Short answer. Exports from India are zero rated supplies under Section 16 of the IGST Act, 2017, meaning you do not charge GST to your foreign buyer, but you are still entitled to recover the GST embedded in your own costs. You have exactly two routes to do that, and the choice matters more than most first time exporters realise. Export under a Letter of Undertaking, LUT, without paying IGST, and claim a refund of your accumulated input tax credit under Rule 89. Or pay IGST on the export invoice and claim it back automatically, with your shipping bill itself acting as the refund application, under Rule 96. LUT preserves your working capital. Paying IGST and claiming it back ties up cash for one to eight weeks before it returns. Most exporters should be on LUT. A meaningful number are not, simply because nobody told them it exists or their first year’s filing window passed unnoticed.
The two routes are not interchangeable paperwork variations of the same thing. They have different legal basis, different refund mechanics, different timelines and they fail in different ways. Getting the wrong one, or getting the right one but filing it incorrectly, is one of the more expensive mistakes a new exporter makes in the first year, because the cost is invisible until you notice how much working capital is sitting with the government instead of in your account.
Why exports are zero rated, not exempt
This distinction trips up more exporters than it should. An exempt supply carries no GST on the output, but you also cannot claim input tax credit on what went into producing it, because you never intended to charge GST in the first place. A zero rated supply is different in a way that matters financially. Under Section 16 of the IGST Act, export of goods or services and supply to a Special Economic Zone unit or developer are treated as zero rated, meaning the effective GST rate on the output is nil, but you remain fully entitled to claim credit for the GST paid on your inputs and input services. That credit either gets used against other tax you owe, or it comes back to you as cash. Zero rated is a much better position than exempt, and it exists specifically so exporters are not penalised for the tax embedded in their supply chain.
One category sits outside this and it is worth flagging early because it surprises people. Deemed exports, certain supplies to Export Oriented Units, supplies against Advance Authorisation or EPCG that do not physically leave India, are not automatically zero rated. GST generally applies on these, with refund available only under specific conditions. If you are supplying domestically to another exporter’s authorisation rather than shipping abroad yourself, do not assume the zero rating applies without checking. This is the same deemed export carve out that appears on the TRACE certification reimbursement and Duty Drawback rules, and it is not a coincidence, the government consistently treats deemed exports as a separate, more restricted category across schemes.
The two routes, compared properly
| Dimension | LUT route, Rule 89 | IGST paid route, Rule 96 |
|---|---|---|
| What you do | Export without charging or paying IGST, backed by a Letter of Undertaking | Charge and pay IGST on the export invoice, claim it back after |
| What you recover | Refund of accumulated, unutilised input tax credit | Refund of the IGST you actually paid on the export |
| Working capital impact | None. You never pay the tax in the first place | Cash is locked from the invoice date until the refund lands |
| Application required | Form GST RFD-01 on the GST portal | None separately. The shipping bill itself is the deemed refund application |
| Prerequisite | A valid LUT for the financial year, Form GST RFD-11 under Rule 96A | None beyond correct invoice and return filing |
| Typical timeline | Roughly 15 days to RFD-02 acknowledgement, a 90 percent provisional refund about 7 days after that, full RFD-06 order within 60 days | 7 to 15 working days after GSTR-1, GSTR-3B and the shipping bill data match, often with a 90 percent provisional credit inside 7 working days |
| Interest on delay | 6 percent per annum under Section 56 if the 60 day window is breached | Same provision applies if the process stalls |
| Best suited to | Most exporters, since it never ties up cash | Exporters who are disqualified from LUT, or who prefer the automatic route despite the cash lock |
Rasp International’s default position for clients: LUT, almost without exception. The only real reason to run the IGST paid route deliberately is where an exporter is disqualified from filing a LUT, which happens only in narrow circumstances described below, or in specific working capital situations where the exporter’s own finance team prefers the automatic timeline for reasons unrelated to GST mechanics. For the overwhelming majority of exporters we work with, LUT is simply the correct default.
How to file a LUT, step by step
Step 1. Check you are eligible
Under Rule 96A of the CGST Rules, virtually every registered exporter qualifies for LUT. The disqualification is narrow: a person who has been prosecuted for an offence under the CGST Act or an earlier indirect tax law involving tax evasion of an amount exceeding Rs 2.5 crore is not eligible and must instead furnish a Bond backed by a bank guarantee. For the ordinary exporter with a clean compliance history, this disqualification simply does not apply.
