An exporter is expected to follow the regulations of the domestic and destination country for the seamless movement of goods. As goods are being produced in one country and sold in another, specific tax regulations are in place in each country. As an exporter, it is important to have clarity about the tax requirements. One such document that is important for meeting Goods and Services Tax (GST) requirements in India is a Letter of Undertaking.
An exporter is expected to submit a letter of undertaking on the GST portal before the goods can be exported out of the country. It is one of the most important documents when it comes to taking the required permissions from the government to export products without the payment of Integrated Goods and Services Tax. Here is all you need to know about a letter of undertaking and why it is important in the GST regime to export products out of India:
What is a Letter of Undertaking?
An exporter needs to submit a Letter of Undertaking on the GST portal to be able to export products without the payment of IGST. It acts as a guarantee given by the importer’s bank to the exporter’s bank. All registered sellers under GST are expected to submit a Letter of Undertaking on the GST portal before exporting goods out of the country.
According to the guidelines under Central Goods and Service Act 2017, it is mandatory to submit a LUT for an exporter. The submission of this document allows an exporter to claim a refund on the GST paid. After successfully submitting the Letter of Undertaking, the document is valid for that particular financial year. Once the document has been submitted, the exporter need not submit the document again for each export transaction, unlike the case with the refund process.
What documents are required to file a Letter of Undertaking under GST?
An exporter needs to submit some documents for filing a Letter of Undertaking under GST. These documents are as follows:
- Import Export Code (IEC)
- PAN Card of the export business
- Copy of the GST registration certificate
- Copy of address proof and PAN Card of two witnesses
- Cancelled cheque from the current account of the exporter
- Copy of the Aadhaar Card of the exporter
What is the step-by-step process to file a Letter of Undertaking?
An exporter needs to follow a sequence of steps to successfully file a Letter of Undertaking under GST. Here are the steps for filing a LUT:
- Open the GST portal and log in
- Open the Services tab and click on user services. Select Letter of Undertaking from the options available.
- The ‘LUT Applied for Financial Year’ drop-down list will give the option to select a particular financial year for which LUT is being submitted. Click on the relevant year.
- Fill up the form with the required details
- Click on the preview to ensure that all details submitted are correct.
- The exporter must sign the form using a digital signature certificate (DSC). The exporter can also use EVC for form signing. The exporter will receive OTPs by email and mobile for EVC submission.
- Once the signature is done, the exporter can submit the form. The exporter will see an acknowledgement on the screen once the process is complete. It can be saved for future reference.
Once the exporter has filed the Letter of Undertaking, it is time to get the other required licenses and documentation. These documents can depend on the product and destination country. Once all these export documents and licenses have been obtained, a seller can export products throughout the world using e-commerce. As e-commerce exports do not require setting up any physical store or office in international markets, it becomes easier for sellers to reach International buyers with the help of e-commerce exports.
How to establish an export business from India?
With the emergence of e-commerce exports, it has become much easier for Indian sellers to establish an export business from India. With Amazon Global Selling, Indian sellers can sell their products in over 200 countries and territories. Amazon provides an opportunity to access 18 global marketplaces in markets like the US, UK, UAE, Singapore, and Australia, among others. Indian sellers can reach millions of global customers and enjoy support from Amazon on each step of the journey. Be it product listing, shipping or payments. Amazon makes the process seamless for the sellers that are part of the Amazon Global Selling program.
FAQs
- What is the purpose of a Letter of Undertaking?
A letter of undertaking is a key document that exporters need to ship products out of the country without the payment of GST. Under GST, all goods that are being exported are subject to IGST. The exporter is expected to reclaim the IGST paid via a refund process. However, with a LUT in place, it becomes possible for an exporter to be able to ship products without any GST payment and avoid the refund process entirely.
- How long is the validity of a Letter of Undertaking?
The Letter of Undertaking is valid for the particular financial year in which it is being filed.
