Letter of Undertaking (LUT) for GST Export: Filing Process FY 2026-27

A Letter of Undertaking (LUT) is the most practical mechanism under GST for exporters who want to ship goods or provide services abroad without the cash outflow of paying Integrated GST upfront. For FY 2026-27 (1st April 2026 to 31st March 2027), all eligible exporters must file a fresh LUT on the GST portal before making their first zero-rated export under the LUT route. This guide walks through the exact filing process, eligibility conditions, the legal framework under the IGST Act, and what happens when LUT conditions are not met.

What is an LUT Under GST: The Legal Basis

Under the GST framework, exports of goods and services are classified as zero-rated supplies under Section 16(1) of the IGST Act, 2017. Zero-rated means the GST rate is nil, but unlike an exempt supply, the exporter retains the right to claim Input Tax Credit (ITC) on inputs used for such exports. This distinction is critical: an exemption blocks ITC, while zero-rating preserves it.

Section 16(3) of the IGST Act provides two routes for making zero-rated supplies without paying tax:

• Section 16(3)(a): Supply under a Letter of Undertaking (LUT) without payment of IGST, followed by a claim for refund of unutilised ITC on inputs.
• Section 16(3)(b): Supply with payment of IGST, and then claim a refund of the IGST paid under Section 54 of the CGST Act.

The LUT route under Section 16(3)(a) is preferred by most exporters because it avoids the working capital blockage that comes with paying IGST upfront and waiting for a refund. The LUT is a formal undertaking that the exporter will comply with all export conditions, particularly realising foreign exchange proceeds within the stipulated time.

Who Can File an LUT: Eligibility Criteria for FY 2026-27

Rule 96A(1) of the CGST Rules, 2017 specifies the eligibility criteria for filing an LUT. The conditions are straightforward and apply without any turnover threshold.

Eligible Entities

• Any GST-registered taxpayer who is a registered exporter of goods or services
• SEZ developers and SEZ units making supplies to overseas buyers
• Domestic suppliers making zero-rated supplies to SEZ units or SEZ developers
• Merchant exporters and manufacturer exporters alike
• Service exporters providing software, consulting, or professional services to overseas clients

The Single Disqualification Criterion

An exporter is not eligible to file an LUT if they have been prosecuted for any offence under the CGST Act, IGST Act, or any of the earlier indirect tax laws (Central Excise, Service Tax, Customs) involving a tax amount of ₹250 lakh or more. Note that prosecution is the threshold, not a mere show-cause notice or demand. A taxpayer who has received a demand notice but has not been prosecuted remains eligible.

Who Cannot Use the LUT Route

• Exporters disqualified by prosecution for tax evasion of ₹250 lakh or more (must use the bond route with surety)
• Composition scheme taxpayers: They cannot avail zero-rated supply benefits and cannot export under LUT
• Taxpayers whose GST registration has been suspended or cancelled

LUT vs IGST Payment and Refund: A Comparison

Every exporter faces this choice for each financial year: file an LUT and export without paying IGST, or pay IGST on exports and claim a refund later. The right choice depends on cash flow, transaction volume, and the ability to manage refund paperwork. Here is a structured comparison:

For most active exporters, the LUT route under Rule 96A is the more efficient option. The refund of accumulated ITC (available under the LUT route) processes in 60 days if complete, with interest at 6% per annum payable by the department if delayed beyond 60 days under Section 56 of the CGST Act.

Step-by-Step: How to File an LUT for FY 2026-27 on the GST Portal

The GST portal has made the LUT filing process entirely self-service. No physical visit to the GST office is required. No notarisation, bond, or bank guarantee is needed. The entire process from login to ARN generation typically takes under 10 minutes.