Step 2. File Form GST RFD-11 on the GST portal
The LUT is filed entirely online through Form GST RFD-11. You will select the financial year, name two independent witnesses with their address and occupation, and none of them may be a family member of the proprietor or partners of the firm. You then tick the required self declaration boxes confirming you will comply with the LUT conditions, and sign with a Digital Signature Certificate, mandatory for companies and LLPs, or an Electronic Verification Code, permitted for proprietors and partners.
Step 3. Submit and track the ARN
On submission an Acknowledgement Reference Number is generated. The LUT is deemed approved if no action is taken within 3 working days, so in practice most exporters never wait on a manual approval step at all.
Step 4. File before your first export invoice, every single year
This is the step that catches new exporters. A LUT is valid from 1 April to 31 March and does not auto renew. You must file a fresh LUT for each financial year before raising your first export invoice of that year. Miss this and every invoice you raise before the new LUT is filed technically requires IGST to be charged, which defeats the entire purpose of preserving working capital. We see this most often with exporters who filed their first LUT correctly with our help or their own, then let the renewal slip the following April because nothing on the GST portal actively reminds you.
Step 5. Reference the LUT on every export invoice
Raise your export invoice marked as a zero rated supply under Section 16 of the IGST Act, quoting the LUT ARN. Show the foreign currency value with the INR equivalent at the RBI reference rate applicable on the invoice date, and the place of supply as outside India for services, or reference the shipping bill for goods.
Step 6. Complete the export within the prescribed window
For goods, the physical export must be completed within 3 months of the invoice date under Rule 96A(1)(a). The Commissioner may extend this by a further 3 months on sufficient cause being shown, but do not treat that extension as routine. If the goods are not exported within the window and no extension is granted, the LUT condition is treated as violated for that invoice, and the exporter becomes liable to pay the IGST that was deferred, along with interest.
Step 7. Claim the ITC refund via Form RFD-01
The LUT itself defers the IGST. It does not automatically deliver your input tax credit refund. For that, file Form GST RFD-01 on the GST portal, applying the Rule 89(4) formula to compute the eligible refund amount from your accumulated, unutilised input tax credit. Expect an RFD-02 acknowledgement in roughly 15 days, a 90 percent provisional refund under RFD-04 about 7 days after that and a final order under RFD-06 within a total window of up to 60 days. Delays beyond 60 days attract interest at 6 percent per annum under Section 56.
How the automatic IGST route works, if you use it
Where an exporter pays IGST on the export invoice rather than filing a LUT, the refund mechanism under Rule 96 is genuinely automatic, and it is worth understanding even if you are on LUT, since the same data matching discipline determines whether either refund route succeeds.
No separate refund application is filed. The shipping bill itself is deemed to be the refund claim once the Export General Manifest is filed and GSTR-3B is submitted for that tax period. The system then electronically cross checks three specific data points: Table 6A of GSTR-1, Table 3.1(b) of GSTR-3B, and the shipping bill details filed with Customs. If all three match, ICEGATE pushes the refund to the exporter’s registered bank account, commonly with a 90 percent provisional refund inside 7 working days and the balance following shortly after, typically within a 7 to 15 day window overall.
The single most common reason this refund stalls is a mismatch between those three data points, an invoice value, a shipping bill number or a tax amount that does not tie out exactly across GSTR-1, GSTR-3B and the customs filing. This is a pure data entry discipline issue far more often than it is a policy problem, and it is entirely preventable with a reconciliation check before filing rather than after a refund goes missing.
