GST on Export Business – Complete Guide 2026

Anil Gupta runs a garment export business from Delhi. He ships readymade clothes to buyers in the UAE and the UK. His CA told him: “Your exports are zero-rated — you don’t pay GST on what you sell, and you can recover the GST you paid on your inputs.” Anil’s immediate question: “So I pay zero GST? Then why do I need to file anything?” The answer is that zero-rated does not mean zero compliance. It means zero tax burden on the output — but the process of keeping it that way requires proper LUT filing, correct GSTR-1 reporting, and timely refund claims.

From April 1, 2026, the GST authorities have significantly tightened reconciliation checks, invoice validation, and ITC scrutiny for export refunds. Exporters who were casual about documentation are now facing delays and notices. This guide explains the complete GST framework for exports — goods, services, and SEZ supplies — updated for 2026.

The Core Concept: Under Section 16 of the IGST Act, exports and SEZ supplies are zero-rated supplies — the effective GST on the output is nil. But the GST you paid on inputs (raw materials, freight, professional services, cloud tools) is not lost — you can claim it as a refund. The LUT or bond is what allows you to export without first paying IGST upfront.

What Qualifies as Zero-Rated Supply

Section 16(1) of the IGST Act defines zero-rated supply as:

Export of goods — physical goods shipped outside India through customs
Export of services — all five conditions under Section 2(6) IGST Act must be met
Supply to SEZ developer or unit — for authorised operations only

Five Conditions for Export of Services

#	Condition
1	Supplier is located in India
2	Recipient is located outside India
3	Place of supply is outside India
4	Payment received in convertible foreign exchange (or INR via RBI-permitted Special Vostro Account)
5	Supplier and recipient are not merely separate establishments of the same entity

⚠️ Intermediary Services — NOT Zero-Rated: If you arrange or facilitate supply between two parties without being the principal supplier, you are an “intermediary” under Section 2(13) of the IGST Act. Intermediary services have their place of supply in India — taxable at 18% GST, not zero-rated. A commission agent who connects a foreign buyer with an Indian seller is an intermediary. A software company directly delivering its product to a foreign client is an exporter. The distinction is critical and has been litigated extensively.

Two Routes for Zero-Rated Export

Parameter	Route 1 — LUT (No IGST Payment)	Route 2 — Pay IGST, Claim Refund
Upfront IGST payment	❌ None — export without paying	✅ Pay IGST on invoice, recover later
Working capital impact	Zero — no funds blocked	IGST blocked until refund processed
Refund type	Accumulated ITC refund (Rule 89)	IGST refund (Rule 96) — auto via ICEGATE
Refund processing time	30–60 days (officer scrutiny)	7–15 days (automated ICEGATE matching)
Refund form	Form GST RFD-01 (manual filing)	Shipping bill = deemed refund application
Provisional refund	90% provisional within 7 days of processing	Direct credit — no split
Best for	IT/SaaS exporters, service exporters, large goods exporters	Goods exporters wanting faster processing
Dominant practice	✅ Preferred by most exporters	Used by some goods exporters

Which Route to Choose: For IT companies, freelancers, consultants, and service exporters — LUT is almost always better. No IGST outflow, ITC refund on inputs is straightforward. For goods exporters with tight timelines, the automatic ICEGATE processing under Route 2 can be faster — but you tie up working capital at 18% IGST rate until refund arrives. The Rule 89(4) ITC refund formula sometimes yields a lower refund than the actual IGST paid — making Route 2 better in specific situations. Merchant exporters with low margins should also check Notification 40/2017-CT(R) — the 0.1% concessional GST rate on goods procured for export often beats the LUT route. Run the numbers for your specific case.

LUT — Letter of Undertaking (Form GST RFD-11)

The LUT is a self-declaration filed on the GST portal committing that you will export within the prescribed timelines and pay IGST + interest if you fail to do so.

Key LUT Facts for FY 2026-27

File before March 31, 2026 — a fresh LUT is mandatory every financial year. No retroactive LUT. Every export invoice raised from April 1, 2026 without a valid LUT attracts IGST that must be paid and then refunded — blocking working capital.
Form: GST RFD-11 — filed online on gst.gov.in → Services → User Services → Furnish Letter of Undertaking
Cost: Free — no fees, no bank guarantee, no collateral
Approval: Instant — ARN generated immediately on submission
Validity: April 1 to March 31 — one financial year
Prosecution disqualification: If prosecuted for tax evasion of ₹2.5 crore or more — LUT not available; must use Bond with bank guarantee

Time Limits After Filing LUT

Type	Time Limit	From
Goods export	3 months	Export invoice date
Services — foreign exchange realisation	1 year OR FEMA-permitted period (15 months per RBI) — whichever is later	Export invoice date

⚠️ If Time Limit is Breached: IGST on the export value (at applicable rate) plus 18% interest from the invoice date becomes payable immediately. Apply for extension proactively if shipping delays are anticipated — the Commissioner can extend the 3-month period for goods in genuine cases.

