Obtaining a Letter of Undertaking (LUT) under the Goods and Services Tax (GST) regime in India offers several benefits to businesses engaged in the export of goods and services. Some of the key advantages of having an LUT include:

Exemption from GST Payment: The primary benefit of an LUT is that it allows businesses to export goods and services without having to pay GST upfront. This means that exporters can preserve their working capital as they don't need to block funds for GST payment and then claim a refund.

Improved Cash Flow: By not paying GST on exports, businesses can maintain better cash flow. This is particularly advantageous for small and medium-sized enterprises (SMEs) and businesses with tight liquidity.

Competitive Advantage: Exempting GST on exports makes Indian goods and services more competitive in the international market, as they can be priced more competitively compared to those from countries where similar taxes are levied.

Simplified Documentation: The LUT process replaces the requirement for a bond and bank guarantee with a simpler undertaking. This reduces administrative burdens and paperwork for businesses.

Ease of Compliance: Businesses with an LUT need to focus less on GST compliance for their export transactions, allowing them to allocate resources to other aspects of their operations.

Reduced Transaction Costs: Businesses can save on transaction costs associated with paying GST and claiming refunds, which can be time-consuming and involve administrative expenses.

Enhanced Export Potential: The availability of an LUT encourages more businesses to explore export opportunities, which can contribute to increased foreign exchange earnings for the country.

Avoiding Interest and Penalties: With an LUT in place, businesses eliminate the risk of non-compliance and the associated interest charges and penalties for delayed GST payments.

Annual Validity: An LUT is typically valid for one financial year, which means that businesses can renew it annually as long as they continue to meet the eligibility criteria.

Regulatory Compliance: It helps businesses meet the regulatory requirements for GST exemption on exports, ensuring that they operate within the legal framework.