Exports are zero-rated under section 16 of the IGST Act. That means the export itself carries no tax, but you keep the credit of GST paid on your inputs. There are two ways to get there: export under an LUT without paying IGST and claim back the unused credit, or pay IGST on the export and claim that IGST back.
For most exporters the LUT route is simpler on cash flow, because no tax leaves the business in the first place. This guide covers who can file an LUT, how, the conditions you sign up to, what happens if you miss them, and how the credit refund works. If you want the filing done for you, see our LUT filing service.
Who can furnish an LUT
Under rule 96A of the CGST Rules and CBIC Circular No. 8/8/2017-GST, the LUT is open to every registered person who intends to make zero-rated supplies without paying IGST. That includes:
- Exporters of goods, including manufacturers and merchant exporters.
- Exporters of services, such as software, design, consulting, BPO and other services billed to clients abroad.
- Suppliers to SEZ units and SEZ developers for authorised operations, which are also zero-rated.
There is one exclusion. A person who has been prosecuted for an offence under the GST laws, or an earlier tax law, where the tax evaded is more than ₹250 lakh cannot use an LUT. Such a person must furnish a bond, with a bank guarantee of 15% of the bond amount, instead.
You need a GST registration to file an LUT, since it is filed against your GSTIN. An exporter of goods also needs an Importer Exporter Code to clear customs; our IEC registration service and IEC guide cover that step. An IEC is not part of the LUT itself.
LUT or pay IGST and claim a refund: the comparison
| Point | Export under LUT | Export on payment of IGST |
|---|---|---|
| Tax paid on the export | None | IGST at the applicable rate, paid through credit or cash |
| What you claim back | Refund of unutilised input tax credit | Refund of the IGST paid on the export |
| How the refund is claimed | Form GST RFD-01 on the GST portal | For goods, the shipping bill is treated as the refund application once GSTR-1 and GSTR-3B are filed; for services, RFD-01 |
| Prior paperwork | LUT in Form GST RFD-11, before the export, every financial year | None beyond normal invoicing and returns |
| Cash flow | No outflow on the export; credit sits in the ledger until refunded | Credit or cash used up on the export until the refund arrives |
| Refund amount | Limited by the rule 89(4) formula, so not always the full credit | The IGST actually paid on the export |
| Who it suits | Most exporters, especially service exporters and those whose credit is built up mainly on inputs and input services | Exporters with large balances in their credit ledger they would otherwise struggle to use |
| Goods subject to export duty | No refund of credit | No refund of IGST |
Section 16(4) of the IGST Act lets the government notify who may export on payment of IGST and claim a refund. Notification No. 01/2023-Integrated Tax, as amended, sets this out, and a short list of goods, including pan masala and certain tobacco products, is dealt with separately. If you trade in those goods, check the current notification before choosing a route.
Whichever route you take, section 16(5) and section 54(15) bar any refund, of credit or of IGST, on goods that are subject to export duty.
How to file the LUT on the GST portal
There is no government fee. The steps are:
Step 1: Log in to the GST portal and go to Services > User Services > Furnish Letter of Undertaking (LUT).
Step 2: Select the financial year the LUT is for. If you already have a manually filed LUT approved for the current year, you can upload it with the online application, but this is optional.
Step 3: Tick the self-declarations. These include the undertaking to export within the time allowed and to pay tax with interest if you do not.
Step 4: Enter two witnesses. Name, address and occupation of two independent witnesses.
Step 5: Sign and file. The primary or another authorised signatory signs with a DSC or EVC. Under the circular, the LUT is executed by the working partner, managing director, company secretary, proprietor or a person authorised by them.
Step 6: Download the acknowledgement. The portal generates an ARN and sends it by SMS and email. The LUT can be viewed under 'View My Submitted LUTs'.
The jurisdictional officer is expected to accept the LUT within three working days. If no action is taken in that time, the portal marks it 'Deemed Approved'.
Regikart's fee for preparing and filing the LUT is ₹999.
