Export of Goods & Services Under GST: Zero-Rated Supplies, LUT & Deemed Exports

Understand export of goods and services under gst, zero-rated supplies, ITC refunds, LUT requirements & compliance for seamless global trade.

The export of goods under GST and the export of services under GST are significant aspects of India’s tax system, ensuring that exports remain competitive in global markets. Under the GST framework, exports under GST are considered as “zero-rated supplies”, meaning no GST is levied on exported goods or services. This provides relief to exporters by allowing them to either claim a refund on input tax credit (ITC) or opt for exports without payment of GST under a Letter of Undertaking (LUT).

For service providers, GST on export of services follows specific conditions. The supplier must be located in India, the recipient must be outside India, and the payment should be received in convertible foreign exchange or INR as permitted by the RBI. Additionally, the transaction must not be between two establishments of the same entity.

Similarly, businesses involved in the export of goods under GST can export either with IGST payment (claiming a refund later) or without GST under LUT. The zero-rated nature of exports ensures that Indian exporters remain tax-efficient, preventing double taxation and encouraging global trade. Understanding GST provisions for exporters is essential for compliance and maximizing tax benefits.

Export of Goods and Services Under GST

Under GST, exports refer to the supply of export goods or export services from India to a foreign country. Exports under GST are treated as zero-rated supplies, meaning no GST is levied, and exporters can claim input tax credit (ITC) refunds or export without tax under a Letter of Undertaking (LUT).

• Features of Export Under GST Scheme

The Export Under GST Scheme provides several benefits to exporters, ensuring tax efficiency and compliance. Below are some key features that distinguish exports from domestic supplies when it comes to GST.

1. Zero-Rated Supplies: Under GST, the export of goods and services from India is treated as a zero-rated supply, meaning no GST is levied on the transaction. This helps exporters remain competitive in international markets.
2. Tax Exemptions and Refunds: Exporters can either pay Integrated Goods and Services Tax (IGST) at the time of export and later claim a refund, or export without tax under a Letter of Undertaking (LUT) or Bond.
3. Treatment of Exports vs. Domestic Supplies: Unlike domestic sales, where GST is applicable, exports are exempt from tax payments. This ensures that the burden of indirect taxes does not fall on international buyers.
4. LUT and Bond Requirements: Exporters opting for tax-free exports must submit an LUT or Bond to the GST department, ensuring compliance with export regulations.
5. Payment and Refund Mechanism: Exporters choosing to pay IGST on exports can claim a refund by filing the required documents in the GST portal. This provides liquidity and financial relief.

Overall, GST simplifies export taxation, offering flexibility through IGST refunds and LUT/Bond exemptions, making Indian exports globally competitive while ensuring compliance with tax regulations.

• Place of Supply in Case of Export of Goods and Services

When goods are imported into India, the location of the importer is considered as the place of supply. When goods are exported from India, the place of supply will be the delivery location that’s outside India

Under GST law, determining the place of supply is crucial for taxing cross-border transactions. The place of supply rules help identify whether a transaction qualifies as an export and ensure compliance with GST regulations in India.

• Place of Supply for Export of Goods

For the export of goods, the place of supply is the delivery location where the goods are shipped. As per GST law, if goods are sent from India to an importer in another country, the place of supply is the recipient’s country. This classification allows exports to be treated as zero-rated supplies, exempting them from GST while allowing input tax credit (ITC) refunds.

• Place of Supply for Export of Services

For services, the place of supply depends on the recipient’s location. Under GST law, a service qualifies as an export if:

1. The supplier is in India and the recipient is outside India.
2. The place of supply is outside India.
3. The payment is received in foreign exchange or INR as per RBI guidelines.
4. The transaction is between distinct entities, not branches of the same company.

Accurate determination of the place of supply ensures proper tax treatment of exports and compliance with GST laws in India.

Types of Exports Under GST

Zero-Rated Supplies

Under GST, Zero Rated Supplies refer to the supply of goods or services that are taxed at Zero percent. This applies to exports and supplies made to Special Economic Zones (SEZ), ensuring that such transactions remain tax-free. Unlike exempt supplies, where ITC cannot be claimed, zero-rated supplies allow exporters to claim input tax credit (ITC) on taxes paid on inputs and services.

• Benefits for Exporters

1. Exports Without Payment of Tax: Exporters can supply goods or services without paying GST by filing a Letter of Undertaking (LUT). This helps maintain cash flow.
2. Claiming ITC Refund: Since exports are zero-rated, exporters can claim a refund on accumulated input tax credit (ITC) used in production.
3. IGST Refund Option: Alternatively, exporters can pay Integrated GST (IGST) at the time of export and later claim an IGST refund after the export is completed. This method is faster and preferred by many exporters.
4. SEZ Benefits: Supplies made to SEZ units are also treated as Zero Rated Supplies, ensuring no tax burden on SEZ units or their suppliers.

