Meaning of term Letter of Undertaking(LUT) under GST

What is Letter of Undertaking(LUT) under GST


The details about Letter of Undertaking(LUT)are explained here. 

Letter of Undertaking(LUT):

Exports without the payment of tax can be made only after filing a bond or letter of undertaking (LUT) as applicable to the exporter. There was a lot of ambiguity regarding the exports which are to be made without the payment of IGST. The government of India has released few notifications regarding the filing of bond and LUT in the case of certain specified people. Exporters can make the payment of IGST at the time of export and then claim the refund later but it will block their working capital.


Submission of LUT in place of a Bond

The following persons would be eligible to provide a LUT instead of a bond:

  • Status holder as per Para 5 of Foreign Trade Policy 2015-2020; or
  • A person who has received foreign inward remittances equal to minimum of 10% of the export turnover, which should not be less than INR 10 million, in the preceding financial year.

Such a person should not have been prosecuted for any offence under the CGST Act or any existing law where the amount of tax evaded exceeds INR 25 million.


The LUT should be furnished in duplicate for a financial year in the prescribed format. The LUT

should be executed by the working partner, the Managing Director, the Company Secretary, the

proprietor or by a person duly authorised by such working partner or Board of Directors of such company or proprietor on the letter head of the registered person.


The LUT would be valid for 12 months.

If the exporter fails to comply with the conditions of LUT, he may be asked to provide a bond.


Submission of bond

With regard to submission of bond, circular no. 4/4/2017-GST provides as follows:

  • All persons not eligible to issue LUT would need to submit a bond.
  • A running bond will be submitted and the bond amount should cover the amount of tax involved in the export based on estimated tax liability as assessed by the exporter. A fresh bond is to be submitted if the amount in the bond is less than the outstanding tax liability on exports.
  • The amount of bank guarantee would be decided by the jurisdictional Commissioner and it should not exceed 15% of bond amount. The Commissioner has the power to accept the bond without any bank guarantee in case of assesse with good track record.
  • The bond shall be furnished on non-judicial stamp paper of the value as applicable in the State in which the bond is being furnished.



 Jurisdiction for submission of LUT/ Bond

Bond/ LUT shall be accepted by the jurisdictional Deputy/ Assistant Commissioner having jurisdiction over the principal place of business of the exporter. Until a specific administrative officer is assigned, the exporter can furnish bond/ LUT before any officer (Centre or State). However, State Commissioners have power to direct exporters to submit bond/ LUT to Central tax officers till the administrative framework is ready.

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HI TEK MACHINES: Sir we are special purpus mahine manufacture. Now we sale one machine to SEZ company. What is the procedure to supply it without tax.

M. John William: During the year 2017-18 we have made SEZ supplies without LUT. We have paid the IGST. Shall we claim refund for the supplies made?

Elangovan: Sir, I am a freight forwarding agent , giving service to a SEZ company which is exempted from GST, now that company asking me to put the LUT number on my invoice for the services. Who will provide the LUT, is I am supposed to get LUT from GST authorities?

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