GST LUT for Exporters: How to Export Without Paying IGST

Exports of goods and services are treated as zero-rated supplies under GST — meaning no tax is meant to apply on the export itself. But "zero-rated" doesn't mean the exporter automatically pays nothing at every stage; without the right paperwork in place, exporters end up paying IGST on the export invoice and waiting for a refund, tying up working capital for weeks or months.

The Two Routes for Zero-Rated Exports

Route 1: With LUT	Route 2: Without LUT
Export without paying IGST at all	Pay IGST on the export invoice, then claim a refund
No cash outflow tied up awaiting refund	Working capital locked until refund is processed
Requires filing LUT (Form GST RFD-11) annually	No advance filing required, but refund claim process needed per shipment/period

Almost every regular exporter chooses the LUT route once they understand the cash flow difference — paying IGST upfront on every export invoice and then chasing a refund is a genuine drag on working capital, especially for exporters with thin margins or frequent shipments.

What Is an LUT?

A Letter of Undertaking (LUT) is a declaration filed by an exporter committing to fulfil all export obligations — essentially an undertaking that goods or services will actually be exported, in exchange for being allowed to do so without paying IGST upfront. It's filed on the GST portal via Form GST RFD-11 and is valid for one financial year, needing re-filing each year before the first export of that year.

Who Is Eligible to File LUT?

Any GST-registered exporter can file LUT, except those who have been prosecuted for tax evasion involving an amount exceeding ₹2.5 crore under the CGST Act or an existing law. Exporters who don't meet the LUT eligibility must instead furnish a bond with bank guarantee to get the same IGST-exemption benefit — a materially more cumbersome route reserved for a small minority of cases.

LUT Filing Process

1. Log in to the GST portal and navigate to Services → User Services → Furnish Letter of Undertaking
2. Select the financial year for which LUT is being filed
3. Fill in the self-declaration confirming compliance with export obligations, and provide details of two independent witnesses
4. Submit with digital signature (DSC) or EVC — an acknowledgement (ARN) is generated on successful filing, and the LUT is typically deemed accepted unless the department flags an issue

Filing must happen before the first export invoice of the financial year is raised — an exporter who ships before filing LUT for that year has, technically, made a taxable export requiring IGST payment for that shipment even if LUT is filed immediately after.

IEC — A Prerequisite, Not Part of GST

An Import Export Code (IEC) from DGFT is required to export at all, independent of the GST LUT process — this is often the first registration a new exporter needs, before GST registration or LUT even becomes relevant. If you're setting up export operations for the first time, IEC registration is the starting point.

Common Mistakes Exporters Make

• Forgetting annual renewal — LUT must be re-filed every financial year; a lapsed LUT means the very next export invoice attracts IGST until a fresh LUT is filed
• Mixing export and domestic supply reporting — export invoices under LUT must be clearly marked "SUPPLY MEANT FOR EXPORT UNDER LUT WITHOUT PAYMENT OF IGST" and reported correctly in GSTR-1's export table, distinct from domestic zero-rated or exempt supplies
• Not tracking realisation of export proceeds — export benefits and zero-rating are conditional on actual receipt of foreign exchange within the RBI-prescribed period (generally 9 months from the date of export, extendable); non-realisation can trigger recovery of the tax benefit

Setting up export compliance correctly from the start — IEC, GST registration, and LUT filed before the first invoice — avoids both cash flow drag and reporting errors down the line. Our IEC registration service and GST registration service cover the full setup for new exporters.