Exports and supplies to SEZ units are zero-rated under GST. A business can export in one of two ways:
- pay IGST on the export and claim a refund later; or
- file a Letter of Undertaking and export without paying IGST.
The LUT is filed online in form GST RFD-11 for each financial year, before the first export of that year. It is usually accepted at once. Most registered exporters are eligible unless they have been prosecuted for tax evasion above a set amount.
On the export invoice
An invoice under LUT carries a line stating that it is a supply meant for export under a Letter of Undertaking without payment of IGST, the LUT reference, and IGST at zero. The place of supply is outside India.
Why it helps cash flow
Without an LUT, an exporter pays 18% IGST on each shipment and waits for the refund. A Jamnagar brass parts exporter shipping ₹40 lakh a month would have ₹7.2 lakh of IGST tied up each month. With an LUT, that money stays in the business. Credit on inputs can still be claimed as a refund.
The yearly reminder
An LUT lapses at the end of March. Renewing it in the first week of April avoids a first shipment billed with IGST.
In MatruOS, an export invoice without an LUT on file charges IGST and shows where to add one.