Why Letter of Undertaking is Essential for Export of Goods or Services
Thinking of exporting from India but feeling lost in all the paperwork? Don’t worry! Two important things you need to know are the Letter of Undertaking (LUT) under GST and Know Your Customer (KYC) requirements. These might sound complicated, but once you understand them, they’ll actually make your export process smoother and hassle-free. Let’s break it down in simple terms!
What is a Letter of Undertaking (LUT)
A Letter of Undertaking (LUT) is a document filed by exporters to avail themselves of the benefit of exporting goods or services without payment of IGST (Integrated Goods and Services Tax). It is an important document that ensures compliance with GST regulations and allows exporters to save on taxes, thereby improving cash flow. Letter of Undertaking allows exporters to ship goods and services abroad without paying GST upfront. Instead of paying the tax and later claiming a refund, an LUT lets you export without any tax deduction right from the start. This helps you keep your cash flow healthy and avoid unnecessary delays.
Why Do You Need a LUT for KYC
- Tax Compliance: Ensures your business complies with Indian GST regulations, allowing for tax-free exports.
- Financial Efficiency: Helps in maintaining liquidity by avoiding upfront IGST payments.
- Credibility: Establishes your business as a registered exporter with proper documentation, essential for international trade.
Why is LUT Important for Exporters
- Cost Savings: Avoids the payment of IGST, which can be significant for large export orders.
- Cash Flow Management: Maintains better cash flow by not tying up funds in tax payments.
- Efficiency: Simplifies the process of setting up your account and starting your export journey with ShipGlobal.in.
- Reduces Paperwork: You don’t have to go through the process of claiming a tax refund.
- Faster Process: Since you don’t pay GST, your shipments move smoothly without waiting for refunds.
How to Use Your LUT for KYC at ShipGlobal
- Log into ShipGlobal.in: Access your account and go to the KYC section.
- Upload LUT: Upload a clear photo or scan of your LUT document.
- Verification: Our team will verify your details. This usually takes a few hours to a day.
Tips for a Smooth KYC Process
- Clear Image: Ensure the photo or scan of your LUT is clear and readable.
- Match Details: Ensure the business name on your LUT matches the information on your ShipGlobal.in account.
How to Get Letter of Undertaking if You Do Not Have One
Steps to Apply for a LUT
- Visit the GST Portal: Go to the official GST website (www.gst.gov.in).
- Login: Use your GSTIN and password to log into the portal.
- Navigate to the LUT Application: Go to Services > User Services > Furnish Letter of Undertaking (LUT).
- Fill the Application Form: Complete the online form with the required details.
- Select Financial Year: Choose the financial year for which you are filing the LUT.
- Upload Documents: Attach necessary documents, such as the GST registration certificate and the authorization letter (if applicable).
- Sign and Submit: Sign the application using a Digital Signature Certificate (DSC) or EVC (Electronic Verification Code) and submit it.
And that’s it! Once approved, your LUT is valid for one financial year, after which you’ll need to renew it.
Documents Needed for KYC
Depending on whether you are an individual exporter or a company, the required documents will be different.
For Individual Exporters:
- PAN Card
- Aadhaar Card / Passport / Voter ID / Driving License (any one for identity proof)
- Bank Statement, Electricity Bill, or Rent Agreement (for address proof, if different from the identity proof)
For Companies or Businesses:
- PAN Card of the company
- Certificate of Incorporation
- Memorandum & Articles of Association (business registration details)
- Board Resolution (if required)
- Authorized Signatory’s ID and Address Proof
These documents need to be submitted to customs or your logistics partner before your shipment is cleared.
But What Happens If You Don’t Complete KYC
Skipping KYC can cause major delays in your shipments, extra scrutiny from customs, or even penalties. So, it’s always best to keep your documents updated and ready!
Combining LUT and KYC for a Smooth Export Process
If you’re using platforms like ShipGlobal.in to manage your exports, keeping both your LUT and KYC documents updated will make things much easier. Here’s why:
- Faster Account Setup – A valid LUT speeds up KYC verification.
- No Tax Deduction – Your shipments go out without GST payments.
- More Credibility – Proper documentation builds trust with customs and shipping partners.
Start your export journey smoothly with ShipGlobal.in by completing your KYC with your LUT today!
Frequently Asked Questions for Letter of Undertaking
Approval usually takes a few days, but it can vary based on processing times at the GST office.
No, but without an LUT, exporters need to pay IGST and then claim a refund, which can be a lengthy process.
Yes! You can renew your LUT each financial year by following the same application process on the GST portal.
If you don’t have an LUT, you’ll have to pay IGST on your exports and then apply for a refund, which can take time.
You’ll need your GST registration certificate, an authorization letter (if applicable), and business details.
Yes! Without KYC, your shipments might be delayed or even stopped at customs.
KYC documents should be updated whenever there is a change in business details, but regular verification is recommended.
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