Validity: one financial year at a time
An LUT is valid for the whole financial year in which it is furnished. It does not renew automatically, and the portal marks it 'Expired' at the end of the year. An exporter therefore files a fresh LUT for each financial year, ideally in March for the coming year or on the first working day of April.
The LUT is meant to be in place before the export. Exporting in April and filing the LUT in July leaves three months of invoices that were issued without IGST and without cover. CBIC Circular No. 37/11/2018-GST allows a delay in furnishing the LUT to be condoned, and the facility to be allowed after the event on the facts of each case, but that depends on the officer and is not something to plan around.
The conditions you sign up to
Rule 96A(1) sets out what the undertaking actually commits you to. You agree to pay the tax due, with interest under section 50(1) of the CGST Act, if:
- Goods: the goods are not exported within three months from the date of the invoice, or any further time the Commissioner allows. The tax becomes payable within fifteen days after that period ends.
- Services: payment is not received in convertible foreign exchange, or in Indian rupees where the RBI permits, within one year from the invoice date, or the period allowed under FEMA (including any RBI extension), whichever is later. Again the tax is payable within fifteen days after that period ends, unless the Commissioner allows more time.
The FEMA period matters for both goods and services. In November 2025 the Foreign Exchange Management (Export of Goods and Services) (Second Amendment) Regulations, 2025 extended the period for realising and repatriating export proceeds from nine months to 15 months. Track the date of each shipment or invoice, not just the month.
Two practical points sit under these conditions. For services to Nepal or Bhutan, the supply counts as an export of services only where payment comes in convertible foreign exchange. For goods to Nepal or Bhutan, an LUT can be used whether payment is in rupees or foreign exchange, subject to RBI guidelines.
What happens if the conditions are not met
- Tax with interest. You pay the IGST that would have been charged, with interest under section 50(1), currently 18% a year, from the date it would have been due.
- The LUT facility is withdrawn. If goods are not exported in time and the amount is not paid, rule 96A(3) withdraws the facility immediately and the amount can be recovered under section 79. Until it is restored, further exports must be made on payment of IGST or under a bond with a bank guarantee.
- Restoration on payment. Under rule 96A(4), the facility is restored as soon as the amount due is paid.
- Refund returned for unrealised goods proceeds. If you have already received a credit refund on exported goods and the sale proceeds are not realised within the FEMA period, the proviso to section 16(3) requires the refund to be paid back, with section 50 interest, within 30 days after the FEMA period expires.
Refund of unutilised ITC: how RFD-01 works
Under the LUT route, the credit you pay on inputs and input services builds up because your exports generate no output tax to set it against. Section 54(3) of the CGST Act lets you claim that unutilised credit as a refund, and the claim is made in Form GST RFD-01 on the GST portal.
The refund is not simply your closing credit balance. Rule 89(4) works it out as:
- Net ITC is the credit availed on inputs and input services in the period of the claim. Credit on capital goods is not included.
- Turnover of zero-rated goods is the export value, capped at 1.5 times the value of like goods supplied domestically. For goods it is the lower of the FOB value in the shipping bill and the invoice value.
- Turnover of zero-rated services is the payment received in the period for services exported, adjusted for advances.
- Adjusted total turnover is the total turnover in the state, excluding exempt supplies other than zero-rated supplies.
The claim, step by step
Step 1: File your returns. GSTR-1 and GSTR-3B for the period, with exports reported correctly in GSTR-1.
Step 2: Prepare the statements. For goods, the shipping bill or bill of export numbers and dates, with the related invoices. For services, the invoice details with the bank realisation certificate or foreign inward remittance certificate.
Step 3: File RFD-01 for the period, with the computation and statements. There is no government fee.
Step 4: Acknowledgement and provisional refund. For zero-rated supplies, section 54(6) allows 90% of the claim to be refunded provisionally. From 1 October 2025, rule 91(2) has the provisional order in Form RFD-04 issued within seven days of the acknowledgement, based on the system's risk evaluation, though the officer can record reasons and decline. The provisional route is not available to a claimant prosecuted for evasion above ₹250 lakh in the previous five years.
Step 5: Final order. The balance is decided after the documents are verified.
