GST on Exports — Zero-Rated Supply, IGST Refund, and LUT Guide

Exports from India are zero-rated under GST. This is the most important thing every Indian exporter needs to understand about GST, and the most commonly misunderstood. Zero-rated does not mean "exempt." It means you pay no GST on the final export, and you get a full refund of the GST paid on your inputs — raw materials, services, overheads, everything. In an exempt supply, you cannot claim input tax credit. In a zero-rated supply, you get both benefits.

The practical implication is clear: GST should not be a cost in your export business. If it is costing you money, you are doing something wrong — either you are not claiming your refund, or you are claiming it incorrectly and it is stuck in the system.

This guide walks you through the two routes for exporting under GST, the LUT filing process, the IGST refund mechanism, the ITC refund procedure, and the common errors that cause refund delays. Whether you are filing your first export Shipping Bill or trying to figure out why your GST refund has been stuck for months, this guide covers it.

Exports Are Zero-Rated Under GST — What This Means

Under Section 16 of the IGST Act, 2017, the following are treated as zero-rated supplies:

• Export of goods
• Export of services
• Supply of goods or services to a Special Economic Zone (SEZ) developer or unit

Zero-rated means:

1. No GST is charged on the export sale itself
2. The exporter is entitled to claim a refund of all input tax credit (GST paid on inputs, input services, and capital goods used for making the export)

This is different from exempt supplies (like fresh milk or healthcare services), where no GST is charged on the output but the supplier cannot claim input tax credits either.

For exporters, zero-rating is the best possible GST treatment. You recover every rupee of GST paid anywhere in your supply chain.

Two Routes for Exporting Under GST

Indian exporters have two options for handling GST on exports. Both achieve the same end result — zero GST cost — but through different mechanisms.

Option 1: Export with IGST Payment

You pay IGST on the exported goods at the applicable rate (same rate as domestic supply — 5%, 12%, 18%, or 28% depending on the product). After export, the IGST is refunded to you automatically through the Shipping Bill route.

How it works:

1. You charge IGST on the export invoice
2. You file the Shipping Bill with IGST payment details
3. You report the export in GSTR-1 (Table 6A) and GSTR-3B
4. The ICEGATE system and GSTN exchange data
5. IGST refund is processed automatically and credited to your bank account

Advantages:

• Refund is automatic — no separate application needed
• Faster processing (typically 14-30 days for clean claims)
• Your input tax credit is utilised against the IGST payment, so no ITC accumulation

Disadvantages:

• You need working capital to pay IGST upfront (could be 5-28% of invoice value)
• The refund takes 2-8 weeks — that is your money locked up
• For high-value shipments, the upfront IGST outflow can strain cash flow significantly

Option 2: Export Under Letter of Undertaking (LUT)

You file an LUT with the GST department, which allows you to export without paying IGST. Since you are not paying IGST but still accumulating input tax credit on your purchases, you claim the ITC as a refund through Form RFD-01 on the GST portal.

How it works:

1. You file an LUT on the GST portal before making exports
2. You export goods without charging IGST — your export invoice shows "Supply meant for export under LUT without payment of IGST"
3. You report the export in GSTR-1 (Table 6A) and GSTR-3B
4. The ITC accumulated on your inputs is not utilised (since you are not paying IGST on output)
5. You file RFD-01 on the GST portal to claim refund of the accumulated ITC

Advantages:

• No upfront IGST payment — better for cash flow
• No working capital locked up
• The government's preferred route for regular exporters

Disadvantages:

• ITC refund process is manual (RFD-01 filing) — not automatic like IGST refund
• Processing time is longer (typically 30-90 days)
• Requires more documentation and follow-up
• Subject to the maximum refund formula (explained below)

Which Option Should You Choose?

Factor	IGST Payment Route	LUT Route
Working capital requirement	High (pay IGST upfront)	Low (no IGST payment)
Refund speed	Faster (14-30 days)	Slower (30-90 days)
Refund process	Automatic	Manual (RFD-01)
Documentation effort	Lower	Higher
Best for	Occasional exporters, small shipments	Regular exporters, high-value shipments
Cash flow impact	Negative (money locked up)	Neutral (no outflow)

Recommendation for MSMEs: If you export regularly (monthly or more), file an LUT and use the LUT route. The working capital savings far outweigh the slightly longer refund processing time. If you export occasionally (once or twice a year), the IGST route is simpler.

LUT — Letter of Undertaking

What Is an LUT?

A Letter of Undertaking is a declaration filed on the GST portal in which you undertake to export goods or services without paying IGST. It is your commitment to the tax department that you will fulfil the export obligation. If you fail to export after availing the LUT benefit, you become liable to pay the IGST with interest.

