LUT Annual Filing
Export services at 0% GST with full ITC refund
overview
What is this hack?
File Form RFD-11 (Letter of Undertaking) every April to export services at 0% GST and claim full ITC refund without paying IGST upfront
how it works
How it works
When freelancers/exporters provide services to foreign clients, the supply is an export of services — and so a "zero-rated supply" carrying 0% GST — only if all five conditions in section 2(6) of the IGST Act are met: the supplier is located in India, the recipient is located outside India, the place of supply is outside India, payment is received in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India, and the supplier and recipient are not merely establishments of a distinct person. However, there are two ways to export: (1) Pay 18% IGST upfront and claim refund later (lengthy process, cash flow blocked), OR (2) File a Letter of Undertaking (LUT) via Form RFD-11 promising to comply with export norms, and then invoice at 0% GST without paying anything upfront. LUT is renewed annually every April. With LUT, you can also claim full Input Tax Credit (ITC) refund on business expenses like software, coworking space, equipment - getting back the 18% GST you paid on these inputs. This saves massive cash flow and administrative hassle.
steps
Step-by-step guide
Ensure GST Registration
You must be GST registered. Registration is compulsory once aggregate turnover in a financial year crosses ₹20 lakh (₹10 lakh from a special category State) under section 22 of the CGST Act, and section 24(i) separately compels registration for anyone making an inter-State taxable supply — which is what an export of services is. Do not assume that being under ₹20 lakh makes registration purely optional for an exporter; check your position with a CA.
Login to GST Portal in April
Every financial year, LUT must be filed fresh. Login to GST portal (www.gst.gov.in) between April 1-15 using your GSTIN credentials.
Navigate to LUT Section
Go to Services > User Services > Furnish Letter of Undertaking > Create Letter of Undertaking. Select Form RFD-11.
Fill Form RFD-11
Enter: Financial Year, GSTIN, Legal Name, Trade Name, Address, Bank Details (for ITC refunds), Authorized Signatory details. Undertaking statement acknowledges GST compliance.
Submit & Download ARN
Submit form using DSC or EVC. System generates Application Reference Number (ARN) immediately. LUT is auto-approved - no manual approval needed. Download acknowledgment.
Update Invoice Format
From date of LUT filing, issue invoices to foreign clients with: "Supply meant for export under LUT without payment of IGST", LUT ARN number, SAC code, 0% GST rate, foreign currency amount.
Claim ITC Refunds Quarterly
File GSTR-1 showing export invoices. Claim accumulated ITC on business expenses via Form RFD-01A quarterly for cash refunds.
example
Real Example: Freelance Developer Earning $4,000/month
situation
Rohan is a freelance developer earning $4,000 monthly ($48,000 annually = ₹40 lakh) from US clients. He has business expenses: laptop ₹1.2L, software subscriptions ₹2L annually, coworking space ₹1.5L. Total expenses: ₹4.7L with 18% GST = ₹84,600 GST paid.
without this hack
No LUT filed: Must charge client 18% IGST = ₹7.2L on ₹40L income. Pay ₹7.2L to govt, then apply for refund (6-12 months). Cash flow blocked. Cannot claim ₹84,600 ITC easily without export documentation.
with this hack
With LUT filed: Invoice clients at 0% GST (₹40L only, no IGST). No upfront payment. File GSTR-1 monthly showing exports. Claim ₹84,600 ITC refund quarterly via RFD-01A. Refund received in 30-60 days. Total benefit: ₹7.2L cash flow + ₹84,600 refund.
- LUT must be filed every April - missing deadline means paying IGST until filed
- Export payment must be received in foreign currency to Indian bank - cash not allowed
- Invoice must mention LUT ARN, SAC code, and "Export under LUT" declaration
- If payment not received within 1 year, export status lost and IGST becomes due
- ITC refund requires proper documentation - maintain invoices, payment proofs
- Valid GST registration (even if voluntary)
- Exporting services to foreign clients
- Foreign currency receipts via authorized banking channels
- Indian bank account to receive payments
- Digital Signature Certificate or Aadhaar OTP for filing
- Clean GST compliance record (no pending dues or prosecution)
- Potential savings: 18% cash flow saved
- Implementation time: 1 day
- Legal status: fully legal
- Risk level: low
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Need help implementing this hack?
Get expert guidance from CA Ashama Rajawat on implementing this strategy correctly for your specific situation.