Where this fits against Duty Drawback and RoDTEP
We say this on our Duty Drawback page too, because it is worth repeating in both places. GST refund or LUT position, Duty Drawback and RoDTEP are three separate ledgers that happen to share the same shipping bill. Do not try to net them into one number in your head.
| Dimension | GST, LUT or IGST refund | Duty Drawback | RoDTEP |
|---|---|---|---|
| What it addresses | GST on your own inputs and services, and IGST if paid on the export itself | Customs duty paid on imported inputs used in the exported product | Other embedded central, state and local taxes not refunded by any other mechanism |
| Legal basis | Section 16, IGST Act 2017, with Rule 89 or Rule 96 of CGST Rules | Section 75, Customs Act 1962 | Para 4.54, Foreign Trade Policy 2023 |
| Payment form | Cash refund, or credit never charged in the first place under LUT | Direct cash credit | E-scrip in your ICEGATE credit ledger, not cash |
| Filed through | GST portal, RFD-01 or RFD-11 | DBK declaration on the shipping bill | Separate RoDTEP declaration on the shipping bill |
| Can all three apply to one shipment | Yes. They are independent and commonly claimed together | ||
See our Duty Drawback guide for the customs duty side and our RoDTEP scheme guide for the embedded tax side. Between the three, a well filed export shipment recovers meaningfully more than most exporters realise, and losing even one of the three because a filing window was missed is a permanent loss, not a delay.
If you export services rather than goods
Most of this page reads goods first because that is the majority of our own client base, but the mechanics for a services exporter, an IT company, a design studio, a consulting practice, run on the same LUT and refund framework with a few points that work differently.
The zero rating for services depends on the place of supply genuinely being outside India under Section 13 of the IGST Act, not merely on the buyer being a foreign entity. Get this wrong, for instance where the actual place of supply rules point back to India despite an overseas client, and the supply is not zero rated at all regardless of what the invoice says. This is a materially different test from goods, where the shipping bill itself is straightforward evidence of physical export.
There is no shipping bill for a services export, so the refund application under either route relies more heavily on your invoice and payment realisation evidence. For the IGST paid route, since there is no shipping bill to act as an automatic deemed refund application, services exporters generally file through Form RFD-01 directly rather than relying on the Rule 96 automatic mechanism built around customs data. The relevant date for the two year Section 54 limitation is also different for services: it is the date payment was received in convertible foreign exchange, not an invoice or shipment date, which means the clock on a services export refund can start later than the invoice date if payment realisation itself is delayed.
Foreign Inward Remittance Certificates, FIRCs, or the newer Foreign Inward Remittance Advice from your bank, become the core evidence tying your invoice to an actual foreign exchange receipt. Keep these systematically rather than retrieving them from your bank only when a refund query arrives, since older FIRCs can take longer to source the further back you go.
Four situations we see repeatedly
The exporter who missed their LUT renewal
A garment exporter filed a correct LUT in their first year and exported several months without paying IGST. The following April, the LUT lapsed and nobody filed the renewal because nothing on the portal actively prompts it. Three invoices went out marked zero rated under a LUT that no longer existed for that financial year. The fix required paying the IGST that should have been charged, with interest, then recovering it back through Rule 96, turning what should have been a non event into a multi week cash flow problem entirely avoidable with a calendar reminder.
The exporter whose refund stalled on a data mismatch
An engineering goods exporter on the IGST paid route had a refund sit unprocessed for months. The cause traced to a shipping bill value that did not exactly match the invoice value declared in GSTR-1, a difference of a few hundred rupees from a rounding difference between the accounting system and the customs filing. ICEGATE’s automated matching does not forgive small mismatches, it simply does not release the refund, and there is no notification telling you why. A reconciliation check before filing would have caught it in minutes.
The exporter who exported late against their LUT invoice
A handicraft exporter raised an export invoice under LUT, then a buyer side delay pushed the actual shipment out past the 3 month window under Rule 96A(1)(a). Because nobody applied for the Commissioner’s extension before the window closed, the LUT condition was treated as violated for that invoice, and IGST became payable with interest on an export that did eventually happen exactly as intended, simply later than planned. If a shipment is going to run late against an invoice already raised under LUT, apply for the extension before the three months lapse, not after.
The exporter who assumed a deemed export was zero rated
A component supplier selling to another exporter’s Advance Authorisation, physically delivering goods within India rather than shipping abroad, invoiced the supply as zero rated on the assumption that any export linked transaction qualifies. It did not. Deemed exports are not automatically zero rated, GST generally applies, and refund is available only under the specific conditions that govern deemed export supplies. This is exactly the same distinction that governs deemed export exclusions on TRACE and Duty Drawback, and it catches suppliers who sell into export supply chains without shipping goods abroad themselves more often than direct exporters.
