GST on Exports — LUT, Refund and Zero-Rating Explained

Exports under GST are treated as "zero-rated supplies" — meaning the exporter can either export without paying IGST (by furnishing a Letter of Undertaking — LUT) or export with payment of IGST and claim a refund. The zero-rating ensures that Indian exports are tax-competitive in global markets. Here is the complete guide.

Zero-Rated Supplies — What Qualifies?

• Export of goods outside India (physical export)
• Export of services (supply to foreign customer where payment received in foreign currency — FIRC obtained)
• Supply to SEZ developer/unit (Special Economic Zone) for authorized operations
• All zero-rated supplies qualify for either: Export without IGST (LUT route) OR Export with IGST (refund route)

Letter of Undertaking (LUT) Route — No IGST Upfront

• Eligible exporters file Form GST RFD-11 (LUT) on the GST portal before the start of each financial year
• Once LUT is accepted: The exporter can export goods/services without paying IGST — simply mentioning "Supply under LUT" on the invoice
• LUT is valid for one financial year — must be renewed by April 1 every year
• Exporters who have been prosecuted for tax evasion above ₹250 lakh are NOT eligible for LUT — they must use the IGST payment route

IGST Payment and Refund Route

• Pay IGST on exports at the time of export
• File a refund application in Form RFD-01 on the GST portal
• Refund for goods exports is largely automated — after shipping bill is matched with GSTR-1
• Refund for service exports: Manual refund claim in RFD-01 with FIRC/BRC as evidence

ITC Refund — Inverted Duty Structure

• Even for exporters using LUT (no IGST paid) — accumulated ITC on inputs can be claimed as cash refund (Section 54 — refund of unutilized ITC)
• Exporters regularly file RFD-01 to claim ITC refund for goods exported under LUT
• Net ITC = ITC on inputs used for export — must be computed per Rule 89(4)

Conclusion

GST zero-rating for exports is a major benefit — with LUT being the simpler route for most exporters, supported by ITC refund claims for accumulated credits. SPOTON provides LUT filing, GST refund claim preparation (RFD-01) and export GST compliance for businesses in Kerala. Contact us for expert export GST compliance services.