LUT is an acronym for the Letter of Undertaking, which is a document filed by an exporter to get a relief from payment of IGST on exports. In order to boost exports, the government has provided the option of filing LUT for exporters to do exports without payment of IGST.
Earlier, the importers & exporters had to pay IGST on the purchases of input as well as on export of goods. However, they could claim the refund of GST, but that was a really long-drawn process.
As the small traders face the problem of an extreme liquidity crunch, the government has introduced the option of filing LUT Certificate, wherein they can now conduct exports on 0% IGST, by clearly specifying that their motive is export of goods.
Letter of Undertaking or LUT is mandatory to be filed with the government if you want to export goods without payment of tax.
The main objective of government behind the introduction of LUT registration is the promotion of exports from India.
You do not need to pay the IGST on exporting your goods if you carry a LUT certificate.
With LUT, you will be able to grab the global opportunities easily with comparatively less lengthy customs procedure.
On carrying LUT registration, you can avoid plugging your funds into paying IGST liability which can rather be utilized for boosting your export business.
Gone are those days when you had to wait for months for getting the refund of taxes paid on exports. You can now conduct export without paying IGST.