A worked cash flow comparison: LUT versus paying IGST
The numbers below are illustrative only, built to show the mechanics rather than any real client’s figures.
Say you export Rs 50 lakh of goods in a month, taxed at 18 percent IGST if you were to pay it, which is Rs 9 lakh. Under LUT, that Rs 9 lakh is never charged, never paid and never sitting anywhere except in your working capital, available for the next purchase order or payroll run. Under the IGST paid route, you fund that Rs 9 lakh out of your own cash at the time of the export invoice, then wait for it to come back. Even in the best case, a clean automatic refund inside 7 to 15 working days, that is Rs 9 lakh locked up for roughly two weeks, every single month, on a rolling basis. For a business running on tight working capital, or one growing quickly enough that new export volume keeps arriving before the previous month’s refund has landed, that rolling lock up compounds into a real constraint on how fast you can actually scale, even though on paper you get every rupee back.
This is the entire argument for LUT in one paragraph. The refund mechanics under Rule 96 are genuinely reliable when your data reconciles, which makes the IGST route look safe on paper. It is the timing, not the reliability, that costs you.
The Rule 89(4) refund formula, in plain terms
Exporters on LUT sometimes assume their entire input tax credit balance is simply refunded on request. It is not quite that simple, and understanding the shape of the formula, even without doing the exact calculation yourself, helps explain why the refund amount on your RFD-01 sometimes looks smaller than the ITC balance sitting in your electronic credit ledger.
Rule 89(4) computes your maximum refundable amount broadly as your net input tax credit, multiplied by the ratio of your zero rated supply turnover to your total adjusted turnover for that period. The intent behind the formula is to refund only the portion of your accumulated credit that is genuinely attributable to your export activity, not credit that built up because of unrelated domestic purchases or timing differences in your regular business. An exporter who does both substantial domestic and export business will typically see a refund proportional to their export share of turnover for that period, not their full standing ITC balance.
The practical implication is that your refund tracks your export turnover for the specific period you are claiming against, so a month with unusually high domestic sales and modest exports will produce a smaller refund ratio than a month where exports dominate, even if your absolute ITC balance is identical in both cases. If your refund amount ever looks lower than expected, check the turnover ratio for that period before assuming the claim was processed incorrectly.
Practical notes on the LUT witness requirement
The two independent witness requirement on Form GST RFD-11 is a small step that nonetheless holds up a surprising number of first time LUT filings, usually because the exporter has not decided in advance who the witnesses will be. The witnesses cannot be family members of the proprietor or partners, and you will need their full name, address and occupation at the point of filing, not after. Keep a standing pair of witnesses, for instance your accountant and a colleague not related to the ownership, so the annual renewal in the run up to 1 April does not stall on a detail that has nothing to do with tax substance.
Getting audit ready before Customs or GST asks
Both refund routes remain open to scrutiny after payment, and a GST audit or a refund verification query is a considerably worse time to discover your paperwork does not tie out than the moment of filing. Keep, for every export invoice, the LUT ARN or the IGST payment challan as applicable, the shipping bill and Export General Manifest reference, the reconciliation showing GSTR-1, GSTR-3B and the shipping bill values match exactly and, for LUT exports specifically, proof the physical export was completed inside the 3 month window or that an extension was granted before it lapsed.
The two year window under Section 54 of the CGST Act to claim a refund is a hard deadline, not a guideline. The relevant date for goods is the date of the shipping bill, for services it is the date payment was received in convertible foreign exchange. Miss the two years and the entitlement is lost permanently, with no discretionary extension available. If you are catching up on old exports that were never reconciled, check the dates before doing anything else. There is no point building a careful refund claim for an export that fell outside the window six months ago.
Frequently asked questions
Should I file under LUT or pay IGST and claim it back?
LUT, for almost every exporter. It never ties up working capital, since IGST is never charged in the first place, whereas the IGST paid route locks cash for one to eight weeks before the refund returns. The only reason to use the IGST route deliberately is where you are disqualified from LUT, which applies narrowly to those prosecuted for tax evasion exceeding Rs 2.5 crore under the CGST Act or an earlier indirect tax law.
