Export Invoices Under GST: Letter of Undertaking (LUT) vs IGST Payment for Indian Factories

Exporting goods manufactured in India is categorized as a Zero-Rated Supply under Section 16 of the Integrated Goods and Services Tax (IGST) Act, 2017. The principle of zero-rating is to ensure that Indian manufactured products carry zero indirect tax burden when competing in international markets.

Under Section 16(3), a registered manufacturer has two distinct operational routes to execute export shipments:

1. Export under Letter of Undertaking (LUT) without payment of IGST: The exporter ships goods without depositing tax, and subsequently claims a refund of accumulated unutilized Input Tax Credit (ITC) on raw materials and services.
2. Export with payment of IGST: The exporter charges and pays IGST (using accumulated ITC or cash ledger), and receives an automated direct refund of the IGST paid directly into their bank account upon Customs export verification.

Choosing between LUT and IGST payment has profound financial implications for factory cash flows:

An export invoice must fulfill both GST statutory rules (Rule 46) and Indian Customs regulations:

• Mandatory Legal Endorsement: For LUT shipments, the invoice must state in bold: "SUPPLY MEANT FOR EXPORT/SUPPLY TO SEZ UNIT OR SEZ DEVELOPER FOR AUTHORISED OPERATIONS UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF INTEGRATED TAX".
• Dual Currency Presentation: The invoice must show invoice values in the contractual foreign currency (e.g. USD, EUR, GBP) as well as the converted Indian Rupee (INR) equivalent based on CBIC notified exchange rates.
• Port & Shipping Details: Port of Loading (e.g. INNSA1 Nhava Sheva), Port of Discharge, Country of Destination, and Container/Vessel details.

Thousands of Indian exporters experience delayed refunds due to data mismatches between the GST Portal and the Indian Customs Electronic Gateway (ICEGATE):

• Error SB001: Invalid customer GSTIN transmitted to customs.
• Error SB005: Invoice number mismatch between the shipping bill filed by your Customs Broker (CHA) and Table 6A of your GSTR-1 return.
• PFMS Validation Failure: Bank account details in ICEGATE do not match the company PAN.

Werkora generates standardized invoice numbering, clean item descriptions, and HSN tax breakdowns to maintain consistency across shipping documentation and statutory accounting.

Supplying manufactured components to a unit in a Special Economic Zone (SEZ) or an Export Oriented Unit (EOU) is legally treated as an export under GST, even though the physical delivery occurs within Indian territory.

Werkora supports SEZ supply invoicing, enforcing mandatory capture of the SEZ Specified Officer's verification endorsement and ensuring correct classification in Table 6B of GSTR-1.

Werkora's integrated export management module handles the complete international order-to-cash lifecycle:

1. Multi-Currency Sales Orders: Maintain quotes and orders in foreign currencies with automated CBIC exchange rate conversion.
2. Commercial Invoices & Packing Lists: Generate buyer-ready commercial invoices, detailed packing slips with CBM/weight ratios, and Certificate of Origin drafts in one click.
3. e-BRC & Foreign Inward Remittance Reconciliation: Track incoming wire payments (SWIFT), log bank charges, and match remittances against shipping bills to close EDPMS (Export Data Processing and Monitoring System) RBI compliance records without manual friction.