Exporters often confuse the two. Here's a clean breakdown of when LUT applies, when full registration is needed, and how the filings differ.
These are not alternatives — they are sequential. GST registration is the entry ticket. A Letter of Undertaking is an optional facility that registered exporters use to avoid paying IGST they would only have to reclaim later.
GST registration
Mandatory once aggregate turnover crosses ₹40 lakh for goods or ₹20 lakh for services, with lower thresholds in special category states. It is also mandatory regardless of turnover for anyone making inter-state taxable supplies, e-commerce operators, and — importantly — most exporters, since exports are treated as inter-state supplies.
The LUT
Exports are zero-rated. You can either pay IGST on the export and claim a refund, or furnish a Letter of Undertaking in Form GST RFD-11 and export without paying IGST at all. The second route is almost always better: no working capital gets locked up in a refund queue.
Who can furnish an LUT
- Any registered person exporting goods or services, or supplying to an SEZ
- The applicant must not have been prosecuted for tax evasion exceeding ₹250 lakh
- Those who fail the eligibility test must furnish a bond with a bank guarantee instead
Key practical differences
- Registration is a one-time process; the LUT must be furnished afresh for every financial year
- The LUT is filed online on the GST portal and acknowledged immediately — there is no fee and no waiting period
- An LUT filed for FY 2026-27 must be in place before the first export of that year
- Exporting without a valid LUT means you must pay IGST and go through the refund process
The annual renewal trap
The single most common error is assuming the LUT carries over. It expires on 31 March. File the new one in the first week of April, before you raise your first export invoice of the year — otherwise those invoices attract IGST that you then have to chase as a refund.