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Any registered person availing the option to supply goods or services for export without payment of integrated tax shall furnish, prior to export, a bond or a Letter of Undertaking in FORM GST RFD-11 to the jurisdictional Commissioner (vide circular no 2/2/2017-GST the power has been delegated to Deputy/Assistant Commissioner).

Conditions of Letter of Undertaking:

• The registered person shall bind himself to pay the tax due along with the interest specified under sub-section (1) of section 50 (18%) within a period of -

(a) fifteen days after the expiry of three months, or such further period as may be allowed by the Commissioner,] from the date of issue of the invoice for export, if the goods are not exported out of India; or

fifteen days after the expiry of one year, or such further period as may be allowed by the Commissioner, from the date of issue of the invoice for export, if the payment of such services is not received by the exporter in convertible foreign exchange

The Government has clarified & emphasized that exports have been zero-rated under the Integrated Goods and Services Tax Act, 2017 (IGST Act) and as long as goods have actually been exported even after a period of three months, payment of integrated tax first and claiming refund at a subsequent date should not be insisted upon. In such cases, the jurisdictional Commissioner may consider granting an extension of time limit for export as provided in the said sub-rule on post facto basis keeping in view the facts and circumstances of each case. The same principle should be followed in case of export of services. (Circular No. 37/11/2018-GSTdated 15th March 2018)

• In the event, goods are not exported within the time specified above and the registered person fails to pay the IGST amount, the export as allowed under bond or Letter of Undertaking shall be withdrawn forthwith and the said amount shall be recovered from the registered person in accordance with the provisions of section 79.

• The export as allowed under bond or Letter of Undertaking withdrawn shall be restored immediately when the registered person pays the amount due.

The provisions of sub-rule (1) shall apply, mutatis mutandis, in respect of the zero-rated supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit without payment of integrated tax.”

Letter of Undertaking/Bond not required for exempt supplies

• In terms of Circular No. 45/19/2018 dated 30.05.2018, it has been clarified that in respect of refund claims on account of export of non-GST and exempted goods without payment of integrated tax, LUT/bond is not required. A registered person exporting non-GST goods shall comply with the requirements prescribed under the existing law (i.e. Central Excise Act, 1944 or the VAT law of the respective State) or under the Customs Act, 1962 if any. Further, the exporter would be eligible for a refund of an unutilized input tax credit of central tax, state tax, union territory tax, integrated tax and compensation cess in such cases.

Note: The Government vides Notification No. 16/2017 - Central Tax dated 07.07.2017 has specified the following conditions for a registered person to be eligible for submission of Letter of Undertaking in place of a bond.

(a) a status holder as specified in paragraph 5 of the Foreign Trade Policy 2015-2020; or

(b) who has received the due foreign inward remittances amounting to a minimum of 10% of the export turnover, which should not be less than one crore rupees, in the preceding financial year.

Who can avail Letter of Undertaking under GST

Further, the registered person has not been prosecuted for any offense under the Central Goods and Services Tax Act, 2017 (12 of 2017) or under any of the erstwhile laws in the case where the amount of tax evaded exceeds two hundred and fifty lakh rupees.

However, the above requirement has been relaxed with effect from 04th October 2017

The Government vide Notification No. 37/2017 - Central Tax dated 04.10.2017 has extended the facility of Letter of Undertaking to all registered taxpayers.

However, the following persons shall not be eligible to furnish Letter of Undertaking:

1) A registered person prosecuted for any offense under GST or any existing laws in force with tax evaded exceeding Rs.2.5 crores

2) A registered person who fails to pay the tax due along with interest within:


15 days after the expiry of 3 months from the date of issue of the invoice for export, if the goods are not exported out of India; or

15 days after the expiry of 1 year, or such further period as may be allowed by the

Commissioner, from the date of issue of invoice for export, if the payment of such services is not received by the exporter in convertible foreign exchange.

However, the disqualification in respect of point 2 above will cease on payment of tax along with interest.

A self-declaration by the exporter that he has not been prosecuted is sufficient for the purposes of Notification No. 37/2017- Central Tax dated 4th October 2017. Department may verify the claim after acceptance of the LUT, unless the Department has any specific information otherwise, regarding the prosecution. (Circular No. 8/8/2017-GST dated 04.10.2017)


A registered person who is not eligible to furnish a Letter of Undertaking for reasons discussed above, shall execute a Bond. The Bond shall be accompanied by Bank Guarantee for 15% of the Bond amount. The bond shall be furnished on a non-judicial stamp paper of the value as applicable in the state in which the bond is being furnished. The exporters shall furnish a running bond where the bond amount would cover the amount of self-assessed estimated tax liability on the export. The exporter shall ensure that the outstanding integrated tax liability on exports is within the bond amount. In case the bond amount is insufficient to cover the said liability in yet to be completed exports, the exporter shall furnish a fresh bond to cover such liability. The onus of maintaining the debit/credit entries of integrated tax in the running bond will lie with the exporter. The record of such entries shall be furnished to the Central tax officer as and when required.

(Circular No. 8/8/2017-GST dated 04.10.2017).


The Letter of Undertaking facility is also extended to Supplies made to SEZ.

Letter of Undertaking to be submitted on the portal

Further, the registered person (exporters) shall fill and submit FORM GST RFD-11 on the common portal. A LUT shall be deemed to be accepted as soon as an acknowledgment for the same, bearing the Application Reference Number (ARN), is generated online. If it is discovered that an exporter whose LUT has been so accepted, was ineligible to furnish a LUT in place of the bond as per Notification No. 37/2017-Central Tax, then the exporter’s LUT will be liable for rejection. In case of rejection, the LUT shall be deemed to have been rejected ab initio. No document needs to be physically submitted to the jurisdictional office for acceptance of LUT. (Circular No. 40/14/2018-GST dated 06.04.2018)

Jurisdictional officer for acceptance of Letter of Undertaking

LUT/Bond shall be accepted by the jurisdictional Deputy/Assistant Commissioner having jurisdiction over the principal place of business of the exporter. The exporter is at liberty to furnish the LUT/bond before either the Central Tax Authority or the State Tax Authority till the administrative mechanism for assigning of taxpayers to the respective authority is implemented.

Letter of Undertaking for supplies to Nepal and Bhutan

Acceptance of LUT for supplies of goods to Nepal or Bhutan or SEZ developer or SEZ unit will be permissible irrespective of whether the payments are made in Indian currency or convertible foreign exchange as long as they are in accordance with the applicable RBI guidelines. It may also be noted that the supply of services to SEZ developer or SEZ unit under LUT will also be permissible on the same lines. The supply of services, however, to Nepal or Bhutan will be deemed to be export of services only if the payment for such services is received by the supplier in convertible foreign exchange.[Circular 8/8/2017 dated 4-10-17]. Supply of services having a place of supply in Nepal or Bhutan against payment in Indian rupees is exempt under Notification 9/2017-IGST inserted vide Notification No. 42/2017-Integrated Tax (Rate), dated 27-10-2017.

Source/Credit: IDTC,ICAI.


Published by

Charmi Doshi & Co.
(Practicing Chartered Accountant)
Category GST   Report

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