Getting an IEC and LUT: the first-time exporter's actual sequence

To export goods or services from India without paying IGST, a first-time exporter must follow this exact sequence: first, obtain GST Registration; second, apply for an Importer Exporter Code (IEC) from DGFT; third, open an Authorized Dealer (AD) Code bank account; and finally, file a Letter of Undertaking (LUT) on the GST portal before executing the export.

Setting up an export business in India is a highly lucrative venture, but the initial regulatory framework can be extremely overwhelming. Government compliance for cross-border trade involves multiple departments, namely the Directorate General of Foreign Trade (DGFT), the Goods and Services Tax Network (GSTN), Customs Authorities, and the Reserve Bank of India (RBI). Each department has its own stringent prerequisites, documentation formats, and interconnected processes.

Many first-time exporters mistakenly apply for an Importer Exporter Code (IEC) first, assuming it is the only primary license needed to ship goods overseas. While this was partially true in the pre-GST era, the introduction of the comprehensive GST framework has fundamentally altered the compliance sequence. An IEC obtained without a corresponding GST registration will create significant, sometimes insurmountable hurdles when you attempt to export without the payment of Integrated Goods and Services Tax (IGST).

This comprehensive guide breaks down the actual, correct sequence of obtaining your core business registrations, ensuring you comply with all statutory references seamlessly. We will cover the prerequisites in detail, the exact step-by-step actions required, common pitfalls to avoid, and what you should precisely do after obtaining these vital trade documents.

Why does the sequence of registrations matter so much for exporters?#

When you export goods or services from the territory of India, the government considers these transactions as "zero-rated supplies" under . The fundamental macroeconomic principle behind zero-rating is that taxes should not be exported, making Indian goods and services highly competitive in the global market.

To avail this crucial zero-rating benefit, exporters essentially have two legal options:

1. Export with the upfront payment of IGST and claim a full refund later from the Customs or GST department.
2. Export without any payment of IGST under a valid bond or Letter of Undertaking (LUT).

Most businesses heavily prefer the second option. Exporting under an LUT prevents crucial working capital from being unnecessarily blocked in the form of tax payments while waiting for bureaucratic refunds. However, to file an LUT, you must first be a registered taxpayer under the GST regime.

Simultaneously, the Directorate General of Foreign Trade (DGFT) mandates that every single exporter must possess an Importer Exporter Code (IEC). Historically a unique 10-digit number, the IEC is now legally identical to the entity's Permanent Account Number (PAN) but requires formal activation through the DGFT's online portal. Without an active IEC, Customs authorities will outright refuse to clear your outbound shipments, and your bankers will not be able to process inward foreign remittances under the Foreign Exchange Management Act (FEMA).

Therefore, the sequence matters tremendously. You absolutely cannot file an LUT without a GST registration, and you cannot ship physical goods out of a port without an IEC and an Authorized Dealer (AD) Code registered at that specific port. If you mix up the sequence, you may end up with high-value shipments stuck at the port incurring demurrage, or worse, face severe penalties for non-compliance. In practice, the sequence must rigidly flow: Entity Incorporation -> GST Registration -> IEC Issuance -> AD Code Registration -> LUT Filing.

What is the exact sequence to follow for first-time exporters?#

Here is the detailed, step-by-step sequence every first-time exporter should follow to ensure full legal compliance and a completely smooth export process from day one.

Step 1: Obtain GST Registration#

The absolute first step in your international trade journey is to obtain a Goods and Services Tax (GST) Registration. Under the current GST law, any person making inter-state taxable supplies—which inherently includes all export transactions—must mandatorily register for GST. This applies irrespective of the standard turnover threshold limit of (or for goods in certain specified states).

However, if you are strictly an exporter of services, you might legally be exempt from mandatory registration if your aggregate turnover remains below the threshold (or in specified special category states). Despite this technical exemption, practically speaking, securing a GST registration is essential. Without a GSTIN, you cannot file an LUT to export services without tax, nor can you easily claim Input Tax Credit (ITC) on your inward business expenses.

During the application process, ensure your core business activity is correctly classified under the HSN or SAC codes. The application requires solid proof of business premises, promoter details, and a valid bank account. If you face procedural issues and your application is denied, it is vital to quickly review common GST registration rejected reasons to precisely rectify the discrepancies and reapply without losing time.

Step 2: Apply for the Importer Exporter Code (IEC)#

Once your GST registration is formally approved and you have successfully opened a current bank account in the name of your newly registered business, you must immediately proceed to apply for an IEC. The application is filed entirely online on the DGFT (Directorate General of Foreign Trade) portal using Form .

The IEC is now permanently linked to your PAN. The official government fee for a new IEC application is exactly . The process is entirely digital and faceless, meaning you do not need to physically visit any DGFT regional authority office. The application requires secure authentication using a Class 2 or Class 3 Digital Signature Certificate (DSC) or an Aadhaar-based e-sign.