Do I need to file a new LUT every year?
Yes. A LUT is valid only for the financial year it is filed for, 1 April to 31 March, and does not auto renew. File the new one before your first export invoice of the new financial year.
What happens if I forget to renew my LUT and raise an export invoice anyway?
That invoice technically required IGST to be charged, since no valid LUT covered it. You will need to pay the IGST with applicable interest and then recover it through the Rule 96 route on that specific invoice, rather than it having been covered by LUT from the outset.
How long does a GST refund on exports actually take?
Under Rule 96, IGST paid route, typically 7 to 15 working days after your GSTR-1, GSTR-3B and shipping bill data match, often with a 90 percent provisional credit inside 7 working days. Under Rule 89, LUT route, roughly 15 days to RFD-02 acknowledgement, a 90 percent provisional refund about 7 days after that and a final order within 60 days total. Delays beyond 60 days attract 6 percent annual interest under Section 56.
Why has my IGST refund not arrived even though my shipping bill cleared?
The most common cause is a mismatch between Table 6A of GSTR-1, Table 3.1(b) of GSTR-3B and the shipping bill details. ICEGATE’s matching is exact, not approximate, and even a small rounding difference will hold the refund without generating an obvious error message. Reconcile all three before filing rather than after a refund goes missing.
Is a deemed export zero rated under GST?
Not automatically. GST generally applies on deemed exports, with refund available only under specific conditions. Do not assume the zero rating covers a domestic supply simply because it is linked to another party’s export or authorisation.
What is the time limit for claiming a GST export refund?
Two years from the relevant date under Section 54 of the CGST Act. For goods, the relevant date is the shipping bill date. For services, it is the date payment was received in convertible foreign exchange. This is a hard limit with no discretionary extension.
What happens if my export is delayed past the LUT window?
Under Rule 96A(1)(a), goods must be exported within 3 months of the invoice date. If a delay is likely, apply to the Commissioner for a further 3 month extension before the original window lapses. If the window lapses without an extension, the LUT condition is treated as violated for that invoice and IGST becomes payable with interest.
Can I claim both a GST refund and Duty Drawback on the same export?
Yes. GST refund or LUT position, Duty Drawback and RoDTEP are independent mechanisms addressing different taxes, and a single shipment can carry all three without conflict.
How Rasp International handles this
We file and track LUT renewals so the 1 April deadline never becomes a fire drill, reconcile GSTR-1, GSTR-3B and shipping bill data before filing rather than after a refund stalls, and keep every export file audit ready against the two year Section 54 window. Where a refund has gone quiet, we trace the specific mismatch rather than resubmitting and hoping. Talk to our team if your LUT status or a pending refund needs a second look.
References and official sources
Every rule, section and timeline on this page is traceable to the CGST Act, the IGST Act, or CBIC and GST portal procedure. Where a secondary source is used to confirm current filing mechanics, it is marked below.
| Source | What it covers | Type |
|---|---|---|
| GST portal | Form GST RFD-11 for LUT filing, Form GST RFD-01 for refund claims, return filing including GSTR-1 and GSTR-3B | Primary, Government of India |
| CBIC | CGST Rules including Rule 89, 96 and 96A and circulars on export refund procedure | Primary, Government of India |
| ICEGATE | Shipping bill and EGM data matched against GSTR-1 and GSTR-3B for automatic Rule 96 refund processing | Primary, Government of India |
| Rule 96 versus Rule 89 comparison | Refund timelines and common mismatch causes under both routes | Secondary, professional summary |
| GST export refund procedural guide | RFD-01 to RFD-06 workflow, the 60 day interest trigger and the two year Section 54 limitation | Secondary, professional summary |
| LUT and deemed export treatment guide | Section 16 IGST Act zero rating scope and deemed export exclusion | Secondary, professional summary |
Last verified 12 August 2026 by Rasp International. GST procedure and rules are amended periodically, verify current filing requirements on the GST portal before relying on any specific timeline.
Related reading
- Duty Drawback for Indian exporters
- RoDTEP scheme explained
- Current RoDTEP rates for 2026
- Importer Exporter Code
- AD Code and incentive bank account registration
- TRACE certification cost reimbursement
From the shop
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