GST for Exporters: Zero-Rating, LUT and Refunds

Exports of goods and services, and supplies to a Special Economic Zone, are zero-rated under Section 16 of the IGST Act. The supply is taxable but at 0%, and — unlike an exempt supply — you keep the right to input tax credit on what went into it. This note covers the two export routes, the paperwork, and why refunds get stuck. The filing steps themselves are in the GSTR-1 and GSTR-3B walkthroughs.

The two routes

The Letter of Undertaking (LUT)

• Filed in Form RFD-11 online — Services → User Services → Furnish Letter of Undertaking.
• Valid for one financial year; file a fresh LUT at the start of each year.
• Open to any registered exporter, unless prosecuted for tax evasion of ₹2.5 crore or more.
• If the LUT has lapsed and you export without IGST anyway, it is treated as a breach — you may have to pay the IGST with interest and then claim it back.

Reporting exports in your returns

• GSTR-1, Table 6A — every export invoice, with the shipping bill number, date and port code for goods, and the with-payment / without-payment flag. Service exports also go in 6A.
• GSTR-3B, Table 3.1(b) — zero-rated outward supplies: the taxable value, plus IGST if exported on payment.
• For the IGST route on goods, the invoice details in GSTR-1 must match the shipping bill, and the GSTR-1 and GSTR-3B figures must agree, or the refund will not transmit.

Refund of accumulated ITC (LUT route)

• Apply in RFD-01 — Services → Refunds → Application for Refund → “Refund of ITC on account of exports without payment of tax”.
• The refundable amount is worked out by the Rule 89(4) formula: turnover of zero-rated supply × net ITC ÷ adjusted total turnover.
• Supporting documents include a statement of export invoices and, for services, the FIRC or BRC proving receipt of foreign currency.
• Time limit: two years from the relevant date. Zero-rated refunds are eligible for 90% provisional sanction, with the balance after scrutiny.
• See the chapter on GST refunds for the process and timelines.

Refund of IGST paid (with-payment route, goods)

There is no separate application — the shipping bill filed with customs is treated as the refund claim. It processes automatically once:

• GSTR-1 is filed with correct Table 6A export details;
• GSTR-3B is filed with the zero-rated supplies in Table 3.1(b);
• the invoice, shipping bill and Export General Manifest (EGM) data match on ICEGATE;
• your bank account is validated with PFMS.

Common hold-ups: a mismatch between the GSTR-1 invoice and the shipping bill (error codes SB000 to SB006), the EGM not filed by the shipping line, a GSTR-1 versus GSTR-3B difference, or an unvalidated bank account.

Related situations

• Supplies to SEZ — zero-rated, with an endorsement from the SEZ authorised officer that the supply was for authorised operations.
• Deemed exports (supplies against Advance Authorisation, to an EOU, and similar) are not zero-rated — tax is paid, and either the supplier or the recipient claims the refund.
• Merchant exporters can buy goods from a domestic supplier at a concessional 0.1% GST under prescribed conditions, then export them.
• Realisation of proceeds. For a goods refund, failure to bring in the export proceeds within the FEMA period can lead to recovery of the refund. For services, receipt of convertible foreign exchange is part of the definition of “export of service” in the first place.

Key takeaways

• Exports are zero-rated — 0% tax, but full ITC is preserved.
• Choose the route: LUT without IGST (refund of accumulated ITC via RFD-01), or on payment of IGST (refund of the IGST, automatic for goods via the shipping bill).
• File a fresh LUT (RFD-11) every financial year.
• For the automatic goods refund, GSTR-1, GSTR-3B and the shipping bill must all reconcile, and the bank account must be PFMS-validated.
• Claim any export refund within two years of the relevant date.