GST for Exporters: LUT Filing and the Export Refund Process

What is a Letter of Undertaking (LUT)?

A Letter of Undertaking is a declaration by a registered GST taxpayer undertaking to fulfil the export obligation within the prescribed time and to pay IGST along with 18% interest if the export does not materialise. It is governed by Rule 96A of the CGST Rules, 2017 and enables exporters to supply goods or services to overseas buyers — or to Special Economic Zone (SEZ) units and developers — without collecting or depositing IGST at the time of supply.

The LUT must be submitted before making any zero-rated supply. An exporter who ships goods or raises a service invoice without a valid LUT in place will be treated as having made a taxable supply and will be required to pay IGST along with applicable interest and penalties.

Exports Covered by LUT

• Export of goods out of India (under shipping bill filed with Indian Customs)
• Export of services where payment is received in convertible foreign exchange (or in Indian rupees where the RBI so permits)
• Supply of goods or services to SEZ units and SEZ developers

Eligibility: Who Can File an LUT?

Any GST-registered person who intends to make zero-rated supplies can file an LUT, subject to one exclusion. An exporter is not eligible to furnish an LUT if they have been prosecuted for any offence under the CGST Act, IGST Act or any earlier law involving an evasion of tax exceeding ₹2.5 crore (₹250 lakh). Such exporters must instead execute a bond with a bank guarantee. A self-declaration that the exporter has not been so prosecuted is sufficient under Notification No. 37/2017-Central Tax.

There is no minimum turnover threshold to file an LUT. Micro and small exporters under the Udyam scheme are equally entitled. A newly registered exporter can file an LUT for their very first export — there is no seasoning requirement.

LUT vs Bond: Key Differences

Exporters who are ineligible for the LUT route must execute a bond in Form GST RFD-11. A bond requires a bank guarantee as security, which ties up additional working capital and involves the bank's processing charges. The LUT, by contrast, is a simple self-declaration with no security deposit and no government fee.

• LUT: Online self-declaration, no fee, no bank guarantee, renewable annually
• Bond: Physical surety instrument, bank guarantee required, more paperwork, accepted when LUT eligibility is lost

For the overwhelming majority of Indian exporters — manufacturers, service providers, traders, e-commerce exporters — the LUT is the correct instrument. The bond route applies only in prosecution cases.

How to File the LUT on the GST Portal (Step-by-Step)

The LUT is filed entirely online on the GST portal (gst.gov.in). There is no government fee and no physical document submission required. Keep your GSTIN login credentials ready before starting.

1. Log in to gst.gov.in using your GSTIN and password. Complete the OTP-based two-factor authentication.
2. Navigate to Services > User Services > Furnish Letter of Undertaking (LUT). This opens the LUT application form for the current financial year.
3. Select the financial year for which the LUT is being filed. The portal auto-populates your GSTIN and legal name.
4. Declare the nature of exports: Goods, Services, or Both. Enter the expected export turnover and the particulars of witnesses (name, occupation, address) as required under Rule 96A.
5. Confirm the undertaking that you have not been prosecuted for tax evasion exceeding ₹2.5 crore under the GST Acts and that you will fulfil the export obligation within the time prescribed.
6. Sign digitally using your DSC or EVC (Electronic Verification Code via Aadhaar OTP or net banking). Authorised signatories — proprietor, managing partner, MD, or authorised employee — can sign.
7. Submit and download the acknowledgment. An Application Reference Number (ARN) is generated instantly. There is no waiting period — the LUT is treated as accepted upon filing and you can begin exporting immediately.

The entire process takes under 15 minutes. Store the ARN confirmation for your records and quote it on export invoices and shipping bills wherever the department requires LUT reference.

Validity and Annual Renewal

A LUT is valid for one financial year — 1 April to 31 March. It must be renewed at the start of each new financial year before the first export shipment or invoice of that year. The CBIC has clarified that an LUT filed in one year cannot be carried forward; a fresh application must be submitted.

If you forget to file the renewed LUT for the new year and have already made an export supply, you should file the LUT immediately. The department has generally permitted retroactive LUT acceptance in such cases on appeal, but this is discretionary and should not be relied upon as a routine practice. Mark your calendar for the first week of April.

Two Routes to Zero-Rated Export: Comparison

Even after holding a valid LUT, an exporter retains the option — supply by supply — to instead pay IGST on the export and claim a refund of that IGST later. The two routes have different refund mechanisms and cash-flow implications.

The majority of Indian exporters benefit from Route 1. Route 2 may suit exporters who have very little input GST (e.g., pure traders purchasing from composition dealers or unregistered suppliers) and who need the simplicity of auto-processed refunds through ICEGATE.

Route 1: Claiming Refund of Accumulated ITC on LUT Exports

When you export under LUT, you continue to avail Input Tax Credit (ITC) on all purchases — raw materials, packing materials, freight, professional services, etc. Because you do not charge IGST on the export, this ITC accumulates in your electronic credit ledger. The GST law entitles you to claim a refund of this accumulated ITC under Section 54 of the CGST Act.

The Refund Formula (Rule 89(4), CGST Rules)

The refund of ITC is not the full ITC balance — it is calculated proportionately based on your export turnover relative to total turnover:

Refund Amount = (Turnover of Zero-Rated Supply × Net ITC) ÷ Adjusted Total Turnover

Where:

• Turnover of Zero-Rated Supply = value of export invoices + SEZ supplies in the tax period
• Net ITC = total ITC availed on inputs and input services during the period (excluding ITC on capital goods)
• Adjusted Total Turnover = total turnover in the State/UT, excluding exempt supplies, nil-rated supplies, and non-GST supplies

Refund on capital goods ITC is separately governed by Rule 89(5) and is relevant for service exporters whose output is entirely zero-rated.