Prerequisites Before Filing

• Active GST registration (GSTIN in active status)
• Authorised signatory details updated in the GST registration
• Access to the authorised signatory's registered mobile number (for OTP) or a valid Digital Signature Certificate (DSC) for companies and LLPs
• IEC code from DGFT if exporting goods (required by Customs for shipping bill generation)

Filing Process: Step-by-Step

1. Log in to the GST Portal: Visit www.gst.gov.in. Enter your GSTIN, username, and password. Complete the CAPTCHA verification.
2. Navigate to LUT Filing Section: On the dashboard, go to Services > Refunds > Furnish Letter of Undertaking (LUT). This takes you directly to the EXP-01 form.
3. Select Financial Year: From the dropdown, select 2026-27. The previous year's LUT (if filed) will appear in the history tab below for reference.
4. Verify Pre-Filled Details: The portal auto-fills your GSTIN, legal name, trade name, principal place of business address, and authorised signatory details from your GST registration. Review these carefully.
5. Select Export Type: Choose whether the LUT covers:
   • Export of goods
   • Export of services
   • Supply to SEZ units or SEZ developers
   • All of the above (select all applicable checkboxes)
6. Enter Witness Details: The form requires details of two witnesses: full name, address, and occupation. These are declaratory in nature and do not require the witnesses to be physically present or to sign the form. Any two individuals known to the authorised signatory can be listed.
7. Read and Accept the Self-Declaration: The LUT contains a statutory self-declaration that the taxpayer: (a) is eligible to file an LUT, (b) has not been prosecuted for tax evasion of ₹250 lakh or more, and (c) undertakes to pay IGST with interest if export proceeds are not realised within the prescribed time. Check the confirmation box.
8. Submit with OTP or DSC:
   • For proprietorships, partnership firms, and individuals: Submit using EVC (Electronic Verification Code) sent as OTP to the registered mobile number of the authorised signatory.
   • For companies and LLPs: DSC (Digital Signature Certificate) of the authorised signatory is mandatory. The DSC must be registered on the GST portal before use.
9. Download the ARN and LUT PDF: After successful submission, an Application Reference Number (ARN) is generated. Download the LUT acknowledgment PDF. This PDF serves as the accepted LUT for the financial year. No department signature is required on this document.

LUT Conditions: Obligations After Filing

Filing the LUT is only the first step. The exporter must comply with the conditions stated in the LUT throughout the financial year. Non-compliance has direct tax and legal consequences.

Condition 1: Realisation of Export Proceeds

For export of goods: Export proceeds in foreign exchange must be realised within 1 year (12 months) from the date of export, as measured by the Let Export Order (LEO) date on the shipping bill. The RBI prescribes the time limit for realisation under FEMA, and currently the standard period is 9 months for goods exported to normal countries (extended to 12 months for certain cases). For GST LUT purposes, Rule 96A uses the 1-year period as the outer limit.

For export of services: Payment must be received in convertible foreign exchange (or Indian rupees where permitted by RBI) within 1 year from the date of invoice. Services like software development, consulting, BPO, and professional services provided to overseas clients are covered here.

Condition 2: Filing of GSTR-1 and GSTR-3B

Exports made under LUT must be correctly reported in GSTR-1: Table 6A covers direct exports with shipping bill details, and Table 6B covers exports to SEZ units. The GSTR-3B (Table 3.1(b)) must reflect zero-rated supplies (exports) in the correct column. Incorrect or missing reporting can flag the exporter for scrutiny and delay ITC refund claims.

Condition 3: Shipping Bill and Invoice Linkage

For goods export, the GST invoice must cite the LUT ARN number. The shipping bill filed with Customs (through ICEGATE) must also carry the GST invoice details. ICEGATE and GSTN share data, and the system cross-matches the shipping bill with the GSTR-1 export data. Any mismatch causes refund delays or demand notices from the jurisdictional officer.

Condition 4: Timely ITC Refund Claims

While not a condition of the LUT itself, exporters who file LUT and accumulate ITC on inputs must file refund claims within 2 years from the date of export under Section 54(1) of the CGST Act. Missing this limitation period permanently bars the refund claim.

What Happens When LUT Conditions Are Violated

Rule 96A(3) of the CGST Rules specifies the consequences when an exporter fails to meet LUT conditions, particularly non-realisation of export proceeds within the prescribed period.

