Introduction
India's implementation of the Goods and Services Tax (GST) has simplified indirect taxation, specifically benefiting exporters through the filing of a Letter of Undertaking (LUT). Exporters are allowed to supply goods or services without paying Integrated GST (IGST) by filing a GST LUT, given they meet the specified conditions. While the process seems simple, many businesses commit avoidable errors that lead to delays, rejections, or compliance issues. Let's understand the meaning and errors to avoid while filing the LUT.
Meaning of Letter of Undertaking (LUT)
Under Rule 96A of the CGST Rules, 2017, LUT is a declaration filed by exporters that allows them to make zero-rated supplies without paying IGST. It essentially serves as a commitment to fulfil all GST obligations on export supplies. For small and medium exporters, this facility ensures improved liquidity and reduces the procedural burden compared to executing bonds with a bank guarantee.
Common Mistakes While Filing GST LUT Application
1. Filing After the Due Date
One of the most frequent mistakes is filing the LUT after the due date. As per GST rules, the LUT must be filed before the commencement of exports in a financial year. Late filing compels the exporter to pay IGST on exports and later claim refunds, which affects liquidity and delays settlements. To avoid this, ensure your LUT is renewed before April 1 each year, or at least before the first export transaction of the new year.
2. Providing Incomplete or Incorrect Details
Errors in key details like GSTIN, PAN, legal name, or bank information often lead to LUT rejection. Even minor discrepancies-such as spelling errors or mismatched PAN-GSTIN details-can cause issues. It is essential to always cross-verify information with official records before submission to ensure accuracy.
3. Ignoring Eligibility Criteria
Businesses sometimes ignore the eligibility criteria and file LUTs despite pending GST dues or past non-compliance. Only compliant taxpayers with no pending liabilities or prosecutions can successfully submit an LUT. It is important to verify your compliance status before filing to prevent rejection or disputes during verification.
4. Failure to Use the Latest Format
The GST portal and LUT template are regularly updated. Submitting an LUT using an expired form can trigger system errors or rejection. Always download or use the latest format directly from the GST portal and ensure that your digital signature certificate (DSC) is valid and registered. Staying current with updates helps prevent errors during LUT filing and avoids further problems.
5. Non-Compliance with Signature Requirements
A Letter of Undertaking must be digitally signed by the authorised person. Common errors include missing signatures or using an unauthorised DSC. Such submissions are automatically rejected. Ensure that the LUT is signed only by an authorised person as per the GST registration records.
6. Overlooking Annual Renewal
An LUT remains valid for one financial year only. Many exporters assume that their previously filed LUT remains valid indefinitely, leading to inadvertent IGST payments. Set yearly reminders for renewal to maintain uninterrupted exemption benefits.
7. Failing to Maintain Supporting Documents
Although the LUT is filed online, exporters must retain supporting documentation-such as export invoices, shipping bills, bank realisation certificates, and proof of dispatch-for verification. Missing documents during GST audits can lead to penalties or the withdrawal of LUT benefits. Maintain accurate and complete digital and hard copy records of all export-related paperwork.
Conclusion
Filing a GST Letter of Undertaking application is an essential step for exporters seeking the zero-rated supplies benefit under the GST regime. Despite being a simple online process, many businesses encounter issues due to errors such as late filing, incomplete details, or expired LUTs. By carefully verifying eligibility, maintaining timely renewals, and adhering to updated GST portal requirements, exporters can ensure a smooth, error-free process. Avoiding these common mistakes not only ensures compliance with GST laws but also supports better cash flow management and hassle-free export operations.
Setindiabiz is a trusted legal and compliance platform that supports businesses at every stage of their GST and export compliance journey. It helps exporters stay fully GST-compliant with expert assistance for LUT filing, registration, and renewals. The team ensures accurate submissions, prevents common errors, and simplifies complex GST procedures. With technology-driven solutions, Setindiabiz makes compliance quick, transparent, and hassle-free, allowing businesses to focus on smooth and efficient export operations.
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