The LUT Bond is an acronym for the Letter of Undertaking which is a document filed by an exporter to get relief from payment of IGST on exports. The government has provided the option of filing LUT for exporters to do exports without payment of IGST in order to boost the exports. Most of the small traders face the problem of an extreme liquidity crunch so to solve this problem, the government has introduced the option of filing LUT Bond wherein they can now conduct exports on 0% IGST just by clearly specifying that their motive is export of goods.
Any registered taxpayer who is exporting goods or services is eligible to make use of L UTs. But, a person who has been prosecuted for tax evasion for an amount of Rs. 2.5 crores or above are not eligible under the act to furnish LUTs. Besides, the validity of such LUTs is for a period of one year (till the end of the financial year). Whereas, an exporter furnishing LUT’s are required to furnish fresh LUT for each financial year. If in case, the mentioned conditions in LUT are not satisfied within the time-limit, the privileges are revoked and the exporter will have to furnish bonds.
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