How to File Form RFD-01

1. Ensure your GSTR-1 and GSTR-3B are filed for all tax periods covered in the refund claim. Unfiled returns will block RFD-01 submission.
2. On the GST portal, go to Services > Refunds > Application for Refund and select "Refund of ITC on Export of Goods/Services Without Payment of Tax."
3. Select the relevant tax period (can span up to the current date from the start of the financial year).
4. The portal auto-populates export turnover figures from your GSTR-1 data. Verify these figures against your shipping bills and service invoices.
5. Upload Statement 3A (for goods) or Statement 3 (for services) showing invoice-level export details.
6. For service exports, attach the Bank Realization Certificates (BRC) or Foreign Inward Remittance Certificates (FIRC/FIRA) evidencing receipt of foreign exchange.
7. Sign and submit using DSC or EVC. Download the ARN as acknowledgment.

The application is forwarded to your jurisdictional GST officer for processing. The officer may issue a deficiency memo (RFD-03) requesting additional documents, a provisional refund order (RFD-04 for 90% provisional credit), or a final refund order (RFD-06).

Route 2: IGST Refund on Tax-Paid Exports

If you choose to pay IGST on an export shipment, the refund process is largely automatic, driven by data-matching between the GSTN portal and the ICEGATE customs portal. Here is how it works:

1. You file your GSTR-1, reporting the export invoice with the Shipping Bill number and date in Table 6A.
2. Indian Customs processes your Shipping Bill and files the Export General Manifest (EGM) once the vessel or aircraft departs.
3. ICEGATE cross-matches the shipping bill data with your GSTR-1 Table 6A data and the GSTR-3B tax payment.
4. On successful matching, the refund is credited directly to your registered bank account — no separate RFD-01 filing needed in most cases.

Mismatches arise when the invoice number, GSTIN, or shipping bill number recorded in GSTR-1 differs from what Customs has on record. You can view mismatch status and resubmit corrections via the ICEGATE portal.

Important restriction: If you claim IGST refund on an export, you cannot simultaneously claim the higher ("AIR") Customs duty drawback rates on those goods. Where you have voluntarily opted for the higher drawback rate, an IGST refund is allowed only after the differential drawback is deducted or repaid. You can otherwise claim only the lower drawback rate that accounts for non-GST taxes embedded in the export product. Exporters should calculate which combination — higher drawback alone, or lower drawback plus IGST refund — yields a better net benefit for their specific product and input structure.

Refund Timelines, Interest, and Escalation

The law sets a strict timeline for GST refund processing:

• 60 days from the date of filing a complete RFD-01 (or from the date ICEGATE match confirms eligibility for Route 2) — this is the outer limit for the department to issue a refund order.
• If the department fails to pay within 60 days, interest at 6% per annum accrues on the withheld refund amount from the date immediately after the 60-day window expires, under Section 56 of the CGST Act. Where the refund arises from an order of an appellate authority, tribunal or court that has attained finality, interest is payable at up to 9% per annum under the proviso to Section 56.
• Provisional refund (90% of the claimed amount) can be sanctioned within 7 days of filing a complete application under Rule 91. Since November 2025 the GST system grants this 90% provisional refund to low-risk zero-rated exporters automatically on a risk-based basis, with the proper officer scrutinising only flagged or higher-risk claims.
• The outer time limit to file a refund claim is 2 years from the relevant date. For goods exports, the relevant date is the date on which the ship or aircraft departs Indian shores. For service exports, it is the date of receipt of foreign exchange payment.

If your refund is stuck or the officer has issued a Show Cause Notice (SCN), respond within the time specified in the notice. Unresolved refund disputes can be escalated to the GST Appellate Authority and subsequently to the GST Appellate Tribunal once fully constituted. Courts have consistently directed departments to pay interest on belated refunds.

Common Mistakes Exporters Make — and How to Avoid Them

• Exporting before filing the LUT: The LUT must be in place before the first invoice or shipping bill of the year. Retroactive acceptance is possible but not guaranteed.
• Mismatch between GSTR-1 and shipping bill: The GSTIN, invoice number, and shipping bill number must match exactly — even a hyphen difference causes ICEGATE mismatch and delays Route 2 refunds.
• Claiming full ITC instead of applying the formula: The RFD-01 computes the proportionate refund automatically — do not manually inflate the claim beyond the Rule 89(4) formula result.
• Not tracking BRC/FIRC for service exports: Without evidence of foreign exchange realisation, service export refunds can be rejected. Collect the BRC, FIRC or — as most banks now issue for electronic remittances — the Foreign Inward Remittance Advice (FIRA) within the RBI-permitted realisation period. Under RBI's FEMA (Export and Import of Goods and Services) Regulations, 2026, in force from 1 October 2026, the realisation period for service exports is 15 months from the invoice date (18 months where the invoice is raised in Indian rupees); the earlier limit was 9 months.
• Overlooking the 2-year limitation: Old unrealised refunds are often abandoned. Review your export invoices from two years ago and file any pending RFD-01 applications before the limitation window closes.
• Forgetting to renew the LUT at the start of April: A lapsed LUT means your April exports are technically without a valid undertaking. Set a renewal reminder for the first week of each financial year.