With a primary aim to promote trade especially exports, the government comes up with many reliefs.
Under GST regime, the exporter has either of the two options:
- Export under bond without payment of tax
- Export along with tax payment and claim refund late
The second option is not convenient as one has to pay the GST and then later claim the refund during which the exporters money is blocked from the time of payment of tax till the refund.
LUT, is one such way the government supports exporters. LUT means letter of understanding, it is a bond/ bank guarantee that an exporter signs that confirms that he would pay all the applicable GST taxes and fulfil the requirements needed. It is basically to allows the exporter to avoid the whole process of paying and claiming refund on the tax paid.
A registered tax payer who is exporting goods from India can file LUT. Exception being the ones who have evaded tax of Rs 2.5 crore or more. LUT’s are valid for a year. Fresh LUT’s are required to be filed for every financial year. Condition being, the privileges would be revoked in case the conditions mentioned in the LUT are not fulfilled within the time-limit.
for a detailed information about LUT read this blog : https://www.legalwiz.in/blog/filing-and-renewal-of-lut-made-online-gst