- 1. Check the supply
Identify the recipient, product or service, place of supply and export evidence.
- 2. Confirm eligibility
Review GST registration, the LUT conditions and the financial year before relying on this route.
- 3. Plan cash flow
Separate output tax treatment, purchase-side GST, eligible credit and any refund application.
- 4. Monitor completion
Track shipment or service payment against the applicable rules and retain a reconciled evidence file.
What an LUT changes in your cash flow
The LUT is an undertaking, rather than an export licence or a refund approval. It supports the route for qualifying supplies without payment of integrated tax. It does not remove GST from purchases, make every input credit eligible or eliminate returns. Keep these three questions separate: is the supply zero-rated, can it be made under LUT, and is the input tax credit refundable?
An illustrative exporter has materials, packing, freight and service costs to pay before the overseas customer settles an invoice. Avoiding an upfront output-tax payment on a qualifying export can leave more money available for these expenses. Purchase-side tax may still sit in the credit ledger until it is used or an eligible refund is processed. Budget for that waiting period and for customer payment delays.
Under the current section 16 framework, exports and supplies for authorised operations to an SEZ developer or unit are zero-rated. The without-payment route and refunds are subject to prescribed conditions. The alternative of paying integrated tax and claiming its refund is governed by notified classes and conditions; it should not be described as an unrestricted choice for every exporter.
Who can use the LUT facility
Notification 37/2017-Central Tax extends eligibility to registered persons intending to export without payment of integrated tax, except persons prosecuted for the specified tax offences where tax evaded exceeds ₹250 lakh. Review the precise condition if there is any relevant prosecution history. A new eligible exporter does not need to show the old minimum export-turnover condition from superseded guidance.
The undertaking is for a financial year and must be made by the appropriate authorised person. Map it to the GST registration from which the supplies are made. A trading name, a foreign customer and an IEC do not independently prove LUT eligibility or the GST treatment of a transaction. If the ordinary LUT route is unavailable, obtain advice on the applicable bond arrangement and safeguards.
Check that the underlying supply qualifies
For goods, retain evidence of movement out of India and reconcile the commercial documents with customs and GST records. For services, examine the statutory export conditions, including the locations of supplier and recipient, place of supply, permitted receipt of payment and the relationship between the establishments. A foreign billing address alone is insufficient.
Contracts involving an overseas group entity, arranging another supplier’s transaction, services linked to property, or payments collected through a platform deserve a specific review. State who actually receives the service, who contracts with you and what work you perform. Do not change the contract description merely to fit a desired tax result.
For an SEZ supply, confirm the authorised-operations requirement and the endorsement or other evidence needed for the transaction and any refund. Supplying to an ordinary business situated near an SEZ is not the same as a qualifying supply to its developer or unit.
| Question | What to examine | Why it matters |
|---|---|---|
| Which registration supplies? | Legal entity, GSTIN, supplying location and financial year | Avoid using another registration’s undertaking. |
| Is it a goods export? | Invoice, shipping bill, movement and completion records | Shows that the documented goods left India. |
| Is it a service export? | Contract, recipient, place of supply and payment evidence | A foreign customer alone does not meet every condition. |
| Is a refund proposed? | Eligible credit, purchase invoices and return reconciliation | An LUT acknowledgement does not approve a refund. |
| Has completion or payment slipped? | Invoice dates, outstanding receipts and any permitted extension | Late events may create tax, interest or refund recovery issues. |
Build an evidence file that remains useful after filing
Keep the LUT acknowledgement, financial-year selection, signatory authority and a copy of the information submitted. Separately maintain the documents supporting each supply: accepted quotation or contract, invoice, shipment or work-completion evidence, credit notes, receipts and the matching bank record. For service refund claims, the prescribed bank realisation or inward-remittance evidence may be important.
Use one invoice-wise register with columns for customer, currency, invoice date, value, GST treatment, export or service completion, payment received and amount outstanding. Reconcile it with returns and the accounts. Where a platform deducts charges before settling a payment, preserve the gross invoice, platform statement, fees and net receipt trail; a bank credit alone may not explain the transaction.
Ensure export invoices carry the prescribed endorsement for the chosen route and contain the required recipient and destination details. Review eligible input credits rather than assuming every business purchase is refundable. Mixed domestic and export activity, blocked credit, capital goods and refund formula limits can affect the available claim.
Monitor time conditions and avoid blanket deadline advice
An LUT does not permit unlimited delay. Track the applicable goods-export and service-payment conditions under Rule 96A. The service provision was amended in 2024 to take account of the later of the one-year period and the period allowed under FEMA, including an RBI-permitted extension, with provision for a further period allowed by the Commissioner. Do not assume every unpaid service invoice has the same automatic final date.
Goods payment realisation can also matter to a refund already received under section 16. Obtain a transaction-specific review where goods were not exported, payment is overdue, a refund has been claimed or an extension is needed. Record the legal basis and approval for an extension. Filing an LUT late does not itself settle the treatment of earlier transactions.
Common avoidable mistakes are treating LUT as a permanent registration, missing the financial-year change, describing a domestic service as export, mismatching customs and GST invoice values, and claiming a refund before supporting records are ready. Correct discrepancies in the relevant process instead of keeping a separate spreadsheet that disagrees with the filed returns.
Frequently asked questions
Can a new exporter furnish an LUT?
An eligible GST-registered new exporter can use the facility. Review the current notification conditions; the superseded minimum export-turnover test should not be applied.
Does LUT mean I do not pay GST on purchases?
No. Purchase-side GST and input tax credit follow their own rules. An LUT concerns qualifying outward supplies without payment of integrated tax.
Does an LUT acknowledgement guarantee a refund?
No. Refund eligibility, documents, reconciliation and the prescribed procedure require a separate assessment.
Is a foreign customer enough to make my service an export?
No. Review all statutory export conditions, including place of supply, permitted receipt of payment and the relationship between establishments.
What should I do if export payment is delayed?
Track the invoice and applicable time conditions, retain follow-up evidence and obtain advice on any permitted extension, tax, interest or refund consequences.
Get help with a defined scope
Before requesting support, share your GSTIN, financial year, activity, sample contract and invoice, customer location, payment status and any refund history. Ask LIQUETAX for a written scope covering eligibility review, record reconciliation and the filings you need.
The quotation should separate professional charges in ₹, applicable GST, bank or third-party charges and any government amounts actually payable. Clarify whether refund applications, notices, older transactions and bank follow-up are included. Completion depends on correct records, authority queries and the facts of the supply.