. Authorized Letter:  Granting power to the authorized signatory.

      13. Procedure for Filing Online LUT under GST:

      Filing of LUT has been made online through the GST Portal and the following are the steps :-

      1. Login to the GST Portal with valid credentials.
      2. Go to menu bar and select ‘Service’ option. Under ‘Service’ option go to ‘User Service’ option’ and select the Tab “Furnishing Letter of Undertaking”.
      3. Form GST RFD-11 will be displayed.
      4. Select the Financial Year for which period you want to furnish the LUT.
      5. Upload LUT that belong to an earlier period by clicking on the choose file option and uploading the LUT file.
      6. If LUT have already furnished Offline, for previous period, attach the same and continue to file your application.
      7. For filing LUT, please read and select all the three check boxes for accepting the conditions prescribed in Letter of Undertaking.
      8. In name, address and occupation of the independent witnesses section, enter name and address of two witnesses.
      9. In the Place field, enter the place where the form is filed.
      10. Next step is to select name of Primary Authorized signatory or other Authorized signatory who will sign the Application form.
      11. Click the PREVIEW button to preview the form.
      12. Click the SAVE button to save the form and retrieve later.
      13. Click the SIGN AND FILE WITH DSC or SIGN AND FILE WITH EVC button.
      14. Once signed and filed, Form cannot be edited.
      15. Kindly recheck at least once before signing and submitting.

      Learn about the government’s support for trade and business exports. Select your preferred option under GST: export under bond without tax payment (LUT-Letter of Undertaking) or export with tax payment and claim a refund later. Find out more from Udaipur CA or expert GST consultant in Udaipur.

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