What is the validity of LUT?

A LUT is valid for one financial year.

When LUT is Filed?

A Letter of Undertaking (LUT) must be filed annually at the beginning of each financial year by exporters who wish to export goods or services without paying IGST. Here’s a breakdown of the timeline:

1. Annual Filing: LUTs are valid for one financial year (April to March). Exporters must renew and file a new LUT at the start of each financial year to continue availing of IGST exemption on exports.
2. First-Time Filing: If a business intends to export goods or services for the first time, it can file the LUT at any point during the financial year.
3. Processing Time: Once filed, the LUT is usually processed quickly, allowing exporters to start making zero-rated exports immediately.
4. Validity and Renewal: The LUT remains valid for the entire financial year, after which exporters need to refile it for the next year.

What is the benefit of LUT?

A Letter of Undertaking (LUT) under GST provides exporters the benefit of exporting goods and services without paying Integrated Goods and Services Tax (IGST). Here are the key advantages:

1. Cash Flow Savings: Exporters do not need to block working capital by paying IGST upfront and then seeking refunds. This improves cash flow and eases the burden on finances.
2. Simplified Refund Process: With a LUT, exporters avoid the lengthy refund process associated with paid IGST on exports.
3. Cost Efficiency: The LUT process is simple and free, eliminating additional costs and paperwork.
4. Wider Applicability: Available for both goods and service exports, LUT applies to zero-rated supplies, which include exports and supplies to SEZs.

In short, LUT makes it financially viable and simpler for exporters to conduct international trade without the burden of IGST payments.