Exporters can use a letter of undertaking to export goods or services without paying taxes. Under the new GST system, all exports are subject to IGST, which may then be reclaimed through a refund against the tax paid. By applying for a LUT ( Letter of Undertaking), exporters can avoid the effort of requesting a refund and avoid the freezing of cash through tax payments.
Any exporter of goods or services who has registered for GST is required to submit a GST LUT. Exporters who have been accused of committing a crime or tax evasion totaling more than INR 250 lakhs in violation of the CGST Act, the IGST Act, 2017, or any other applicable law are disqualified from submitting a GST LUT. In this case, they would have to offer an export bond. According to the CGST Rules, 2017, any registered person may submit an export bond or LUT under GST RFD 11 without having to pay the integrated tax. They could apply for LUT if:
• They want to offer goods or services to India, other nations, or SEZs (Special Economic Zones) and have registered for GST.
• They wish to avoid paying the integrated tax when they sell goods.