Time limit. The claim must be filed within two years from the relevant date. For goods exported by sea or air, that is the date the ship or aircraft leaves India. For services, it is the date of receipt of payment in foreign exchange, or the invoice date where the payment was received in advance.
A refund claim is only as good as the returns behind it. Mismatched export figures between GSTR-1, GSTR-3B and the shipping bills are the most common reason for deficiency memos, which is why reconciliation matters. Our GST return filing service, from ₹999 a month, keeps the returns clean, and our GST refund service, from ₹4,999, handles the RFD-01 claim. For the reconciliation side, see our input tax credit reconciliation guide.
Common mistakes
- Not renewing the LUT. Last year's LUT expired on 31 March. Exports in April under an expired LUT are exports without cover.
- Charging IGST and also quoting the LUT. Pick one route per supply. An invoice under LUT should show no IGST and carry the endorsement that the supply is made under LUT without payment of IGST.
- Losing track of the three-month window for goods. Goods invoiced but not shipped within three months bring the tax and interest back.
- Assuming every foreign client's payment is an export. For services, payment must come in convertible foreign exchange, or rupees where the RBI permits, within the time allowed.
- Claiming the closing credit balance as the refund. The rule 89(4) formula decides the figure, and it excludes credit on capital goods.
- Letting the two-year limit run out. Each period's claim has its own relevant date. File regularly rather than leaving several periods to the end.
- Reporting exports inconsistently. Export values that differ between GSTR-1, GSTR-3B and the shipping bill hold up the refund.
Getting it right
For most exporters, the order is simple: file the LUT before the year starts, invoice without IGST under it, keep the export and payment dates within the limits, and file the RFD-01 claim regularly.
Regikart is a CA and CS firm serving 250+ clients from Kolkata (head office), Delhi and Bengaluru. We file the annual LUT, track export and realisation dates against the conditions, and prepare and file the refund claim. Call or WhatsApp +91 70444 94804, or contact us.
Frequently asked questions
What is an LUT in GST?
A Letter of Undertaking in Form GST RFD-11 lets a registered person export goods or services, or supply to an SEZ, without paying IGST. In it you undertake to pay the tax with interest if goods are not exported within three months of the invoice, or payment for services is not received in convertible foreign exchange within the time allowed.
How long is an LUT valid?
For the whole financial year in which it is furnished. It does not renew automatically and expires at the end of that year, so a fresh LUT is needed for each financial year, ideally before the first export of the year.
Is there a government fee for filing an LUT?
No. Filing Form GST RFD-11 on the GST portal carries no government fee. Regikart's professional fee for preparing and filing it is ₹999.
Who cannot file an LUT?
A person prosecuted for an offence under the GST laws, or an earlier tax law, where the tax evaded exceeds ₹250 lakh. Such a person must furnish a bond with a bank guarantee of 15% of the bond amount instead.
What happens if export payment is not received in time?
For services, you pay the IGST with interest under section 50(1) within fifteen days after the permitted period ends. For goods, if a credit refund was received and the proceeds are not realised within the FEMA period, the refund must be repaid with interest within 30 days after that period expires.
Is it better to export under LUT or pay IGST and claim a refund?
For most exporters, the LUT route, because no tax is paid on the export and only the unutilised credit is claimed back. Paying IGST can suit an exporter with a large credit balance that would otherwise sit unused. Goods subject to export duty get no refund on either route.
How is the refund of unutilised ITC calculated?
Under rule 89(4), refund equals the turnover of zero-rated goods and services multiplied by net ITC and divided by adjusted total turnover. Net ITC is the credit on inputs and input services in the period, so credit on capital goods is excluded. The claim is filed in RFD-01 within two years from the relevant date. See our GST refund service.
Can an LUT be filed after exports have started?
The LUT is meant to be in place before the export. CBIC Circular No. 37/11/2018-GST allows the delay to be condoned and the LUT accepted after the event on the facts of each case, but that is at the officer's discretion. File the LUT before the financial year begins to avoid the question.
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Regikart CA Team
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