Guides · GST
LUT and export without payment of tax
Exports are zero-rated under GST, and there are two ways to do them. One is to pay IGST and claim it back; the other is to export under a Letter of Undertaking — an LUT — without paying the tax upfront.
The two export routes
Because exports and supplies to a SEZ are zero-rated, an exporter can either pay IGST on the supply and claim a refund of that tax, or supply under an LUT or bond without paying IGST and claim a refund of the unutilised input tax credit instead.
The LUT route avoids locking up cash in tax that will later be refunded, which is why many exporters prefer it.
What an LUT is
A Letter of Undertaking is a declaration an eligible exporter furnishes, undertaking to meet the conditions for zero-rated supply without payment of tax. It is furnished for the relevant period and lets the exporter bill without adding IGST.
Eligibility and the exact process are set by the rules, so an exporter should confirm the current requirement before relying on the LUT route.
How Lekha records export supplies
Lekha records the export invoice with its details in the two-sided ledger, so a zero-rated supply under an LUT is captured alongside domestic sales.
Lekha records what your documents say and tracks the money on both sides — what you owe and what you are owed. It records and tracks; it does not replace your accountant.
Questions
- What is an LUT under GST?
- A Letter of Undertaking — a declaration an eligible exporter furnishes to make zero-rated supplies without paying IGST upfront, undertaking to meet the conditions.
- What are the two ways to export under GST?
- Pay IGST and claim a refund of the tax, or export under an LUT or bond without paying IGST and claim a refund of unutilised input tax credit.
- Why do exporters prefer the LUT route?
- It avoids paying IGST upfront and waiting for a refund, so it does not lock up working capital in tax that will later come back.
This guide is general information, not legal or tax advice. Confirm the current rules and your own circumstances for any specific case.