What are the Benefits of Using GST LUT for Businesses

What are the Benefits of Using GST LUT for Businesses


The Goods and Services Tax (GST) Law introduced the concept of a Letter of Undertaking (LUT) to facilitate seamless exports and simplify the compliance process for businesses in India. The LUT allows exporters to undertake exports without the need to pay tax upfront and claim refunds later. In this article, we will delve into the benefits of using GST LUT for businesses and how it streamlines the export process.

  1. Exempted from Integrated Goods and Services Tax (IGST)

One of the primary benefits of utilizing GST LUT is the exemption from Integrated Goods and Services Tax (IGST) on export transactions. IGST is the tax applicable on the inter-state and international movement of goods or services. By submitting the LUT, exporters can enjoy a zero-rated tax benefit, eliminating the need to pay IGST at the time of exports. This helps businesses conserve working capital and reduces the financial burden associated with export transactions.

  1. Streamlined Export Process

By availing the benefits of GST LUT, businesses can streamline their export processes. They no longer need to follow the time-consuming and complex procedure of paying IGST, claiming refunds, and undergoing subsequent verifications. The LUT simplifies the export cycle, allowing businesses to concentrate on their core activities, meet customer demands, and expand their global reach.

  1. Improved Cash Flow

GST LUT enables businesses to maintain a healthy cash flow by eliminating the need to lock capital in the form of tax payments. Instead of waiting for refunds, which may involve a lengthy processing time, businesses can use their funds for other operational or growth-related activities. This improved cash flow provides financial stability and flexibility for exporters to invest in their businesses and seize new opportunities.

  1. Competitive Edge in International Markets

Utilizing GST LUT offers Indian exporters a competitive edge in international markets. By availing zero-rated tax benefits, businesses can offer their products or services at more competitive prices compared to their global counterparts who might be subject to higher tax implications. This advantage can attract international buyers, foster greater trade opportunities, and contribute to the growth of the Indian export sector.

  1. Reduced Compliance Burden

GST LUT significantly reduces the compliance burden for exporters. The traditional process of paying taxes, claiming refunds, and undergoing audits can be time-consuming and cumbersome. With the LUT in place, businesses can focus on their core operations without the added burden of tax-related paperwork. This simplification of compliance processes saves time, resources, and administrative efforts, enabling businesses to operate more efficiently and effectively.


The utilization of GST LUT brings numerous benefits to businesses engaged in exports. From exemption from IGST to improved cash flow, streamlined processes, and reduced compliance burden, the advantages are substantial. By availing the benefits of GST LUT, businesses can enhance their competitiveness in international markets, expand their customer base, and contribute to the growth of the Indian economy. It is imperative for exporters to understand and leverage the benefits of GST LUT to maximize their export potential and thrive in a global business landscape.

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