It is utterly crucial that the details entered in the IEC application perfectly match the details on your PAN and GST registration certificate. Any minor mismatch in the entity name, address, or promoter details will automatically lead to a rejection by the DGFT system. To ensure a completely error-free process, many smart businesses opt for professional assistance through our comprehensive Import Export Licence services.

Step 3: Secure and Register the AD Code with Customs#

After successfully securing your IEC certificate, the next critical administrative step involves your banking partner. You must request your bank—specifically a branch authorized by the RBI to deal in foreign exchange (an Authorized Dealer or AD bank)—to formally issue an AD Code letter. This official letter confirms that your business maintains a current account with them and that they are legally authorized to process your foreign inward and outward remittances.

For the export of physical goods, you must register this specific AD Code at every single Customs port (sea port, airport, or Inland Container Depot) from where you intend to export shipments. Without AD Code registration at the specific port of exit, the Customs Indian Customs Electronic Data Interchange Gateway (ICEGATE) system will categorically not allow your shipping bill to be generated.

Registering the AD Code historically required the physical submission of documents to the Customs House. However, this is now largely done online via the ICEGATE portal using a digital signature. The process involves submitting the original AD Code letter (printed on bank letterhead), along with your IEC certificate, GST registration certificate, and company PAN card.

Step 4: File the Letter of Undertaking (LUT)#

The final, absolute prerequisite step before you can legally issue your first commercial export invoice is to file the Letter of Undertaking (LUT). This procedure is done exclusively on the GST portal using the specific Form .

The LUT serves as a formal legal declaration and promise to the government. By filing the LUT, you are legally binding your entity to either physically export the goods out of India within from the date of the export invoice, or pay the applicable IGST along with severe interest at . For the export of services, the primary statutory condition is to receive the convertible foreign exchange in your Indian bank account within from the date of the export invoice.

It is critical for compliance managers to remember that an LUT is only valid for one financial year. Therefore, it must be proactively renewed every single year before for the upcoming financial year to ensure uninterrupted zero-rated exports.

What documents are required for the IEC and LUT processes?#

To ensure a smooth, uninterrupted application process across multiple government portals, you must keep a specific set of documents fully prepared, digitally scanned, and appropriately sized in advance.

Documents for IEC Application#

• PAN Card of the individual proprietor, partnership firm, LLP, or company.
• Valid address proof of the registered business premise (e.g., registered Sale deed, official Rent agreement, or a commercial Electricity bill not older than ).
• A cancelled cheque bearing the pre-printed name of the applicant entity. If a pre-printed cheque is unavailable, a formal bank certificate in the DGFT's prescribed format must be obtained directly from the branch manager.
• Digital Signature Certificate (DSC) or Aadhaar-linked mobile number for instant e-sign verification.

Documents for LUT Filing#

• Valid GSTIN and secure access credentials for the GST portal.
• Details of two independent witnesses (including their full Name, Occupation, and residential Address). These witnesses essentially attest to your undertaking and must be verifiable.
• The previous year's LUT reference number (ARN), if the application is for an annual renewal.
• Digital Signature Certificate (DSC) or Electronic Verification Code (EVC) linked to the authorized signatory.

How long does the entire registration sequence take?#

The timeline for completing this sequence varies significantly depending on the accuracy of your initial documentation, the specific state of your GST jurisdiction, and the varying processing times of the different government portals.

| Registration Process Step | Estimated Timeline | Official Government Fees | | :--- | :--- | :--- | | GST Registration | | | | IEC Application via DGFT | | | | AD Code Registration at ICEGATE | | | | LUT Filing on GST Portal | Instant (Auto-approved via ARN) | |

In a best-case scenario, if you have all prerequisite documents prepared flawlessly and face no departmental queries, the entire operational sequence from the initial GST registration application to the final LUT filing can take about . It is highly advisable to commence this process well in advance of your first expected shipment date to avoid incredibly costly delays at the port.

What happens if you export goods without an LUT in place?#

If you execute an export transaction—meaning you generate an export invoice and ship the goods—without having an active, valid LUT in place on the GST portal at the time of invoice generation, the zero-rating benefit will not be legally available to you.

Under the stringent GST law, you will be legally required to pay the applicable IGST out of your pocket on the export invoice value. After paying this tax, you must then subsequently file a complex claim for a refund of the tax paid. This alternate route can severely block your working capital and disrupt your cash flow. The refund process, while streamlined in recent years, can still take anywhere from a few weeks to several months depending on the accuracy of your filings.

Moreover, any minor discrepancies in filing your regular GST Returns could result in the refund being aggressively withheld or delayed by the jurisdictional tax officer. Additionally, if you fail to export the physical goods within the stipulated , or fail to realize the foreign exchange for services within the mandatory , you will automatically be liable to pay the full IGST along with a hefty calculated retroactively from the exact date of the invoice.

