GST Network Introduces Feature of Letter of Undertaking for FY 2021-22

The Goods and Service Network has decided to introduce the feature of Letter of Undertaking (LUT) for the financial year 2021 to 2022 on the GST portal.

Further, the same has been in consonance to Rule 96 A of the CGST Rules 2017, which was notified by way of Notification Number 16/ 2017, dated 07.07.2017. Under the said rule, any registered person who has availed the option to supply goods or services for the purpose of export, but had not made the payment, needs to furnish a bond or Letter of Undertaking (LUT) in form GST RFD 11 with the authorities. The same must be done prior to export.

However, the said feature of Letter of Undertaking has been extended to all the registered persons who intend to supply their goods or services for export but without making payment of integrated tax.

In this blog, we will discuss about the feature of Letter of Undertaking, together with the process to furnish the same.

Concept of Letter of Undertaking

The term LUT or Letter of Undertaking means a document that an assessee uses to provide aa declaration that all the requirements under the GST are duly complied with. Further, the said document is furnished when the exports are undertaken without paying IGST (Integrated Goods and Service Tax).

Also, based on the provisions of the Notification No 37/ 2017, it is compulsory to submit a Letter of Undertaking for the export of goods and services without paying IGST. However, if in case an exporter fails to furnish the LUT, then, in that case, he/ she needs to either pay IGST or an Export Bond.

Moreover, it shall be pertinent to state that earlier, an LUT could only be filed at the respective GST office. However, to ease out the process, the same can now be filed online.

Also, Read: Implications of Union Budget 2021 on GST Act

Applicability of Letter of Undertaking

The facility to export under Letter of Undertaking has been extended to all the registered person who wishes to supply goods and services for export without paying the amount levied as Integrated Tax. Further, the term Registered Person means the individual who have obtain GST Registration.

However, it shall be relevant to state that all those who have been prosecuted for any offence under the provisions of the Central Goods and Service Tax or under the Integrated Goods and Service Tax or any other existing laws will not be allowed to use the feature of Letter of Undertaking.

Also, in the case where the assessee has evaded the tax of Rs 50 lakhs or more, then, in that case, he/ she will not be allowed to use the feature of Letter of Undertaking.

Further, the Central Government, by way of the Union Budget 2021, has proposed that the refund of GST paid on the export of goods and service will be restricted only to the notified taxpayers of Goods and Services.

Impact of the Changes Made by Government

The main impact of the feature of Letter of Undertaking is that many businesses, which were earlier claiming rebate on the tax payment made for exports, can now resort to exports without making payment under Letter of Undertaking or bond. After that, these entities can claim a refund of unutilised input credits as well.

Launch of Feature of Letter of Undertaking

The new feature of Letter of Undertaking for the financial year 2021 to 2022 will be made applicable before 01.04.2021 for doing exports of goods and services or both on or after 01.04.2021.

Validity of Letter of Undertaking

The validity for the Letter of Undertaking is till next 31^st March, starting from the date of issuance. Also, the process for Submission or Renewal of Letter of Undertaking (LUT) is very simple and user friendly.

Process to file Letter of Undertaking on GST Portal

The steps involved in the process to file a Letter of Undertaking on the GST Portal are as follows:

• Visit the official GST Portal at https://www.gst.gov.in/;
• Now, the Homepage of GST will be displayed;
• In the next step, log in to the GST portal with the provided credentials;
•  After that, click on “Services” > “User Services” > Furnish LUT (Letter of Undertaking);
• Now, the assesseee needs to choose the financial year for 2021 – 2022 from the drop down menu of the Letter of Undertaking (LUT) Applied for Financial Year;
• After that, the assessee needs to select the file button to upload the previous Letter of Undertaking (if in case the assessee has not furnished LUT for the previous period, then, in that case, he/ she needs to attach the same and continue to file his/ her application);
• It shall be pertinent to state that only JPEG or PDF formats are allowed, and the file size for upload should not exceed 2 MB;
• Now, read carefully and tick the checkboxes for the declaration to accept the conditions and stipulations specified in the Letter of Undertaking;
• In the next step, the assessee needs to fill in the details of the two witnesses as required by LUT. The term details include Name and Addresses of the witnesses;
• After that, select the authorised signatory;
• Now, click the preview button for form preview;
• Choose the “Save” button to save the application form to retrieve it later;
• Now, in this step, the assessee requires to sign the form with DSC or with the EVC option;
• Once the LUT is accepted by GSTN, an Application Reference Number (ARN) as an acknowledgement for the same will be displayed on the screen. The assessee need to record the same for future reference;

Conclusion

In a nutshell, a Letter of Undertaking denotes a document that an assessee uses to declare that the requirements of GST are duly complied with. Further, by way of the Budget 2021, the government has declared that the facility to export under the feature of Letter of Undertaking has been extended to all the registered person who wants to export without paying the Integrated Tax. Also, a Letter of Undertaking remains valid till the next 31^st March, starting from the date of issuance.

Also, Read: Extension of Sanction for Pending IGST Refunds by CBIC