• Refund Mechanism

To claim refunds, a dealer must file the appropriate refund application on the GST portal. For IGST refund, exporters must file a shipping bill and GST return (GSTR-1 & GSTR-3B). For ITC refund, exporters must apply separately for unutilized credit. This system ensures smooth supply of goods and services to international markets without additional tax costs.

Deemed Exports Under GST

Under the CGST/SGST Act, deemed exports refer to certain supplies of goods within India that are treated as exports for tax benefits. Unlike regular exports, where goods or services are sent outside India, deemed exports occur domestically but qualify for tax refunds. These include supplies to Export Oriented Units (EOUs) and certain government-notified transactions.

• Key Features of Deemed Exports

1. GST Payment Requirement – Unlike zero-rated exports, deemed exports are subject to GST at the time of supply. However, suppliers or recipients can later claim refund eligibility on the tax paid.
2. No Foreign Exchange Requirement – Unlike standard exports, payment for deemed exports is received in Indian currency rather than foreign exchange.
3. Limited to Goods – Deemed exports apply only to goods, not services.

Difference Between Deemed Exports and Zero-Rated Exports

• Zero-rated exports (under Section 16 of the IGST Act) include actual exports and supplies to Special Economic Zones (SEZs), where GST is not levied. Exporters can either pay IGST and claim a refund or export without GST under an LUT.
• Deemed exports (under Section 147 of the CGST/SGST Act) require GST payment upfront, with later refund eligibility.

Deemed exports provide tax relief for domestic suppliers supporting India’s export industry, ensuring that Indian manufacturers benefit from tax refunds while strengthening the economy.

GST on Export of Goods and Services: How Is It Levied?

Under GST, the export of goods and services is treated as zero-rated supplies, meaning no tax is levied. Exporters can choose:

1. Export with Payment of IGST – Pay Integrated GST (IGST) and later claim a refund.
2. Export without Payment of Tax – Submit a Letter of Undertaking (LUT) and claim a refund on input tax credit (ITC).

Unlike domestic supplies, exports are tax-free to maintain global competitiveness. Supplies to Special Economic Zones (SEZs) also qualify for zero-rating, ensuring businesses benefit from tax refunds and seamless compliance under GST regulations.

• Export of Goods

Exporters of goods can choose between two methods:

1. Export with Payment of IGST – The exporter pays IGST at the time of export and later claims a refund after customs clearance and submission of required documents. This method ensures faster refunds.
2. Export Under Bond/LUT Without Paying GST – Instead of paying IGST, exporters can furnish a Letter of Undertaking (LUT) to export goods without tax. This option improves cash flow by eliminating upfront tax payments.

Procedure for Export Under LUT

• The exporter must submit an LUT online on the GST portal before making tax-free exports.
• The shipping bill and other documents must be filed for customs clearance.
• The exporter can claim a refund of unutilized input tax credit (ITC) used for procuring goods and services for export.

Exports are exempt from GST, ensuring competitiveness in international markets. Compliance with these rules helps exporters optimize tax benefits and maintain smooth operations under GST regulations.

Export of Services

Under GST, export services are treated as zero-rated supplies, meaning no GST is levied. Exporters can either pay IGST and claim a refund or export under a Letter of Undertaking (LUT) without paying tax.

Criteria for Zero-Rating

A service qualifies as an export service if:

1. The supplier is in India.
2. The recipient is outside India.
3. The service is provided outside India.
4. Payment is received in convertible foreign exchange or INR as per RBI regulations.
5. The transaction is between two distinct entities and not different branches of the same company.

Special Scenarios

• Intermediary Services: GST applies if an Indian intermediary facilitates a transaction between two foreign parties. Such services are not considered exports and are taxed under the reverse charge mechanism.
• Online Services: Cross-border digital services, such as software or streaming services provided to overseas customers, qualify as exports if they meet zero-rating criteria.
• BPO and IT Services: Business process outsourcing (BPO) and IT services provided to foreign clients are zero-rated, ensuring input tax credit (ITC) refunds.

Proper classification of export services ensures compliance and enables businesses to benefit from tax refunds and exemptions under GST regulations.

GST Refund Process for Exporters

Under GST, exporters are eligible for a refund on taxes paid for exported goods and services, ensuring smooth trade and liquidity. Since exports are treated as zero-rated supplies, businesses can claim refunds either on Integrated GST (IGST) paid at the time of export or on unutilized input tax credit (ITC) when exporting under a Letter of Undertaking (LUT) without paying tax. The refund process involves filing relevant forms on the GST portal, verifying shipping bills with customs clearance, and ensuring compliance with documentation requirements. A seamless GST refund process helps exporters maintain cash flow and global competitiveness.

