Exporting under a letter of undertaking, and its window
Most Indian exporters furnish a letter of undertaking once, treat it as settled, and never read what they undertook. It is an annual instrument carrying a hard window on each shipment, and the window is measured from the invoice rather than from the sailing. This sets out both routes and the clock the LUT route puts you on.
Section 16(1) of the IGST Act 2017 defines a zero rated supply as the export of goods or services or both, or a supply for authorised operations to a Special Economic Zone developer or unit. Section 16(3), as substituted with effect from 01-10-2023, provides that a registered person making a zero rated supply is eligible to claim refund of unutilised input tax credit on a supply made without payment of integrated tax, under bond or letter of undertaking. That is one of the two routes. The other is to pay the tax and claim it back.
What are the two routes for a zero rated export?
Route one is to export without paying integrated tax at all, under a bond or letter of undertaking furnished in advance, and to claim refund of accumulated input tax credit under Section 16(3) of the IGST Act 2017. Route two is to pay integrated tax on the export and claim the tax back, which Rule 96 of the CGST Rules 2017 runs off the shipping bill itself. Section 16(5) of the IGST Act 2017, inserted in 2024, closes both to zero rated supplies of goods that are subjected to export duty. The choice is made before the shipment, not after it.
What is a letter of undertaking, and who may furnish one?
Rule 96A(1) of the CGST Rules 2017 provides that any registered person availing the option to supply goods or services for export without payment of integrated tax shall furnish, prior to export, a bond or a letter of undertaking in FORM GST RFD-11 to the jurisdictional Commissioner. Circular No. 8/8/2017-GST dated 04-10-2017 records that Notification No. 37/2017-Central Tax dated 04-10-2017 extended the LUT facility to all registered persons intending to export without payment of integrated tax, except those prosecuted for an offence under the GST or existing laws where the tax evaded exceeds Rs 250 lakh.
How long is a letter of undertaking valid?
Circular No. 8/8/2017-GST dated 04-10-2017 states it plainly: the LUT shall be valid for the whole financial year in which it is tendered. That is the first clock, and it is the one most exporters do carry in a diary. The same circular sets the administrative expectations around it: a self-declaration that the conditions are fulfilled is to be accepted unless there is specific information otherwise, with verification on a post facto basis, and the LUT or bond should be accepted within three working days of receipt, failing which it is deemed accepted. Where a bond is required instead, it is to be accompanied by a bank guarantee of 15 percent of the bond amount.
What window does the LUT put on a shipment of goods?
The second clock, and the one that is rarely diarised. Rule 96A(1)(a) of the CGST Rules 2017 binds the person furnishing the LUT to pay the tax due, along with the interest specified under Section 50(1) of the CGST Act 2017, within fifteen days after the expiry of three months, or such further period as may be allowed by the Commissioner, from the date of issue of the invoice for export, if the goods are not exported out of India. Note where that window starts. It runs from the invoice, not from the booking, not from the container being packed and not from the sailing.
What is the window for services?
Longer, and tied to a different statute. Rule 96A(1)(b) of the CGST Rules 2017, as amended, requires payment within fifteen days after the expiry of one year, or the period allowed under the Foreign Exchange Management Act 1999 including any extension permitted by the Reserve Bank of India, whichever is later, from the date of issue of the invoice for export, or such further period as the Commissioner may allow, if the payment for those services is not received in convertible foreign exchange, or in Indian rupees wherever permitted by the Reserve Bank of India. That cross-reference matters in 2026, because the exchange control window is itself moving, as the realisation clock changes on 01-10-2026 sets out.
What happens if the window closes?
Rule 96A(3) of the CGST Rules 2017 provides that where the goods are not exported within the specified time and the registered person fails to pay the amount, the export as allowed under bond or letter of undertaking shall be withdrawn forthwith and the amount recovered under Section 79 of the CGST Act 2017. Rule 96A(4) provides that it shall be restored immediately when the person pays the amount due. Circular No. 8/8/2017-GST dated 04-10-2017 spells out the gap: exports made between withdrawal and restoration have to be on payment of integrated tax, or under bond with a bank guarantee.
