GST on Exports — Zero-Rated Supply, LUT and Refund of ITC

Exports of goods and services are treated as "zero-rated supplies" under the GST framework — meaning no GST is levied on exports, and exporters can claim a full refund of all input taxes. This makes Indian exports GST-free, enhancing their competitiveness in global markets. Here is the complete guide to GST export compliance.

Zero-Rated Supply — What It Means

Under Section 16 of the IGST Act, "zero-rated supply" includes: (a) export of goods/services out of India, and (b) supply to a Special Economic Zone (SEZ) developer or unit. Unlike exempt supplies (where no ITC is available), zero-rated supplies allow full ITC claim and refund.

Two Options for Exporters

Option 1: Export with payment of IGST and claim refund

• Pay IGST on the export invoice using the electronic cash ledger
• Claim refund of IGST paid — processed automatically based on shipping bill data matched with GSTR-1
• Refund is credited directly to the bank account by ICEGATE/Customs

Option 2: Export under LUT (Letter of Undertaking) without paying IGST — then claim ITC refund

• File LUT (Form RFD-11) on the GST portal — must be filed every financial year before the first export
• Export goods/services without paying IGST on the invoice
• Claim refund of accumulated ITC used in making exports (Rule 89 of CGST Rules)
• Eligible exporters: all GST-registered exporters who have not been prosecuted for tax evasion exceeding ₹2.5 crore

LUT Filing — Process

• File on GST portal: Services → Refunds → Application for Filing LUT
• Valid for the entire financial year (April to March)
• Must be filed before the first export of the year
• Self-certification — no physical bond or surety required (as of 2022)
• Quote LUT reference number on all export invoices

ITC Refund for Exporters

• File refund claim in Form RFD-01 on the GST portal
• Refund amount = (Turnover of zero-rated supply × Net ITC) / Adjusted total turnover
• Refund is processed within 60 days — interest at 6% p.a. if delayed
• Provisional refund of 90% granted within 7 days for eligible exporters

Deemed Exports

Certain supplies within India are treated as "deemed exports" under Section 147 and are eligible for refund of IGST paid: supply to EOU, supply against Advance Authorisation, supply of capital goods against EPCG authorisation.

Conclusion

GST zero-rated supply for exports is a powerful benefit — but requires timely LUT filing and careful ITC refund claiming. SPOTON provides complete GST export compliance including LUT filing, refund claims and export return filing for businesses in Kerala and across India. Contact us for expert GST export compliance services.