• Eligibility for GST Refund

Exporters can claim GST refunds under two categories: IGST refund and ITC refund, both applicable to zero-rated supplies. To qualify, exporters must meet the following eligibility criteria:

1. Export of Goods or Services: The supply must be classified as an export under GST laws.
2. Zero-Rated Supplies: The goods or services must qualify as zero-rated supplies under GST.
3. Proper Documentation: Exporters must file returns (GSTR-1, GSTR-3B), provide shipping bills, and ensure customs clearance.
4. Payment in Convertible Foreign Exchange: Export proceeds should be received in convertible foreign exchange or INR as per RBI guidelines.

Difference Between ITC and IGST Refunds

1. IGST Refund:
   • Exporters pay IGST on their exports and later claim a refund.
   • The refund is processed automatically after shipping bill validation by customs.
   • Faster refund process with minimal paperwork.
2. ITC Refund:
   • Applies when exporters choose to export under a Letter of Undertaking (LUT) without paying tax.
   • Refund is claimed on unutilized input tax credit (ITC) for inputs and services used in exports.
   • Requires a separate application on the GST portal.

Choosing the right refund method ensures cash flow efficiency for exporters while complying with GST regulations.

• Filing a Refund Application

Exporters can claim a refund for zero-rated supplies through the GST portal by following these steps:

1. Login to GST Portal: Visit www.gst.gov.in and log in using credentials.
2. Navigate to Refund Section
   • Click on ‘Services’ → ‘Refunds’ → ‘Application for Refund’.
3. Select the Refund Type
   • Choose the applicable refund category:
     • Refund of IGST (for exports with tax payment).
     • Refund of ITC (for exports under LUT).
4. Fill in the Required Forms: Complete Form RFD-01 with details of the tax period, export invoices, and shipping bills.
5. Upload Supporting Documents: Attach necessary documents, including export invoices, shipping bills, FIRC/BRC (foreign exchange receipts), and LUT (if applicable).
6. Submit Application and ARN Generation: Submit the GST refund application, after which an Acknowledgement Reference Number (ARN) is generated.
7. Processing and Approval: The GST officer verifies details. ITC refunds require additional scrutiny, while IGST refunds are auto-processed via customs validation.
8. Refund Disbursement: Once approved, the refund amount is credited to the exporter’s bank account.

A properly filed GST refund application ensures faster processing and compliance with GST norms.

• Documents Required for Refund Application

To ensure a smooth GST refund process, exporters must submit the following accurate documentation to avoid delays:

• Export Invoice – A copy of the invoice issued for exported goods or services.
• Shipping Bill – Proof of goods being exported, verified by customs authorities.
• Proof of Export – Documents such as Bill of Lading (BOL) or Airway Bill (AWB) to confirm shipment.
• Foreign Inward Remittance Certificate (FIRC)/Bank Realization Certificate (BRC) – Proof of payment received in convertible foreign exchange or permitted INR.
• GST Returns (GSTR-1 and GSTR-3B) – Filed returns confirming export transactions.
• Letter of Undertaking (LUT) – Required if exporting without paying IGST.
• Tax Payment Proof – If claiming an IGST refund, proof of IGST payment on exports.
• Input Tax Credit (ITC) Statement – If claiming an ITC refund, details of unutilized credit.

Accurate documentation is crucial for quick refund processing and compliance with GST rules. Any mismatch or missing documents can lead to delays or rejection of the refund application.

• Timeframe and Challenges in GST Refunds

The refund timeline for GST refunds depends on proper application submission and verification. After submitting Form RFD-01, the process includes:

1. Acknowledgement (RFD-02) – Issued within 15 days if the application is complete.
2. Processing Time:
   • IGST Refund on Exports – Generally credited within 7 days after customs clearance.
   • ITC Refund for Exports (Without IGST Payment) – Processed within 60 days from the application date.
3. Interest on Delay – If refunds are not processed within 60 days, an interest of 6% per annum is payable.

Common Processing Issues and Solutions

• Compliance Errors: Mismatch in GSTR-1, GSTR-3B, or shipping bill details may delay the refund. Ensure accuracy before filing.
• Incomplete Documentation: Missing export invoices, proof of export, or LUT can lead to rejection. Verify all required documents before submission.
• Banking Issues: Incorrect bank details in the GST portal may hold up the refund amount. Update bank details in the application before filing.
• Manual Verification Delays: Some cases require officer verification. Regular follow-ups and resubmitting additional aspects of the refund claim can speed up the process.