Who Is Eligible for LUT?

Any registered person making zero-rated supplies can file an LUT, with one exception: a person who has been prosecuted for tax evasion exceeding Rs 2.5 crore under CGST Act, SGST Act, or the erstwhile laws cannot file an LUT. For all practical purposes, every legitimate MSME exporter is eligible.

How to File LUT on the GST Portal — Step by Step

Step 1: Log in to the GST Portal

Visit gst.gov.in and log in with your GSTIN and password.

Step 2: Navigate to LUT Filing

Go to Services → User Services → Furnish Letter of Undertaking (LUT)

Step 3: Select the Financial Year

Choose the financial year for which you want the LUT to be valid. LUT is valid for one financial year (April to March). You must renew it before the start of each financial year.

Step 4: Fill in the Details

• Enter the names of two witnesses (name, address, and occupation)
• No other documentation is needed at the time of filing

Step 5: Submit with DSC or EVC

Sign using Digital Signature Certificate or Electronic Verification Code (Aadhaar-based OTP).

Step 6: LUT is Effective Immediately

Once submitted, the LUT is active immediately. You will receive an acknowledgement with a reference number. Save this for your records.

Total time required: 10-15 minutes. No fee.

LUT Validity and Renewal

• LUT is valid for one financial year (1 April to 31 March)
• You must file a new LUT before the start of each financial year
• If you forget to renew and make an export without a valid LUT, you become liable to pay IGST on that shipment
• Best practice: File your LUT in the first week of April every year. Set a calendar reminder.

When LUT Can Be Revoked

The jurisdictional GST Commissioner can revoke your LUT if:

• You fail to export goods after availing the LUT benefit, and do not pay the applicable IGST with interest within the specified time
• You are prosecuted for tax evasion exceeding Rs 2.5 crore

If your LUT is revoked, you must export under IGST payment (Option 1) until the issue is resolved.

IGST Refund Process (Option 1 — Detailed)

If you choose to export with IGST payment, here is the detailed refund process:

Step 1: Pay IGST on the Export Invoice

Your export invoice charges IGST at the applicable rate. It must include your GSTIN, invoice number and date, buyer details, goods description, HSN code (verify with the HS Code Finder), quantity, unit price, total value, IGST rate and amount, and the Shipping Bill number.

Step 2: File the Shipping Bill

File the Shipping Bill on ICEGATE with your GSTIN, IGST amount, HS code, and invoice number. The invoice number must exactly match what you report in GSTR-1 — any mismatch blocks the automatic refund.

Step 3: File GSTR-1 (Table 6A)

In your monthly GSTR-1, report all export invoices in Table 6A with invoice number and date, Shipping Bill number and date, port code, and IGST amount charged.

Table 6A is the bridge between your GST returns and ICEGATE. The GSTN system transmits Table 6A data to ICEGATE for matching. If this data is wrong or missing, your refund will not process.

Step 4: File GSTR-3B

In GSTR-3B for the same month, report your export turnover under:

• Table 3.1(b): Zero-rated supply (with payment of IGST)
• Ensure the IGST amount matches what you reported in GSTR-1

Step 5: ICEGATE-GSTN Data Exchange

The ICEGATE system receives your Shipping Bill data. The GSTN system sends your GSTR-1 Table 6A data to ICEGATE. ICEGATE matches the two:

Data Point	Shipping Bill	GSTR-1 (Table 6A)
Invoice number	Must match	Must match
GSTIN	Must match	Must match
IGST amount	Must match	Must match
Port code	Must match	Must match
HS code	Declared in SB	Declared in return

If all data points match, the refund is validated.

Step 6: Refund Credited to Bank Account

Once validated, the IGST refund is processed by ICEGATE and credited to the bank account registered in your Shipping Bill (which should match your ICEGATE profile).

Timeline:

Scenario	Typical Processing Time
Clean match, no errors	14 – 21 days after GSTR-3B filing
Minor data mismatch (invoice number format, etc.)	30 – 60 days
Significant mismatch requiring manual intervention	60 – 180 days
SB005 error (GSTN-ICEGATE transmission failure)	Until resolved by helpdesk

Common Reasons for IGST Refund Delays

Invoice number mismatch. The invoice number in your Shipping Bill says "INV-2024-001" but your GSTR-1 says "INV/2024/001." The system treats these as different invoices and the refund gets stuck. Use the exact same format everywhere.

GSTR-1 not filed or filed late. ICEGATE cannot process the refund until it receives your GSTR-1 data. If you delay filing GSTR-1, your refund gets delayed by the same amount.