IGST Liability Arises

When export proceeds are not received within 1 year, the exporter must pay IGST on the export value (at the rate applicable to the goods or services) along with interest under Section 50(1) of the CGST Act at 18% per annum. The interest is calculated from the date of export invoice to the date of actual IGST payment. For high-value exports, this interest accumulation can be substantial.

Example: An exporter ships goods worth ₹50 lakh on 1st May 2026 under an LUT. IGST rate is 18% (i.e., ₹9 lakh would have been payable). If proceeds are not received by 1st May 2027, the exporter must pay ₹9 lakh IGST plus interest at 18% per annum (₹9 lakh x 18% = ₹1,62,000 per year). After 13 months of default, total outflow would be approximately ₹9 lakh + ₹1,75,500 = ₹10,75,500.

LUT Revocation by the Tax Officer

The jurisdictional GST officer can revoke the LUT under Rule 96A(3) if the exporter fails to pay IGST with interest after the default period. Once revoked, the exporter cannot make zero-rated supplies under the LUT route until dues are cleared and a fresh LUT is accepted. This effectively stops the exporter from making tax-free exports until compliance is restored.

Penalty Provisions

A violation of LUT conditions can attract a penalty under Section 122(1)(xiii) of the CGST Act for failing to account for any taxable supply. The penalty can be ₹10,000 or the amount of tax due, whichever is higher. In cases involving deliberate evasion, the officer may initiate proceedings under Section 74 of the CGST Act with a penalty of up to 100% of the tax due.

LUT for Export of Services: Special Considerations

Export of services under GST has specific nuances when using the LUT route. Unlike goods exports where ICEGATE and GSTN share data automatically, services exports rely on invoices and bank receipts as evidence of zero-rated supply.

Definition of Export of Services

Under Section 2(6) of the IGST Act, a supply of services qualifies as an export of services when:

1. The supplier is located in India
2. The recipient is located outside India
3. The place of supply is outside India under Sections 12 or 13 of the IGST Act
4. Payment is received in convertible foreign exchange or Indian rupees (where RBI permits)
5. The supplier and recipient are not merely establishments of the same entity (e.g., branch and head office)

Acceptable Payment Currencies

RBI has permitted receipt of export proceeds for certain services in Indian rupees from specific countries. Exporters should verify the current RBI circular on Liberalised Remittance Scheme and FEMA regulations at rbi.org.in for the list of permitted currencies and countries. Payment received in Indian rupees from a non-resident account (FCNR or NRE account) also qualifies as foreign exchange receipt for this purpose.

Reporting Services Export in GSTR-1

Services exports under LUT must be reported in GSTR-1 Table 6B (exports without payment of tax). The entry requires: invoice date, invoice number, export type (services), invoice value (in INR), and taxable value. Unlike goods, there is no shipping bill reference for services. The invoice itself serves as the primary export document.

LUT Validity: Managing the Annual Renewal Cycle

The annual renewal requirement is the most common administrative gap for exporters. Many exporters, particularly small businesses and startups new to export operations, fail to file the LUT for the new financial year on time. Here is how to manage the renewal cycle effectively.

Timing of Renewal

• The LUT for FY 2025-26 expires on 31st March 2026
• The LUT for FY 2026-27 can be filed from 1st April 2026 (the first day of the new financial year)
• There is no grace period: exports made on 1st April 2026 under the assumption that the previous year's LUT continues will be non-compliant if the FY 2026-27 LUT has not been filed
• Best practice: file the FY 2026-27 LUT on 31st March 2026 or 1st April 2026 to ensure continuity

Gap Period: What to Do if the LUT Lapses

If exports are made after 31st March without the new LUT being filed, the exporter has two options:

1. Immediate LUT Filing: File the LUT for the new financial year immediately. Exports made after the LUT is filed are covered. Exports made before filing must be regularised.
2. Retrospective IGST Payment: For exports made before the LUT was filed, pay IGST on those transactions and claim a refund under Rule 96. Alternatively, the CBIC has in past years issued circulars allowing exporters to file LUTs with retrospective effect for minor delays at the start of a financial year. Check the current CBIC advisory on www.cbic.gov.in for any such relaxation for FY 2026-27.