ITC Refund Under Rule 89 — The LUT Route Refund Formula

When you export under LUT, you do not pay IGST on the output — but GST paid on your inputs (raw materials, freight, professional fees, cloud subscriptions, office rent) accumulates as ITC. You claim this via Form GST RFD-01.

Rule 89(4) Formula

Refund = (Turnover of Zero-Rated Supply × Net ITC) ÷ Adjusted Total Turnover

Net ITC = Total ITC availed minus ITC reversed during the period
Adjusted Total Turnover = Total turnover minus exempt supplies minus zero-rated supplies on which IGST was paid (Route 2)
CA certificate required for refund claims above ₹2 lakh
Claims below ₹1,000 are not admissible

RFD-01 Filing Process

1 Go to GST portal → Services → Refunds → Application for Refund → Select “Refund of ITC on account of exports without payment of tax”
2 Select tax period — you can club multiple tax periods in a single RFD-01 (CBIC Circular 135/05/2020 — same-FY restriction removed)
3 Fill Statement 3 (invoice details) and Statement 3A (formula computation)
4 Upload: GSTR-1 Table 6B confirmation, shipping bills / BRC / FIRC (services), and CA certificate if above ₹2 lakh
5 Submit — 90% provisional refund processed within 7 days of acknowledgement; balance 10% after verification
6 Department issues RFD-04 (provisional refund), RFD-05 (payment order), and finally RFD-06 (final order after scrutiny). If not processed within 60 days — 6% interest accrues on the refund amount.

Filing window: Within 2 years from the relevant date (date of export).

GSTR-1 and GSTR-3B — Correct Table Placement

This is where most exporters make costly mistakes. Incorrect table placement means invoices don’t transmit to ICEGATE — and refunds get stuck.

Transaction Type	GSTR-1 Table	GSTR-3B Table
Export with IGST payment (Route 2)	Table 6A	Table 3.1(b)
Export under LUT (Route 1)	Table 6B	Table 3.1(b)
SEZ supply with IGST	Table 6A	Table 3.1(b)
SEZ supply under LUT	Table 6B	Table 3.1(b)

⚠️ Critical Rule — April 2026 Tightening: The IGST amount in GSTR-3B Table 3.1(b) must equal or exceed the total from GSTR-1 Tables 6A + 6B — otherwise invoices will not transmit to ICEGATE and refunds stall. From April 1, 2026, GST authorities have increased system-based reconciliation. Any discrepancy between GSTR-1, GSTR-3B, and ICEGATE shipping bill data now triggers automated deficiency memos. Double-check all three before filing.

Amendment Deadline

GSTR-1 corrections for export invoices can be made until November 30 of the following financial year or the annual return date — whichever is earlier. Do not leave corrections to the last minute.

Export of Services — Specific Documentation

Service exports have one critical documentation requirement that goods exports do not: proof of foreign exchange realisation.

FIRC (Foreign Inward Remittance Certificate) — issued by the receiving bank for each foreign payment. Costs approximately ₹150 per certificate at most banks.
BRC (Bank Realisation Certificate) — for exports routed through AD banks. Sometimes used interchangeably with FIRC.
eBRC — electronic BRC on DGFT portal — becoming the standard for export documentation

✅ Court Ruling — FIRC Cannot Be Sole Reason for Refund Rejection: GST officers routinely reject service export refunds citing non-production of FIRC. The Karnataka HC in Mavenir Systems Pvt. Ltd. v. Union of India (2025) held that refund cannot be denied if eBRC, FIRC, or equivalent bank evidence is on record. Collect and file FIRC/eBRC proactively — and if rejected on this ground, cite this ruling in your appeal.

SEZ Supplies — Same Zero-Rating, Different Documentation

Supplies to SEZ developers and units for authorised operations are zero-rated under Section 16(1)(b) of the IGST Act. The supplier (DTA unit) claims the refund — not the SEZ unit itself.

Same two routes apply — LUT or pay IGST and claim refund
GSTR-1: Table 6B (LUT) or Table 6A (IGST paid)
Additional documentation: SEZ unit’s Letter of Approval, endorsement on invoice that supply is for authorised operations, Bill of Entry filed by the SEZ unit
Supply must be for authorised operations — general procurement or personal consumption by SEZ employees does not qualify

Real Examples

Example 1: Anil’s Garment Export (Goods — LUT Route)

Anil exports ₹50 lakh of garments to UAE under LUT. GST paid on fabric, threads, packaging: ₹3.6 lakh ITC accumulated.