GSTR-3B mismatch. If the IGST amount in GSTR-3B does not match GSTR-1, the system flags it and the refund is held.

Port code error. Incorrect port code in GSTR-1 Table 6A. You must enter the correct 6-digit port code where the goods were actually exported.

EGM not filed. The shipping line must file the Export General Manifest with Customs. Until the EGM is filed and matched with your Shipping Bill, the refund does not process.

Scroll generation issues. ICEGATE generates refund scrolls that are sent to the bank. System or technical issues can delay scroll generation.

ITC Refund Process (Option 2 — LUT Route — Detailed)

If you export under LUT without paying IGST, your input tax credit accumulates because there is no output tax to set it off against. You claim this accumulated ITC as a refund by filing Form RFD-01 on the GST portal.

The Maximum Refund Formula

You cannot claim refund of your entire ITC balance. The refund is limited by the following formula (Rule 89(4) of the CGST Rules):

Maximum Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) / Adjusted Total Turnover x Net ITC

Where:

• Turnover of zero-rated supply = FOB value of exports during the refund period
• Adjusted Total Turnover = Total turnover minus turnover of exempt supplies (other than zero-rated)
• Net ITC = Input tax credit availed on inputs and input services during the refund period (excluding ITC on capital goods and ITC on inputs used for exempt supplies)

Practical implication: If 100% of your turnover is from exports (zero-rated), the formula gives you a refund of nearly 100% of your net ITC. If only 50% of your turnover is exports and 50% is domestic, you get refund on roughly 50% of your ITC. The remaining ITC gets used against your domestic output tax liability.

Step-by-Step RFD-01 Filing

Step 1: Calculate the refund amount using the formula above. Prepare a working sheet showing the computation.

Step 2: Log in to the GST Portal and navigate to Services → Refunds → Application for Refund.

Step 3: Select the refund type: "Refund of ITC on account of Export of Goods/Services without payment of Tax (LUT/Bond)"

Step 4: Select the tax period for which you are claiming the refund.

Step 5: Fill in the details:

• Turnover of zero-rated supplies (FOB value from Shipping Bills)
• Adjusted total turnover
• Net ITC amount
• System auto-calculates the maximum refund

Step 6: Upload supporting documents:

Document	Details
Statement 3 (Rule 89(2)(c))	Statement of export invoices correlated with Shipping Bills
Bank realisation certificate / FIRC	Proof that export proceeds have been received (for services — goods exporters may get conditional refund without this)
Copy of Shipping Bills	For goods exports
CA certificate	If refund exceeds Rs 2 lakh in a financial year

Step 7: Submit with DSC or EVC.

Step 8: Acknowledgement. The system generates an ARN (Application Reference Number).

Step 9: Provisional refund (90%). Under Rule 91, the officer must issue a provisional refund of 90% of the claimed amount within 7 days of acknowledgement, provided the application is complete.

Step 10: Final order. After verification, the officer issues a final refund order for the balance. If any portion is rejected, you receive a show-cause notice with an opportunity to respond.

Timeline for ITC Refund

Stage	Timeline
Filing RFD-01	Day 0
Acknowledgement (if application is complete)	Within 15 days
Provisional refund (90%)	Within 7 days of acknowledgement
Final order	Within 60 days of acknowledgement
Total for 90% refund	15 – 22 days (if clean)
Total for full refund	30 – 90 days

In practice: Many exporters receive 90% of their refund within 3-4 weeks. The remaining 10% takes longer due to verification.

Deficiency Memo

If the application is incomplete, the officer issues a Deficiency Memo within 15 days. You re-file with corrections, and the clock resets. Common deficiencies: missing Shipping Bill details, mismatch between GSTR returns and Shipping Bill data, incorrect refund calculation, or missing CA certificate.

Deemed Exports and Export of Services

Deemed exports — supplies to SEZ units/developers, supplies against Advance Authorisation, and supplies against EPCG Authorisation — are treated as zero-rated. The refund mechanism is similar to regular exports, but documentation requirements differ. In some cases, the recipient (not the supplier) can claim the refund.

Export of services is also zero-rated, but with different conditions. A supply qualifies as export of services if the supplier is in India, the recipient is outside India, the place of supply is outside India, payment is in convertible foreign exchange, and the supplier and recipient are not establishments of the same person.

The key difference: there is no Shipping Bill for services, so the automatic IGST refund through ICEGATE does not apply. Both routes (IGST payment and LUT) require manual filing of RFD-01. For service exporters, the LUT route is strongly recommended since there is no cash flow advantage to the IGST route. A Bank Realisation Certificate (BRC) or FIRC is needed to prove foreign exchange receipt.

