LUT for export of services: who needs it and how to file it

Under GST, export of services is treated as a zero-rated supply. A registered exporter can either pay IGST on the export and claim a refund, or export without paying IGST by furnishing a Letter of Undertaking (LUT). For most service exporters, the LUT route is simpler and avoids having cash locked up in refunds.

Who should file an LUT

Any GST-registered person who exports services, or supplies to an SEZ unit or developer, can furnish an LUT, provided they meet the eligibility conditions and have not been prosecuted for tax evasion above the specified threshold. Consultants, software and IT service providers, agencies and other professionals billing overseas clients commonly use it.

When it qualifies as export of services

• The supplier is located in India.
• The recipient is located outside India.
• The place of supply is outside India.
• Payment is received in convertible foreign exchange, or in Indian rupees where permitted by the Reserve Bank of India.
• The supplier and recipient are not merely establishments of the same person.

How to file

• Log in to the GST portal.
• Go to Services, User Services, Furnish Letter of Undertaking (LUT).
• Select the financial year and confirm the declarations.
• Enter the details of two independent witnesses.
• Sign and submit using DSC or EVC, and download the acknowledgement.

The LUT is valid for the financial year for which it is filed, so it should be renewed at the start of each financial year, before the first export invoice of that year.

File the LUT before you raise your first export invoice of the year.

Invoicing under LUT

Export invoices issued under an LUT should state that the supply is meant for export under LUT without payment of IGST, and should show the LUT reference. Report the exports correctly in your GST returns.

What happens without one

If you export without a valid LUT, you must charge and pay IGST on the export and then apply for a refund. This ties up working capital until the refund is processed, and missing the LUT can lead to demands for tax on supplies treated as exports.

Keep the supporting records

Keep copies of contracts, invoices and proof of foreign exchange receipt, such as FIRC or e-BRC, for each export. They support the zero-rated treatment if it is ever questioned.