How to Save GST on Exports | Complete LUT Filing Guide

If you ship goods or sell services to clients outside India, you have probably wondered how to save GST on every export invoice you raise. Most exporters end up paying IGST upfront and then chasing the refund for weeks. There is a smarter, fully legal alternative that has been part of GST law since 2017. It is called the Letter of Undertaking (LUT), and filing it correctly is the single most effective way to save GST on exports and free up working capital.

This guide explains exactly how LUT filing works for FY 2026-27, who is eligible, the step-by-step filing process, the refund route for past invoices, and the small mistakes that cost exporters lakhs every year. Whether you are a freelancer in Pune billing US clients or a manufacturer in Tirupur shipping to Europe, the rules are the same and the savings are real.

What is a Letter of Undertaking (LUT) Under GST?

A Letter of Undertaking is a digital declaration filed by an exporter on the GST portal in Form GST RFD-11. It is governed by Rule 96A of the CGST Rules, 2017, read with Section 16 of the IGST Act, 2017. By filing an LUT, you formally promise the tax department that you will export within the prescribed time limit, receive payment in foreign currency where applicable, and follow all GST rules.

In return, the government allows you to raise zero IGST invoices to overseas clients or SEZ buyers for the entire financial year. There is no upfront tax payment and no refund chase, which is exactly why LUT is the best answer to the question of how to save GST on exports.

• Form used: GST RFD-11 (online on the GST portal)
• Validity: One financial year, from 1 April to 31 March
• Government fee: Nil
• Approval time: 3 working days, deemed approved if no action is taken
• Coverage: Goods exports, services exports, and SEZ supplies

How to Save GST on Exports: The Two Routes Available

Indian GST law treats exports as zero rated supplies under Section 16 of the IGST Act, which means exports should bear no tax burden. However, the law gives you two ways to achieve that zero tax outcome. Choosing the right route is the first step in figuring out how to save GST on your export business.

Route 1: Pay IGST Upfront and Claim a GST Refund

Here you charge IGST (often 18% for services) on the export invoice and pay it to the government. After the goods are shipped or services are delivered, you claim the IGST back through a refund. For goods exporters, the shipping bill itself acts as the refund application through ICEGATE. For service exporters, you file Form RFD-01 separately on the GST portal. This route works only if you have spare cash to pay IGST upfront and you do not mind waiting 30 to 90 days, which is hard on cash flow.

Route 2: File LUT and Export at 0% IGST

Here you file an LUT once at the start of the financial year. Every export invoice then goes out at zero IGST, with no refund process to chase. If you have accumulated Input Tax Credit on inputs like rent, software, or professional fees, you can still claim a refund of that ITC through Form RFD-01 separately. For most Indian exporters, especially service providers and MSMEs, the LUT route is the more efficient way to save GST on exports and keep working capital in the business.

LUT vs IGST Refund Route: Side-by-Side Comparison

How Much GST Can You Actually Save With LUT? (Real Examples)

The cash-flow impact of LUT becomes obvious once you run the numbers. Here are three real-world scenarios.

Example 1: Freelance UI Designer in Pune

Annual billing to clients in the US and Germany is around Rs. 30 lakh. Without LUT, the freelancer would pay roughly Rs. 5.4 lakh in IGST upfront and wait 60 to 90 days for each refund. With LUT, that Rs. 5.4 lakh stays in the bank account, where it can fund new tools, marketing, or simply earn interest.

Example 2: Garment Exporter in Tirupur

Annual export turnover is Rs. 12 crore. Without LUT, the exporter would have about Rs. 2.16 crore stuck in IGST on a rolling basis. Even at a working-capital interest rate of 10%, the financing cost crosses Rs. 18 lakh a year, just on tax money. With LUT, that entire amount is freed up.

Example 3: SaaS Company in Bangalore

Annual export billing of Rs. 60 crore would mean about Rs. 10.8 crore of IGST exposure at any time without LUT. Refund queries and ICEGATE rejections can stretch the cycle to four months. With LUT, the founders raise USD invoices at zero tax and only file small ITC refunds for cloud bills and office costs.

Who is Eligible to File LUT in India?

Almost every regular Indian exporter qualifies. The eligibility criteria under CBIC Notification 37/2017 (Central Tax) are short and clear.