Key GST Returns for Exporters

Return	Frequency	Export-Related Sections
GSTR-1	Monthly (or quarterly for QRMP)	Table 6A: Export invoices with IGST; Table 6B: Export invoices without IGST (LUT)
GSTR-3B	Monthly (or quarterly for QRMP)	Table 3.1(a): Zero-rated supply (without IGST — LUT); Table 3.1(b): Zero-rated supply (with IGST)
RFD-01	As needed (when claiming ITC refund)	Full refund application

Filing discipline is critical. Your IGST refund depends on accurate and timely filing of GSTR-1 and GSTR-3B. Any error in Table 6A — wrong invoice number, wrong Shipping Bill number, wrong port code, wrong IGST amount — will block or delay your refund. File carefully, not quickly.

Common Mistakes

Not filing LUT before the financial year starts. If your LUT lapses on March 31 and you export on April 2 without renewing, you must pay IGST on that shipment. File your LUT in the first week of April every year.

Mismatch between Shipping Bill and GST returns. The invoice number, GSTIN, IGST amount, and port code in your Shipping Bill must exactly match GSTR-1 Table 6A. This is the single most common cause of IGST refund delays.

Not reconciling ICEGATE data with GSTN. Check the ICEGATE portal for refund scroll status. If Shipping Bills show "data not received from GSTN," your GSTR-1 data has not been transmitted — likely a filing error or system delay.

Wrong GSTIN or HS code in the Shipping Bill. A wrong GSTIN sends your refund to the wrong entity. The HSN code should match your GST invoice. Use the HS Code Finder to verify before filing.

Not claiming provisional refund. Under Rule 91, you are entitled to 90% provisional refund within 7 days of acknowledgement. If you are not receiving this, follow up with the jurisdictional officer.

Mixing up exempt and zero-rated. If exports are shown as exempt in your returns, you lose ITC on related inputs. Exports are zero-rated, not exempt — ensure correct classification.

Ignoring the interaction with duty drawback. Whether you use the IGST route or LUT route, duty drawback covers only the customs duty component — not GST. Understand how these schemes interact to avoid double-counting or missing a benefit.

Monthly Reconciliation Checklist

Run this before filing GSTR-1 each month. Fixing errors before filing is far easier than correcting them after submission.

Check	Source	Against
Export invoice numbers	Shipping Bills	GSTR-1 Table 6A
IGST amounts	Shipping Bills	GSTR-1 Table 6A and GSTR-3B
Port codes	Shipping Bills	GSTR-1 Table 6A
Shipping Bill numbers and dates	ICEGATE	GSTR-1 Table 6A
Total export turnover	All Shipping Bills	GSTR-3B Table 3.1
ITC claimed	Purchase invoices	GSTR-3B Table 4
Refund scroll status	ICEGATE	Bank account credits

Key Takeaways

• Exports are zero-rated under GST — you pay no GST on the export and get full refund of input tax credit
• Two routes: Pay IGST and get automatic refund (faster but locks up cash), or file LUT and claim ITC refund (no cash outflow but slower refund)
• File LUT on the GST portal — it takes 15 minutes, costs nothing, and is valid for one financial year. Renew it every April.
• IGST refund depends on exact matching between Shipping Bill data and GSTR-1 Table 6A — any mismatch blocks the refund
• ITC refund is claimed through RFD-01; you are entitled to 90% provisional refund within 7 days of acknowledgement
• Reconcile monthly — Shipping Bill data, GSTR-1, GSTR-3B, and ICEGATE refund scrolls must all match
• Exports are zero-rated, not exempt — this distinction affects your ITC eligibility

Get Your GST Refunds Moving

Here is your action plan:

1. Decide your route — IGST payment or LUT. For regular exporters, LUT is usually better for cash flow
2. File your LUT on the GST portal if you have not already — it takes 15 minutes
3. Use the HS Code Finder to verify HSN codes before filing Shipping Bills and GST returns
4. Set up a reconciliation process — match Shipping Bill data with GSTR-1 and GSTR-3B every month before filing
5. File RFD-01 promptly if using the LUT route — do not let ITC accumulate for months
6. Check ICEGATE for refund scroll status if using the IGST route
7. Read the duty drawback guide to understand how drawback and GST refunds work together — claim both where eligible
8. Factor the refund timeline into your export pricing — if refunds take 60 days, that is 60 days of working capital cost

The mechanism works, but only if you file correctly, reconcile diligently, and follow up on pending refunds. Do not leave your money with the government longer than necessary.