Export invoices: 0% IGST with LUT ARN mentioned
GSTR-1: Table 6B; GSTR-3B: Table 3.1(b)
Shipping bills filed on ICEGATE — match with GSTR-1 invoice data
RFD-01 filed after quarter end: Refund = (₹50L × ₹3.6L) ÷ ₹50L = ₹3.6L (full ITC — entire turnover is zero-rated)
Refund received: ₹3.24L (90%) within 7 days of processing; ₹36K (10%) after verification

Example 2: Freelance Software Developer (Services — LUT Route)

Priya (Delhi) provides software development services to a US client. Monthly invoice: $3,000 (₹2,52,000). Monthly inputs: Adobe subscription ₹5,000 + internet ₹2,000 + co-working ₹10,000 = ₹17,000 GST-bearing inputs at 18% = ₹3,060 ITC per month.

Invoice: 0% IGST, LUT ARN mentioned, USD invoice with INR equivalent at RBI rate
FIRC collected from bank for each payment
Quarterly RFD-01: ₹9,180 ITC refund claimed
Annual ITC refund: approximately ₹12,240 on ₹68,000 worth of inputs

Common Mistakes — April 2026 Context

Mistake 1 — Not filing LUT before April 1:
There is no retroactive LUT. Every export invoice from April 1 without a valid LUT requires IGST payment — blocking working capital. File the renewal in March every year without exception.

Mistake 2 — Wrong GSTR-1 table for LUT exports:
LUT exports go in Table 6B — not Table 6A. Table 6A is for exports with IGST payment. Using the wrong table means ICEGATE data mismatch and refund stalling. From April 2026, this is now an automated rejection trigger.

Mistake 3 — Not collecting FIRC for service exports:
FIRC/eBRC is mandatory proof that foreign exchange was realised. Without it, refunds for service exports are regularly rejected at officer level. Request FIRC from your bank immediately after each payment receipt — do not wait until refund filing time.

Mistake 4 — Not filing RFD-01 at all:
Many exporters file the LUT, export correctly, and never claim the ITC refund. Accumulated ITC sits unused in the GST ledger. File RFD-01 quarterly or monthly — the 2-year window closes permanently after that.
GST LUT vs Bond — Complete Comparison Guide

Frequently Asked Questions

Q1. I forgot to file LUT for FY 2026-27 before April 1. What now?
File the LUT immediately — the portal allows filing at any point during the financial year. However, for invoices already raised between April 1 and the LUT filing date, those exports are without LUT cover. You must pay IGST on those invoices and claim refund under Route 2 (Rule 96). Going forward, all invoices after the LUT filing date are covered.

Q2. My US client pays in USD via Wise. Does that qualify as foreign exchange?
Yes — payment received through Wise (or other authorised payment platforms) qualifies as convertible foreign exchange for service export purposes, provided it is credited to your Indian bank account and you can obtain FIRC or bank confirmation of the inward remittance. Many banks now provide eBRC for Wise receipts. Confirm with your bank before relying on this.

Q3. Can I club multiple months’ refund claims in a single RFD-01?
Yes — CBIC Circular 135/05/2020 removed the same-FY restriction. You can club multiple tax periods in a single RFD-01 for zero-rated supplies. This reduces administrative burden and helps meet the ₹1,000 minimum claim threshold for smaller exporters.

Q4. My refund was not processed within 60 days — am I entitled to interest?
Yes — if the GST refund is not processed within 60 days from the date of receipt of the complete application, interest at 6% per annum accrues on the refund amount from the 61st day until the date of payment. File a formal interest claim along with your follow-up.

Q5. I supply goods to an SEZ — do I also need an LUT?
Yes — supplies to SEZ units and developers for authorised operations are zero-rated under the same framework. An LUT (Form RFD-11) is required for the SEZ supply route without IGST payment. The process, forms, and GSTR-1 table (6B) are identical to regular export. The SEZ unit’s Letter of Approval and endorsement on your invoice are the additional documents required.

Conclusion

GST on exports is genuinely zero — but maintaining that zero-tax status requires active compliance at every step: LUT filed before April 1, invoices in the right GSTR-1 tables, ICEGATE data reconciled with GST returns, FIRC collected for every service payment, and RFD-01 filed within 2 years. From April 2026, the department’s automated reconciliation has made these steps non-negotiable — gaps that used to slip through now trigger deficiency memos and refund holds.

The reward for doing it right is significant — a fully tax-free output, full recovery of input taxes, and a competitive cost structure versus domestic suppliers who bear GST on their outputs. Get the process right and exports under GST are efficient, cash-flow friendly, and profitable.

Related Guides

Official Government Resources

GST Portal — File LUT (RFD-11), ITC refund (RFD-01)
ICEGATE — Customs portal for shipping bill status and export data
DGFT Portal — eBRC, IEC registration, export documentation
CBIC — Circulars and notifications on zero-rated supply and refunds

Written & Reviewed by: Vipin Goel

B.Com | 20+ Years Experience in Income Tax, GST & NRI Taxation

At TaxPremia.com, I write practical GST guides to help exporters navigate compliance confidently and claim every rupee of refund they are entitled to.

For more GST updates visit: TaxPremia.com

Disclaimer: This article is for educational and informational purposes only. GST rules and refund procedures are subject to change. Please consult a qualified Chartered Accountant or GST practitioner for advice specific to your export business.