• GST registration: You must hold a valid GST registration with an active GSTIN
• Export activity: You export goods, services, or supply to SEZ units or developers
• Clean compliance record: You have not been prosecuted under CGST, IGST, or earlier indirect tax laws for tax evasion of more than Rs. 2.5 crore
• Regular return filing: You file GSTR-1 and GSTR-3B regularly without major defaults
• No turnover limit: Freelancers, MSMEs, large corporates, OPCs, LLPs, partnerships, and proprietorships are all eligible

If you do not qualify because of past prosecution or other red flags, you can still export without IGST by filing a Bond with a bank guarantee (up to 15% of the bond amount). The two are compared later in this guide.

Documents Required to File LUT

The good news is that LUT filing needs almost no paperwork. Most details are pre-filled from your GST registration. Here is what to keep handy before you start.

• GST login credentials: GSTIN, username, and password for the GST portal
• PAN of the business: Of the company, LLP, or proprietor
• Two independent witnesses: Full name, occupation, and complete residential address (not employees or family)
• Digital Signature Certificate (DSC): Mandatory for Companies and LLPs
• Aadhaar-linked mobile: For EVC if you are a proprietorship or partnership
• Import Export Code (IEC): Required for goods exporters; service exporters are usually exempt
• Previous LUT (if any): Only required if you ever filed manually before the online process began

How to File LUT Online for FY 2026-27 (Step by Step)

The whole process takes around 15 minutes if your documents are ready. Here is the exact path on the GST portal.

1. Log in to the GST portal: Visit gst.gov.in and log in with your GSTIN, username, and password.
2. Navigate to the LUT section: Click Services, then User Services, then Furnish Letter of Undertaking (LUT). Form GST RFD-11 opens with your business details pre-filled.
3. Select the financial year: From the dropdown labelled 'LUT Applied for Financial Year', select 2026-27 (or the relevant FY).
4. Upload old LUT (optional): If you filed a manual LUT in earlier years, upload the scanned PDF or JPEG file (max 2 MB).
5. Tick all three self-declarations: Confirm that you will complete exports within the time limit, follow all GST laws, and pay IGST plus 18% interest if you fail to meet the conditions.
6. Add two independent witnesses: Enter the name, occupation, and full address of two unrelated witnesses (an advocate or an unrelated business owner is ideal).
7. Specify place and save: Type the city of filing in the 'Place' field, click Save, then Preview to download the PDF and verify every detail.
8. Sign and submit: Companies and LLPs must use DSC; proprietorships and partnerships can use either DSC or EVC (OTP based).
9. Save the ARN: Download the acknowledgement PDF with the Application Reference Number, which you will need on every export invoice.
10. Track approval: The processing officer has 3 working days to approve, query, or reject. No action means deemed approval.

What to Write on Export Invoices After Filing LUT

Once your LUT is approved, every export invoice should clearly carry the LUT clause. Here is the standard line to use:

"Supply meant for export under Letter of Undertaking (LUT) without payment of Integrated Tax. Zero rated supply under Section 16 of IGST Act, 2017. LUT ARN: [Your ARN Number]."

When you file GSTR-1, report these invoices in Table 6A and choose 'Without payment of tax'. In GSTR-3B, they appear in Table 3.1(b) as zero rated supplies. This single line on the invoice saves you from a lot of audit and refund queries later.

LUT vs Bond: Which One Applies to You?

Both LUT and Bond are filed in Form GST RFD-11. The difference lies in who can use them and what they cost.

For most law-abiding Indian exporters, the LUT is the right answer. A Bond is only necessary where eligibility for the LUT is restricted, so it is worth confirming your status against the latest CBIC notifications before filing one.

How to Get a GST Refund If You Already Exported Without LUT

A lot of new exporters miss the LUT in their first year and end up paying IGST on every invoice. The good news is the law lets you claim that money back. Knowing how to get a GST refund is the second half of saving GST on exports.

For Goods Exporters: Refund Through the Shipping Bill

For goods, no separate refund application is needed. The shipping bill itself acts as the refund claim under Rule 96 of the CGST Rules. Three things must match perfectly: Table 6A of GSTR-1, Table 3.1(b) of GSTR-3B, and the shipping bill filed at the customs port. If all three match, ICEGATE pushes the refund to your bank account, with a 90% provisional refund usually in 7 working days.

