GST on Exports and Imports India — LUT Zero Rated Supply IGST Refund 2026

GST on Exports and Imports India — LUT Zero Rated Supply IGST Refund 2026

GST treatment of exports and imports is one of the most complex areas of Indian GST law, and one of the most consequential for businesses involved in international trade. Exporters are entitled to zero-rated status — meaning no GST is collected on exports and input tax credit can be recovered. But the mechanism to achieve this involves Letter of Undertaking (LUT), IGST refund claims, and careful reconciliation with shipping documentation.

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Exports Under GST — Zero Rated Supply

What Is Zero Rated?
Exports are zero-rated under Section 16 of the IGST Act. Zero-rated means:
- GST rate on the supply: 0%
- But unlike exempt supplies, the exporter can claim ITC on inputs used for zero-rated exports

This distinguishes exports from domestic exempt supplies (like healthcare, basic food) where no ITC is available.

Two Options for Exporting Under GST:

Option 1: LUT (Letter of Undertaking) — Export Without Payment of Tax
- Exporter files LUT on GST portal at the beginning of the financial year
- Export invoice: issued without charging IGST
- ITC on inputs: can be claimed and refunded
- Preferred by: most exporters — preserves cash flow, no need to pay IGST upfront

Option 2: Pay IGST and Claim Refund
- Export invoice: IGST charged at applicable rate
- Shipping Bill: GST portal matches shipping bill with IGST invoice
- Refund: IGST refunded (automatically, based on GSTR-1 and shipping bill data)
- Used when: LUT was not filed, or as a strategy in specific cases

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Letter of Undertaking (LUT) — Complete Process

Who Can File LUT?
All GST-registered exporters can file LUT, EXCEPT:
- Exporters convicted of tax evasion above Rs. 2.5 crore — must provide export bond instead
- New exporters with no track record may face additional scrutiny

How to File LUT:
1. Login to GST portal
2. Go to Services → User Services → Furnish Letter of Undertaking
3. Fill in the form: previous year's export turnover, undertakings
4. Apply using DSC or EVC
5. LUT is valid for the entire financial year — must be renewed annually on April 1

Important: The ARN (Application Reference Number) of your LUT must be mentioned on every export invoice.

LUT Violation:
If goods are exported without paying IGST AND without a valid LUT:
- Export is not eligible for zero-rated treatment
- IGST becomes payable with interest
- Penalty exposure

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Export Invoice Requirements

Export invoices (under LUT) must include:
- Standard GST invoice fields
- "Supply Meant for Export Under LUT Without Payment of IGST" (mandatory declaration)
- LUT ARN number
- Shipping bill number and port of export (added after shipment)
- Buyer's name and address (foreign)
- Foreign currency amount (and equivalent INR)

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ITC Refund for Exporters

Option A: IGST Refund (if IGST was paid)
- File GSTR-1 with export invoices
- GSTN matches with shipping bill data from ICEGATE (Customs)
- Refund processed automatically — no separate refund application needed in most cases
- Typical timeline: 15-30 days after shipping bill and GSTR-1 filed

Option B: ITC Refund (under LUT — accumulated ITC)
- File GSTR-1 and GSTR-3B as normal
- ITC accumulates (input taxes paid, but no output GST to offset)
- File refund application: Form RFD-01 on GST portal
- GST officer reviews and sanctions refund
- Typical timeline: 30-60 days — can be longer if officer raises queries

Common Refund Issues:
- GSTIN mismatch: exporter's GSTIN on shipping bill doesn't match GST registration
- Invoice mismatch: invoice number on shipping bill differs from GSTR-1
- Port mismatch: port of export not matching shipping bill
- Bank account not validated: refund cannot be processed without validated bank account on portal

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Export of Services Under GST

Zero Rated Conditions for Service Exports:
Service export qualifies as zero-rated only if ALL conditions are met:
1. Supplier is located in India
2. Recipient is located outside India
3. Place of supply is outside India
4. Payment is received in convertible foreign exchange
5. Supplier and recipient are not merely establishments of the same entity

LUT Requirement:
Service exporters must also file LUT to export without charging IGST on service invoices.

Software/IT Service Exports:
India's large IT sector exports software services. FIRS (Foreign Inward Remittance Statement) from bank is evidence of foreign exchange receipt — critical for GST refund claims.

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Imports Under GST

How GST Applies to Imports:
- Import of goods: IGST levied by Customs at the point of import — same as if purchased domestically
- IGST rate: applicable GST rate for the product category
- Customs duty: levied separately — not GST
- BCD (Basic Customs Duty) + IGST + cess = total import duty

IGST on Imports as ITC:
- IGST paid at customs is eligible as Input Tax Credit
- Importer can use this ITC to offset output GST liability
- GSTIN must be mentioned in the Bill of Entry to get ITC
- ITC available after Bill of Entry reflects in GSTR-2B

Import of Services (Reverse Charge):
- When Indian company imports services from outside India (e.g., AWS cloud services, software licences)
- Indian company pays IGST under Reverse Charge Mechanism (RCM)
- No IGST from the foreign vendor — Indian company self-assesses and pays
- This IGST paid under RCM is eligible as ITC

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Common GST Compliance Issues for Exporters

- LUT not renewed in April: first exports of new financial year done without valid LUT
- Shipping bill not linked to invoice: refund process fails
- GSTR-1 filed late: shipping bill data can't match, refund delayed
- ITC refund rejected: insufficient documentation — commercial invoices, bank realisation certificates
- Deemed exports: supplies to EOU, SEZ units — treated differently from actual exports

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MICS Export-Import GST Services

- LUT filing: annual renewal, ARN number provided
- Export invoice format: compliant invoice templates
- GSTR-1 filing with export data: Table 6A and 7
- IGST refund application and follow-up: RFD-01, officer liaison
- ITC reconciliation: accumulated ITC tracked and refunded systematically
- Import ITC: Bill of Entry GSTIN tagging, ITC tracking
- RCM compliance: service imports — self-assessment, payment, ITC claim

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Pricing

- LUT filing: Rs. 2,000/year
- Export GST compliance (monthly): Rs. 5,000-10,000/month
- IGST refund application: Rs. 8,000 per refund application
- Import ITC management: Rs. 4,000/month
- Full export-import GST compliance: Rs. 15,000/month

Free export-import GST consultation: +91 9355273535 | admin@mics.asia