Exporters in India often struggle with blocked working capital due to upfront IGST payments on exports. The Letter of Undertaking (LUT) is a compliance mechanism under GST that solves this problem by allowing businesses to export goods and services without paying IGST, provided they meet certain conditions. In February 2026, the GST Network (GSTN) has enabled LUT filing for the financial year 2026–27 via Form GST RFD-11 on the GST portal, ensuring exporters can continue operations seamlessly.
What Exactly is LUT under GST?
A Letter of Undertaking (LUT) is a declaration filed online by exporters stating they will comply with GST laws while exporting goods or services. It is mandatory for businesses that want to make zero-rated supplies without paying IGST upfront.
Why LUT is Crucial for Businesses
- Liquidity Advantage: Avoids blocking funds in IGST and waiting months for refunds.
- Operational Efficiency: Faster clearance of export consignments.
- Compliance Assurance: Simple online filing ensures legal safety.
- Global Competitiveness: Keeps Indian exporters cost-efficient compared to global peers.
Eligibility Criteria
- Any registered taxpayer exporting goods or services.
- SEZ developers or units making zero-rated supplies.
- Businesses not prosecuted for tax evasion exceeding ₹250 lakh in the last five years.
Filing LUT Online: Step-by-Step
- Login to GST portal → Services → User Services → Furnish LUT.
- Select Financial Year (e.g., 2026–27).
- Fill Form GST RFD-11 with required details.
- Upload Previous LUT (if filed offline earlier).
- Submit with DSC/EVC (Digital Signature/Electronic Verification Code).
- Download Acknowledgement for records.
Source:
Goods & Services Tax Portal
Real-World Example
A textile exporter in Surat ships garments worth ₹100 crore annually. Without LUT, they would need to pay IGST upfront and later claim refunds—locking up crores in working capital. By filing LUT, they export seamlessly, keep liquidity intact, and reinvest funds into scaling operations.
Common Mistakes Businesses Make
- Filing LUT late, leading to shipment delays.
- Forgetting annual renewal.
- Incorrectly uploading documents.
- Assuming LUT is optional (it’s mandatory for zero-rated supplies without IGST).
LUT Essentials for Businesses
| Aspect | Details | Business Impact |
|---|---|---|
| Form | GST RFD-11 | Mandatory for LUT filing |
| Validity | 1 Financial Year | Must be renewed annually |
| Eligibility | Exporters, SEZ units, zero-rated suppliers | Allows tax-free exports |
| Exemption | No IGST payment upfront | Improves cash flow |
| Filing Mode | Online via GST Portal | Quick and paperless |
| Penalty Risk | Non-compliance may attract IGST + interest | Ensures legal safety |
Key Takeaways for Entrepreneurs
- File LUT early in the financial year to avoid shipment delays.
- Keep track of annual renewal deadlines.
- Use LUT strategically to unlock working capital and stay competitive.
- Treat LUT as a compliance tool, not just a formality—it directly impacts profitability.
In short, LUT under GST is the gateway to tax-efficient exports—a compliance step that doubles as a business enabler. Smart exporters leverage it not just to stay compliant, but to unlock working capital and fuel expansion.
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