Key takeaways
- Exports are zero-rated
- LUT route usually protects cash flow
- Data mismatches cause most delays
- Reconcile monthly
Exports as zero-rated supplies
Under India's GST framework, exports of goods and services are treated as zero-rated supplies. The principle is that taxes should not be exported: the exporter should not bear GST on inputs used for exports.
Two routes to zero-rating
Exporters can choose between two routes. In the first, they export under a Letter of Undertaking (LUT) without paying integrated GST, and claim a refund of accumulated input tax credit. In the second, they pay IGST on the export and claim a refund of that tax.
For most regular exporters, the LUT route is simpler for cash flow, since no tax is paid upfront on the export. The LUT is filed online and must be renewed each financial year.
Where cash gets stuck
Refund delays usually come from avoidable mismatches:
- Differences between shipping bill and GST return data
- Incorrect bank account details registered with customs
- Invoice values that do not match across documents
- Missing or late filing of returns
- Supplier non-compliance that blocks input tax credit
Good compliance habits
Reconcile export invoices with shipping bills every month, monitor supplier filings so your input credit is secure, and keep a refund tracker with dates and status. For service exporters, ensure foreign exchange is received within permitted timelines and keep proof of remittance.
How ITFOI helps
Our advisory desk circulates updates on GST changes and procedures, and members can seek guidance on refund issues. Complex cases can be supported through our empanelled experts.
This article is for general information and is not legal, tax or financial advice. Rules change frequently — members can contact the ITFOI advisory desk for guidance on their specific situation.