It is also critically important to accurately report your inward supplies and outward zero-rated supplies in your GST returns. Misreporting can lead to highly complicated ITC scenarios, forcing you to deal with the nuances of the input tax credit reversal rule 42 43, which strictly dictates how common credits must be reversed when a business is making both taxable and exempt supplies.

Can an Importer Exporter Code (IEC) be modified or updated?#

Yes, an IEC can and absolutely must be updated when entity details change. In fact, the DGFT has made annual updates a strict mandatory compliance. According to the current Foreign Trade Policy, every single IEC holder must ensure that the details in their IEC are updated electronically every year, specifically during the period from .

If there are no changes in the IEC details, the exporter must still log into the DGFT portal and electronically confirm that the existing details are 100% correct. Failure to update or formally confirm the IEC details within this stipulated time frame will result in the automatic, system-driven deactivation of the IEC by the DGFT. A deactivated IEC can be re-activated only upon successful updation, and it will likely attract a late fee.

More importantly, any export or import transaction made while the IEC is in a deactivated state will be considered a severe violation of the Foreign Trade Policy. Modifications to the IEC, such as changes in the constitution of the firm, the registered address, or primary bank account details, can be done online. Such operational modifications must be formally applied for within of the change taking place in reality.

What are the specific penalties for non-compliance?#

Failing to adhere to the strict statutory requirements laid down by the DGFT, Customs, and GST departments can invite significant, business-threatening penalties and operational bottlenecks.

• Exporting without a valid IEC: Goods can be summarily confiscated by Customs authorities under the provisions of the Customs Act, 1962. Financial penalties for such infractions can range up to the assessed value of the confiscated goods.
• Failing to update IEC details annually: The IEC will be deactivated, instantly halting all export and import operations at the port level. A late fee penalty may be applicable for reactivation, depending on the latest DGFT policy notifications.
• Exporting without LUT and failing to pay IGST: This is considered blatant tax evasion under the CGST Act, 2017. The penalty can be up to or a minimum of , whichever is higher, along with possible confiscation of goods.
• Non-realization of export proceeds: If the convertible foreign exchange is not realized and credited to your Indian bank account within the RBI stipulated timeline (which is usually for goods and for services), you directly violate FEMA regulations. This can attract severe monetary penalties, compounding fees, and intense scrutiny from the Enforcement Directorate (ED).

What to do next#

Navigating the exact sequence of business registrations, especially for international trade, requires extreme precision, deep understanding of the law, and unwavering attention to detail. One missed deadline, an incorrectly formatted document, or a wrongly sequenced application can delay your shipments, block your vital working capital, and invite unnecessary departmental scrutiny.

If you are a first-time exporter looking to set up your regulatory framework perfectly from day one without the stress of navigating multiple confusing government portals, we can help. Our specialized team of trade compliance experts will handle your complete GST registration, secure your IEC issuance, coordinate your AD Code registration, and file your LUT seamlessly, allowing you to focus entirely on finding and serving your global buyers.

Check out our comprehensive Import Export Licence service to get started securely and compliantly today.

Frequently Asked Questions (FAQs)#

Do I need a separate IEC if I have multiple GST registrations in different states across India?#

No. The Importer Exporter Code (IEC) is a strictly PAN-based registration. A single PAN will be issued only one IEC, which is universally valid across all your branches, factories, and GST registrations throughout the entire territory of India. You do not need state-wise IECs.

Is filing an LUT mandatory for exporting software or consulting services?#

Yes, if you wish to export any form of services (including IT software, consulting, or digital marketing) without the upfront payment of IGST, filing an LUT is absolutely mandatory. If you do not file an LUT prior to invoicing, you must pay the IGST on the service invoice out of pocket and claim a refund later, which negatively impacts cash flow.

Can an individual or a freelancer obtain an IEC for exporting goods?#

Yes, a sole proprietor, an individual, or even a freelancer can seamlessly apply for an IEC. The IEC will be issued directly against their personal PAN, and the export business can be legally conducted in their own individual name without needing to incorporate a company.

How much does it cost in government fees to renew an LUT every financial year?#

The official government fee for filing a new Letter of Undertaking (LUT) or renewing it annually on the GST portal is exactly . You can easily complete the process yourself for free if you possess your valid GST login credentials and a registered digital signature or Aadhaar OTP.

My bank hasn't issued the final AD Code letter yet. Can I still apply for my IEC?#

Yes, you can proceed without it. To apply for an IEC on the DGFT portal, you primarily need a cancelled cheque or a standard bank certificate confirming your active current account. The specific AD Code letter is only required later at the Customs port for the physical clearance of goods via ICEGATE, which is the subsequent step.

What is the actual validity period of an Importer Exporter Code?#

An IEC is fundamentally valid for the entire lifetime of the entity, as long as the underlying business exists and the PAN remains active. However, it is critical to note that the DGFT strictly requires all exporters to electronically update or validate their IEC details annually between to prevent temporary deactivation.

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Last reviewed: 2026-08-09