Letter of Undertaking (LUT) Under GST: Rule 96A, Export of Services & RFD-11 Guide
Akash Kore
· Founder & Product Architect· 8 min read
For Indian software exporters, digital agencies, and remote consultants, paying 18% Integrated GST (IGST) upfront on foreign client invoices and then waiting 6 to 12 months for tax refunds severely throttles working capital. By submitting a Letter of Undertaking (LUT) under Rule 96A of the CGST Rules, exporters can legally bill foreign clients with zero tax payable. Here is how to file Form GST RFD-11, satisfy the 5 statutory export conditions, and maintain airtight FEMA compliance.
- ✓Filing an LUT (Form GST RFD-11) enables Indian exporters to supply goods and services without paying 18% IGST upfront under Section 16 of the IGST Act.
- ✓An LUT is valid for an entire financial year (April 1 to March 31) and must be submitted online before initiating exports for that year.
- ✓To qualify as an 'Export of Services' under Section 2(6) of the IGST Act, payment must be realized in convertible foreign exchange or RBI-permitted INR within 9 months.
- ✓All zero-rated export invoices must contain the statutory declaration under Rule 46: 'Supply meant for export under bond or letter of undertaking without payment of integrated tax'.
What is an LUT and why is it essential for service exporters?
Under Section 16(1) of the Integrated Goods and Services Tax (IGST) Act, export of goods or services is categorized as a 'Zero-Rated Supply'. Exporters have two statutory options:
Option 1: Export under payment of IGST and subsequently apply for a tax refund from the department.
Option 2: Furnish a Letter of Undertaking (LUT) in Form GST RFD-11 prior to export, allowing supplies to be made without paying any IGST upfront while retaining 100% eligibility to claim accumulated Input Tax Credit (ITC) on business expenses.
The 5 mandatory statutory tests for 'Export of Services'
Not every invoice billed to an overseas entity qualifies as an export. Under Section 2(6) of the IGST Act 2017, an Indian supplier must satisfy all 5 cumulative conditions:
| Condition | Statutory Provision | Compliance Requirement |
|---|---|---|
| 1. Location of Supplier | Section 2(6)(i) | Must be located in the taxable territory of India |
| 2. Location of Recipient | Section 2(6)(ii) | Must be located outside India |
| 3. Place of Supply | Section 2(6)(iii) & Sec 13 | Place of supply of service must be outside India |
| 4. Payment Realization | Section 2(6)(iv) | Received in convertible foreign exchange or RBI-approved Special Rupee Vostro account |
| 5. Non-Distinct Persons | Section 2(6)(v) | Supplier and recipient are not merely establishments of a distinct person under Explanation 1 of Section 8 |
How to file Form GST RFD-11 on the GST portal
Filing an LUT takes less than 10 minutes on the official GST portal and generates an instant Application Reference Number (ARN):
- Log in to the GST Portal (gst.gov.in) with valid credentials.
- Navigate to Services > User Services > Furnish Letter of Undertaking (LUT).
- Select the Financial Year for which the LUT is being filed (e.g., 2026-2027).
- Check the 3 statutory undertakings regarding adherence to export realization guidelines.
- Fill in names and addresses of two independent witnesses (no notarization required).
- Sign digitally using DSC (mandatory for companies/LLPs) or EVC via Aadhaar OTP (for individuals/proprietorships).
The 9-Month FEMA Forex Realization Window
Under Rule 96A(1)(b), if export proceeds are not realized in convertible foreign exchange within 9 months from the date of issue of the export invoice (or period allowed by RBI), the exporter must pay the applicable 18% IGST with 18% annual interest under Section 50 within 15 days.
Mandatory declarations on zero-rated export invoices
Under Rule 46 of the CGST Rules, every invoice issued under an LUT must clearly state:
'SUPPLY MEANT FOR EXPORT UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF INTEGRATED TAX'
The invoice must display the exporter's GSTIN, client's overseas billing address, place of supply (Outside India), 6-digit SAC code (e.g., 998314 for IT development), currency of invoice (USD, EUR, GBP), and the authorized ARN of the filed LUT.
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Frequently Asked Questions
Is LUT mandatory for exporting services?
If you do not file an LUT, you are legally obligated to charge 18% IGST on your export invoices, collect or deposit that tax out of pocket, and claim a refund through Form GST RFD-01. Filing an LUT completely eliminates this upfront tax burden.
Can payments received through Stripe, PayPal, or Wise qualify under LUT?
Yes, provided the payment is accompanied by an electronic Foreign Inward Remittance Certificate (e-FIRC) or Foreign Inward Remittance Advice (FIRA) issued by an Authorized Dealer (AD Category-I) bank in India confirming receipt of convertible foreign exchange.
What is the validity period of an LUT?
An LUT is valid for one financial year starting from 1st April (or date of filing) through 31st March. You must submit a fresh LUT for each financial year prior to issuing export invoices.
Can an exporter claim Input Tax Credit (ITC) if they export under LUT?
Yes. Under Section 16(2) of the IGST Act, zero-rated exporters can accumulate 100% ITC on business expenses (laptops, software subscriptions, office rent) and either utilize it against domestic tax liabilities or claim a cash refund of unutilized ITC via Form GST RFD-01.
Akash Kore
Founder & Product ArchitectArchitecting business document operating systems and automated billing workflows for Indian SMBs, agencies, and enterprises.