LUT and ITC Refund: How They Work Together

The LUT exempts the exporter from paying IGST but does not eliminate GST costs entirely. Exporters still pay GST on their input purchases (raw materials, services, overhead). This input GST accumulates as ITC in the electronic credit ledger. Since exports under LUT carry nil IGST output, the ITC cannot be set off against output tax. The solution is to claim a refund of accumulated ITC under Section 54(3) of the CGST Act.

ITC Refund Process Under Rule 89(4)

1. File Form GST RFD-01 on the GST portal (Services > Refunds > Application for Refund)
2. Select the refund category: "Refund of unutilised ITC on account of exports without payment of tax (Zero-rated supply)"
3. The refund amount is calculated using the formula in Rule 89(4): Refund = (Turnover of zero-rated supply / Adjusted total turnover) x Net ITC
4. Attach GSTR-2B statements, shipping bills (for goods), and export invoices (for services)
5. The application is processed by the jurisdictional GST refund officer within 60 days under Section 54(7) of the CGST Act
6. If the refund is not processed within 60 days, the department must pay interest at 6% per annum on the delayed refund under Section 56 of the CGST Act

Common Errors and How to Avoid Them

The following errors are frequently encountered during LUT filing and post-filing compliance. Awareness of these issues can save time and prevent compliance notices.

Error 1: Not Citing LUT ARN on Export Invoice

The GST export invoice must include the statement: "Supply meant for export under LUT without payment of IGST" along with the LUT ARN. Omitting the LUT ARN from the invoice causes mismatches when the jurisdictional officer cross-checks GSTR-1 data with the shipping bill. Use the exact invoice format prescribed under Rule 46 of the CGST Rules, which requires all export-specific fields.

Error 2: Filing LUT on a Suspended GSTIN

The GST portal does not allow LUT filing if the GSTIN is in a suspended state (which occurs when returns are pending for 2 or more consecutive months for monthly filers, under Rule 21A of the CGST Rules). Before filing the LUT, verify GSTIN status at Services > Registration > Track Application Status. Clear all pending returns to restore active status before attempting LUT submission.

Error 3: Selecting Wrong Financial Year

The LUT form has a financial year dropdown that defaults to the current year. Selecting FY 2025-26 instead of FY 2026-27 at the start of the financial year is a common mistake. Always confirm the year displayed before submission. Once submitted, the LUT cannot be deleted or reassigned to a different year; a new filing must be made.

Error 4: Using LUT Before It Is Filed

Some exporters assume the previous year's LUT automatically carries over. It does not. An export made on 1st April 2026 before the FY 2026-27 LUT is filed cannot be covered by the FY 2025-26 LUT (which expired on 31st March 2026). Plan ahead and file the new LUT before the financial year starts.

Error 5: Incorrect ITC Refund Claim Period

The ITC refund claim for exports under LUT must be filed within 2 years from the date of export under Section 54(1) of the CGST Act. Exporters who accumulate ITC over a financial year and file a single annual refund claim sometimes miss exports from the early months of the year. The 2-year clock runs from each individual export date, not from the end of the financial year.

How IncorpX Assists Exporters with LUT and GST Compliance

IncorpX provides assistance for GST export compliance, including LUT filing, ITC refund applications, and ongoing return management. Our assistance covers the full export compliance cycle from GST registration through to refund receipt.

For exporters starting a new business, the prerequisites for filing an LUT include an active GST registration. If your business is not yet GST-registered, IncorpX provides assistance for GST registration with the GSTN portal. For businesses also setting up their corporate structure, assistance is available for private limited company registration, LLP registration, and OPC registration with the Ministry of Corporate Affairs.

Exporters in manufacturing or trading who need MSME recognition alongside their export operations can also explore MSME registration, which provides priority sector lending benefits and a simplified GST refund process under the CBIC's Niryat Mitra programme for MSME exporters.