By ensuring proper documentation and compliance, exporters can minimize delays and receive timely refunds under GST.

Mandatory GST E-Invoicing for Exporters

E-invoicing is a crucial requirement under GST compliance for businesses, including exporters. It mandates the generation of electronic invoices for B2B invoices and exports through the Invoice Registration Portal (IRP). This system helps standardize invoice formats and ensures seamless reporting to the GST portal.

Requirements for E-Invoicing

1. Mandatory for Eligible Businesses – Businesses with an annual turnover above the prescribed limit must generate e-invoices for exports.
2. Invoice Format Standardization – Export invoices must follow the prescribed format, ensuring consistency across the GSTN (Goods and Services Tax Network).
3. QR Code Mandate – The IRP assigns a unique QR code and an identification number (IRN) to each invoice, ensuring authenticity.
4. Real-Time Validation – Once an invoice is uploaded on the IRP, it gets validated and registered with a unique IRN, reducing fraud and duplication.

E-invoicing is a game-changer for exporters, ensuring accurate tax reporting, faster refunds, and smoother GST compliance in international trade.

Conclusion About GST on Exporters

GST has significantly streamlined the taxation system for exporters by providing benefits such as zero-rating, tax refunds, and simplified compliance. Under GST, exports are considered zero-rated supplies, meaning exporters can either export without paying tax under a Letter of Undertaking (LUT) or pay IGST and claim a refund. This mechanism ensures that taxes do not burden export businesses, making Indian goods and services more competitive in global markets.

One of the key advantages of GST for exporters is the refund system, which allows businesses to claim unused Input Tax Credit (ITC) or IGST refunds on paid taxes. However, timely compliance is crucial to ensure smooth refund processing. Exporters must maintain accurate documentation, including export invoices, shipping bills, and proof of foreign exchange receipts, to avoid processing delays or rejections.

Additionally, exporters dealing through e-commerce platforms must comply with GST registration, e-invoicing mandates, and customs reporting for seamless cross-border trade. Failure to adhere to these regulations may lead to penalties or delays in refund claims.a

Given the dynamic nature of GST laws, exporters should stay updated on policy changes, refund procedures, and compliance requirements to maximize benefits. Consulting tax professionals or referring to the GST portal regularly can help exporters remain compliant and leverage the full benefits of the zero-rated export system under GST. Proper compliance ensures smooth operations, quicker refunds, and a competitive edge in international trade.

FAQs on GST for Exporters

What are the conditions for services to qualify as export under GST?

For services to qualify as exports under GST, they must meet these conditions: The supplier must be in India. The recipient must be outside India. The service must be provided outside India. Payment must be received in convertible foreign currency or permitted INR. The transaction must be between distinct entities.

Is GST registration mandatory for small exporters?

GST registration is mandatory for exporters, regardless of turnover, as exports are zero-rated supplies. However, small exporters with turnover below ₹40 lakhs (goods) or ₹20 lakhs (services) may register voluntarily to claim ITC refunds. Exemptions apply only if they operate under specific government schemes or thresholds.

How is the place of supply determined for export services?

The place of supply for export services under GST is determined by Section 13 of the IGST Act. Generally, it is the location of the recipient if they are outside India. However, exceptions apply to services like intermediary services, transportation, and performance-based services, where specific place of supply rules apply.

What is the difference between zero-rated supplies and deemed exports?

Zero-rated supplies include exports and supplies to SEZs, allowing input tax credit (ITC) refunds. Deemed exports involve domestic supply of goods where tax is paid, but the recipient can claim a refund. The key difference is that zero-rated supplies are tax-free, while deemed exports require tax payment with refund eligibility.

Can an exporter claim a refund for unused input tax credit?

Yes, an exporter can claim a refund for unused Input Tax Credit (ITC) when exporting under a Letter of Undertaking (LUT) without paying IGST. The refund is claimed by filing Form RFD-01 on the GST portal, ensuring proper documentation like export invoices, shipping bills, and ITC statements.

Are SEZ units considered exports under GST?

Yes, supplies to SEZ units are treated as zero-rated supplies under GST, similar to exports. SEZ units enjoy tax-free procurement, and suppliers can claim ITC refunds. While supplies to SEZs are tax-free, sales from SEZs to the domestic market (DTA) are treated as regular taxable supplies.

How does GST apply to e-commerce exports?

GST on e-commerce exports applies as zero-rated supplies, meaning exporters can export without paying GST under a Letter of Undertaking (LUT) or pay IGST and claim a refund. Compliance includes GST registration, e-invoicing, shipping bill declaration, and foreign exchange payment proof for eligibility under export rules.