Is a missed window always fatal?
No, and the Board has said so. Circular No. 37/11/2018-GST dated 15-03-2018 records that where goods have actually been exported, even after three months from the date of the invoice, payment of integrated tax first and claiming refund later should not be insisted upon, and that the jurisdictional Commissioner may consider granting the extension provided in the sub-rule on a post facto basis. The same circular provides that a delay in furnishing the LUT itself may be condoned and the facility allowed ex post facto. Neither is a plan. Both are what a well-documented file can ask for.
Which route suits which exporter, and what does each cost in cash?
The LUT route never puts the tax out of the business, so it suits an exporter whose working capital is tight and whose input credit accumulates anyway. The paid route puts cash out and gets it back through the shipping bill under Rule 96 of the CGST Rules 2017, which suits an exporter who wants the refund to run automatically off a document already being filed. There is one more clause worth reading before choosing either: the proviso to Section 16(3) of the IGST Act 2017 makes a registered person liable to deposit a refund received, with applicable interest, within thirty days after the expiry of the exchange control time limit for receipt of remittances, where the sale proceeds are not realised.
That proviso is what makes both routes a documentation problem before they are a tax one, because the file has to prove realisation on dates it captured months earlier. Purser Outbound keeps the LUT, its financial year and each invoice date against the shipment record, so both windows are computed rather than remembered. Purser never submits to a government portal, and it never sends an outbound message without a recorded human approval event.
Where to go from here
The LUT window is one of four clocks a single export shipment starts, and the others begin on the same documents.
- The document both routes run through. The shipping bill, field by field shows where the tax route is declared and what it feeds.
- What the LUT sits inside. Documents required to export from India maps the registrations behind every shipment.
- The exchange control clock Rule 96A refers to. The realisation clock changes on 01-10-2026, and it moves from nine months to fifteen.
- Put a date on your own shipment. The realisation deadline calculator takes a shipping bill date and returns both windows.
Frequently asked questions
How long is a letter of undertaking valid?
Circular No. 8/8/2017-GST dated 04-10-2017 provides that a letter of undertaking shall be valid for the whole financial year in which it is tendered. It also provides that if the goods are not exported within the time specified in Rule 96A(1) of the CGST Rules 2017 and the registered person fails to pay the amount due, the facility of export under LUT is deemed to have been withdrawn, and is restored if the amount is paid subsequently.
What is the time limit to export goods under an LUT?
Rule 96A(1)(a) of the CGST Rules 2017 binds the person furnishing the letter of undertaking to pay the tax due, with interest under Section 50(1) of the CGST Act 2017, within fifteen days after the expiry of three months, or such further period as the Commissioner may allow, from the date of issue of the invoice for export, if the goods are not exported out of India. The window runs from the invoice date, not from the sailing.
What is the time limit for export of services under an LUT?
Rule 96A(1)(b) of the CGST Rules 2017 requires payment within fifteen days after the expiry of one year, or the period allowed under the Foreign Exchange Management Act 1999 including any extension permitted by the Reserve Bank of India, whichever is later, from the date of issue of the invoice for export, or such further period as the Commissioner may allow, if payment is not received in convertible foreign exchange or in Indian rupees wherever the Reserve Bank permits.
Who is eligible to furnish an LUT instead of a bond?
Circular No. 8/8/2017-GST dated 04-10-2017 records that Notification No. 37/2017-Central Tax dated 04-10-2017 extended the facility of export under letter of undertaking to all registered persons intending to supply goods or services for export without payment of integrated tax, except those prosecuted for an offence under the GST laws or any existing law where the amount of tax evaded exceeds Rs 250 lakh. A self-declaration to that effect is to be accepted, with verification on a post facto basis.
What happens if goods are exported after the three month window?
Circular No. 37/11/2018-GST dated 15-03-2018 records that where goods have actually been exported, even after three months from the date of the export invoice, payment of integrated tax first and claiming refund later should not be insisted upon, and that the jurisdictional Commissioner may consider granting the extension of the time limit provided in Rule 96A(1) of the CGST Rules 2017 on a post facto basis, keeping the facts of the case in view.