For Service Exporters: Refund Through Form RFD-01

Service exporters file Form RFD-01 on the GST portal under the category 'Refund of IGST paid on export of services with payment of tax'. Supporting documents include export invoices, FIRC or eFIRC, a refund computation statement, and a professional certification where the refund exceeds Rs. 2 lakh. The statutory timeline is 60 days from filing; beyond that, the GST department owes you 6% interest per year under Section 56 of the CGST Act.

Time Limit for Claiming a Refund

You have 2 years from the relevant date to file a refund application under Section 54 of the CGST Act. Beyond that, the refund claim is barred, so if you have older export invoices where IGST was paid, do not delay further.

ITC Refund: The Refund You Can Still Claim Even With LUT

This is the part many LUT filers forget. When you export under LUT at zero IGST, your Input Tax Credit on rent, software, marketing, professional fees, and other expenses keeps building up. Since you are not charging any output IGST, that ITC has nowhere to go.

You can claim a refund of this accumulated ITC through Form RFD-01 under the category 'Refund of unutilised ITC on account of exports without payment of tax'. You file using Statement 3A or 3B with details of export invoices and a refund computation under Rule 89(4). This keeps your input credit from piling up uselessly while you export at zero tax.

Penalties for Missing LUT or Breaking Its Conditions

GST law does not take export defaults lightly. If you break the LUT conditions, here is what happens.

• Full IGST payable: You must pay the entire IGST on the export invoice that breached the conditions
• Interest at 18%: Charged from the date of the export invoice until payment, under Section 50 of the CGST Act
• 15-day window: If goods are not exported within 3 months of the invoice date, IGST plus interest must be paid within 15 days of that period ending
• Service payment default: The same rule applies if foreign payment for services is not received within 1 year of the invoice
• LUT withdrawal: In repeat or serious cases, the LUT facility itself can be withdrawn, forcing you to file a Bond with a bank guarantee
• Possible prosecution: Section 132 prosecution is possible only in wilful evasion cases, not ordinary missed deadlines

Top Mistakes Exporters Make While Filing LUT

The same mistakes repeat year after year. Avoid these and the process becomes painless.

• Forgetting the March renewal: The LUT is valid for one financial year only. The first export of a new year without a renewed LUT becomes a taxable supply
• Filing after the first invoice: The LUT applies only to invoices issued after its filing date. Earlier invoices need IGST plus a refund
• Picking related witnesses: Witnesses must be independent. Using employees, partners, or family can be flagged during audit
• Wrong signing method: Companies and LLPs cannot sign with EVC. Only DSC works for them
• Missing the LUT ARN on invoices: Causes audit issues and sometimes refund queries on inputs
• Ignoring the 3-month and 1-year deadlines: Once an export crosses those, the LUT cover is gone and you owe IGST plus interest
• Treating LUT as optional once filed: Some exporters file it, then bill in INR or fail to bring foreign currency on time, which breaks the LUT conditions

Conclusion

Saving GST on exports is not a loophole. It is a clear path the law has built for every Indian exporter, and the gateway is the Letter of Undertaking. Filing it once a year, before your first export invoice, is the single most effective way to keep working capital in your business and skip the refund chase entirely.

If you have already exported without LUT, the IGST refund route is still open through Form RFD-01 or the shipping-bill mechanism, as long as you act within the 2-year window. Either way, the goal is the same: ensure your exports stay genuinely zero rated and your cash stays in your business.

Key Takeaways

• An LUT is filed once a year in Form GST RFD-11 and lets you export at 0% IGST for the whole financial year.
• It is free, fully online, valid from 1 April to 31 March, and deemed approved if there is no action within 3 working days.
• Almost every GST-registered exporter qualifies, unless prosecuted for tax evasion above Rs. 2.5 crore; others use a Bond with a bank guarantee.
• File before your first export invoice of the year, and renew every March, as there is no auto-renewal.
• Even under LUT, you can claim a refund of unutilised ITC; if you already paid IGST, claim it back within 2 years under Section 54.