LUT vs IGST calculator
Compare exporting under LUT with exporting on payment of IGST. See how much tax you would pay, how much cash is tied up and for how long, and what that costs your business each month and each year.
An estimate of the cost of money tied up, for planning only. Refund times depend on correct returns and documents. Confirm which route you are eligible for with your chartered accountant.
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We file your LUT for the financial year and help with GST refunds on exports, so your shipments keep moving.
A worked example
An exporter ships goods worth ₹10,00,000 a month at 18% IGST and has ₹1,20,000 of input tax credit on purchases.
| Export under LUT | Export on payment of IGST | |
|---|---|---|
| IGST on the export | Nil | ₹1,80,000 |
| Paid from input tax credit | Nil | ₹1,20,000 |
| Extra cash paid | Nil | ₹60,000 |
| Refund due | ₹1,20,000 of credit, by application | ₹1,80,000 of IGST, through customs |
| Money tied up | ₹1,20,000 for about 60 days | ₹1,80,000 for about 30 days |
| Cost at 10% a year | about ₹1,973 a month | about ₹1,479 a month |
With these timings the IGST route costs slightly less, but it needs ₹60,000 of extra cash each month. If the LUT credit refund comes faster, or the IGST refund is delayed by a mismatch, the answer changes. Change the numbers above to match your own business.
How to choose
- Choose LUT if cash is tight, your input tax credit is small, or you would rather not pay tax upfront. File the LUT at the start of every financial year. See our LUT filing guide.
- Consider the IGST route if you have a large input tax credit balance, your shipping bills and returns always match, and you are eligible for it.
- Whichever you choose, keep your shipping bills, GSTR-1 and GSTR-3B consistent, because mismatches are the main cause of delayed refunds.
Frequently asked questions
What is the difference between exporting under LUT and paying IGST?
Under a Letter of Undertaking (LUT) you export without paying IGST, and later claim a refund of the input tax credit that builds up on your purchases. If you export with payment of IGST, you pay the tax, partly or fully from your input tax credit, and the IGST is refunded to you after the shipping bill and your GST returns match.
Which option is better for cash flow?
It depends on how much input tax credit you have and how fast each refund reaches you. Under LUT no extra cash leaves your business, but your input tax credit waits for a refund application. Under the IGST route you may need extra cash to pay the tax, but the refund is processed automatically through customs once your returns match. This calculator compares the cost of the money tied up in each case.
How is the IGST refund on exports processed?
The shipping bill is treated as the refund claim. Once the shipping bill and export general manifest are filed and your GSTR-1 and GSTR-3B report the same invoices, the refund is processed through ICEGATE and paid to your bank account. Mismatches between the shipping bill and returns are the most common cause of delay.
How do I claim input tax credit refunds under LUT?
You file a refund application on the GST portal for the unutilised input tax credit on zero-rated supplies, with the export invoices and shipping details. The law allows a provisional refund for zero-rated supplies and sets time limits for the final decision, so check the current rules with your tax adviser.
Can every exporter use the IGST refund route?
Not always. Some exporters are restricted, for example where inputs were bought under certain concessional schemes. Check your eligibility with your chartered accountant before choosing the IGST route.
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