{"id":14059,"date":"2026-05-27T07:37:09","date_gmt":"2026-05-27T07:37:09","guid":{"rendered":"https:\/\/lemonn.co.in\/blog\/glossary\/gst-on-export\/"},"modified":"2026-05-27T07:37:09","modified_gmt":"2026-05-27T07:37:09","slug":"gst-on-export","status":"publish","type":"glossary","link":"https:\/\/lemonn.co.in\/blog\/glossary\/gst-on-export\/","title":{"rendered":"GST on Exports: Zero-Rating, LUT, and Refund Process"},"content":{"rendered":"

Exports of goods and services from India are treated as zero-rated supplies under GST<\/a>. This means that GST is effectively not charged on exports, making Indian goods and services competitive in international markets. However, the zero-rating mechanism involves specific procedures and options that every exporter must understand.<\/p>\n

What Does Zero-Rated Supply Mean?<\/h2>\n

A zero-rated supply is a tax<\/a>able supply on which the GST rate is 0%. Unlike exempt supplies, zero-rated supplies still allow the exporter to claim Input Tax Credit on inputs used for making those supplies. This ensures that the tax paid on raw materials and services does not become a cost for the exporter.<\/p>\n

Exports of goods and services to a foreign recipient, and supplies to SEZ units and SEZ developers, are treated as zero-rated supplies under Section 16<\/a> of the IGST<\/a> Act.<\/p>\n

Two Options for Exporting Under GST<\/h2>\n

Exporters have two choices for handling GST on exports:<\/p>\n

**Option 1: Export Under Bond or LUT Without Paying IGST**
\nThe exporter furnishes a Letter of Undertaking (LUT) or a bond to the GST department, undertaking to receive foreign exchange within the specified period. Under this option, no IGST is paid at the time of export. The exporter claims a refund of accumulated ITC on inputs used for those exports.<\/p>\n

This is the preferred option for most exporters as it does not require upfront tax payment.<\/p>\n

**Option 2: Pay IGST and Claim Refund**
\nThe exporter pays IGST at the applicable rate on the export value and then claims a full refund of that IGST. This refund is typically processed automatically by the customs and GST systems for goods exports.<\/p>\n

Letter of Undertaking (LUT)<\/h2>\n

The LUT must be filed on the GST portal (in Form RFD-11) before making exports without IGST payment. It is valid for the entire financial year. Renewal is required each new financial year.<\/p>\n

Any exporter with a clean compliance record (no prosecution under CGST or IGST Act for amounts above Rs. 2.5 crore) can file an LUT.<\/p>\n

Refund of ITC on Exports<\/h2>\n

For exporters under the LUT option, the refund of unutilised ITC accumulated due to zero-rated exports is claimed via Form GST RFD-01. The refund must be filed within two years from the relevant date (the date of the export shipment for goods, or the date of receipt of foreign currency for services).<\/p>\n

Export of Services<\/h2>\n

For services, the export must meet these conditions to be zero-rated:<\/p>\n

– The supplier is in India.
\n– The recipient is outside India.
\n– The place of supply is outside India.
\n– Payment is received in convertible foreign exchange.
\n– The supplier and recipient are not merely establishments of the same person in different countries.<\/p>\n

Practical Example<\/h2>\n

Sunrise Garments exports Rs. 50 lakhs worth of clothing to the UK in August 2024 under LUT (no IGST paid). The ITC accumulated on fabric, packaging, and other inputs is Rs. 4.5 lakhs. Sunrise files a refund claim (Form RFD-01) and receives the Rs. 4.5 lakhs refund within 60 days.<\/p>\n

Key Takeaways<\/h2>\n

– Exports are zero-rated under GST, meaning no GST is charged on export value.
\n– Exporters can either export under LUT (no IGST, claim ITC refund) or pay IGST and claim refund.
\n– LUT is filed annually on the GST portal before making zero-rated exports.
\n– Refund of ITC on exports is claimed via Form GST RFD-01.
\n– Services exports must receive payment in foreign currency to qualify as zero-rated.
\n– Refund must be claimed within two years from the relevant date.<\/p>\n

Choosing the LUT route avoids working capital blockage from IGST payments. Most regular exporters prefer this option for its cash flow<\/a> benefits.<\/p>\n","protected":false},"excerpt":{"rendered":"

Exports of goods and services from India are treated as zero-rated supplies under GST. This means that GST is effectively not charged on exports, making Indian goods and services competitive in international markets. However, the zero-rating mechanism involves specific procedures and options that every exporter must understand. What Does Zero-Rated Supply Mean? A zero-rated supply […]<\/p>\n","protected":false},"author":3,"featured_media":0,"menu_order":0,"template":"","meta":{"_uag_custom_page_level_css":"","footnotes":""},"class_list":["post-14059","glossary","type-glossary","status-publish","hentry"],"blocksy_meta":[],"uagb_featured_image_src":{"full":false,"thumbnail":false,"medium":false,"medium_large":false,"large":false,"1536x1536":false,"2048x2048":false,"web-stories-poster-portrait":false,"web-stories-publisher-logo":false,"web-stories-thumbnail":false},"uagb_author_info":{"display_name":"Team Lemonn","author_link":"https:\/\/lemonn.co.in\/blog\/author\/ashu\/"},"uagb_comment_info":0,"uagb_excerpt":"Exports of goods and services from India are treated as zero-rated supplies under GST. This means that GST is effectively not charged on exports, making Indian goods and services competitive in international markets. However, the zero-rating mechanism involves specific procedures and options that every exporter must understand. What Does Zero-Rated Supply Mean? A zero-rated supply…","_links":{"self":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/14059","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary"}],"about":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/types\/glossary"}],"author":[{"embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/users\/3"}],"version-history":[{"count":0,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/14059\/revisions"}],"wp:attachment":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/media?parent=14059"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}