Exports are treated as zero rated supplies under GST law. This means exporters are not required to bear the burden of tax. They are eligible to claim refund of tax paid or unutilized Input Tax Credit.
This article explains the export refund provisions under GST, applicable sections, procedure, documents required, and practical examples for better understanding.
Legal Provision for Export Refund
Refund for exports is governed by:
Section 16 of the Integrated Goods and Services Tax Act 2017
Section 54 of the Central Goods and Services Tax Act 2017
Exports are treated as zero rated supply, meaning:
Exporter can supply goods or services without payment of tax under LUT and claim refund of unutilized ITC
OR
Exporter can supply goods or services with payment of IGST and claim refund of IGST paid
Two Methods of Claiming GST Refund on Exports
1 Export With Payment of IGST
Exporter pays IGST while filing GSTR 3B and claims refund of IGST paid.
In case of export of goods, refund is processed automatically based on shipping bill and GSTR 1 data.
In case of export of services, refund must be applied through Form GST RFD 01.
2 Export Without Payment of Tax Under LUT
Exporter furnishes Letter of Undertaking and exports without paying IGST.
Refund can be claimed for unutilized Input Tax Credit through Form GST RFD 01.
Time Limit for Claiming Export Refund
Refund application must be filed within two years from the relevant date.
For export of goods
Relevant date is date of shipment or date of export manifest.
For export of services
Relevant date is date of receipt of foreign exchange or date of invoice, as applicable.
Procedure for GST Refund on Export of Goods With Payment of IGST
Step 1
File GSTR 1 with correct export invoice details.
Step 2
File GSTR 3B and pay IGST.
Step 3
Ensure shipping bill details match GST returns.
Step 4
Refund is processed automatically by Customs and credited to bank account.
Important condition
GSTR 3B and GSTR 1 must be properly filed and data must match with ICEGATE portal.
Procedure for Refund of Unutilized ITC Under LUT
Step 1
File LUT before export.
Step 2
Export goods or services without charging IGST.
Step 3
File Form GST RFD 01 on GST portal.
Step 4
Upload statement of export invoices and supporting documents.
Step 5
Submit application and generate ARN.
Refund is processed by GST officer within sixty days.
Documents Required for Export Refund
Copy of LUT
Export invoices
Shipping bills in case of goods
BRC or FIRC in case of services
Statement of invoices
Undertaking regarding unjust enrichment
CA certificate if refund exceeds prescribed limit
Example 1 Export of Goods With Payment of IGST
ABC Traders exports goods worth 10,00,000 rupees.
IGST applicable is 18 percent.
IGST paid equals 1,80,000 rupees.
ABC files GSTR 1 and GSTR 3B correctly.
Shipping bill matches GST data.
Refund of 1,80,000 rupees will be automatically credited to ABC Traders bank account after validation.
Example 2 Export of Services Under LUT
XYZ Solutions provides software services to a US client.
Invoice value is 5,00,000 rupees.
No GST charged under LUT.
Input Tax Credit available on expenses equals 75,000 rupees.
XYZ can apply for refund of 75,000 rupees as unutilized ITC through Form GST RFD 01 after receiving foreign currency.
Common Reasons for Export Refund Rejection
Mismatch between shipping bill and GSTR 1
Incorrect invoice details
Non filing of GSTR 3B
Non receipt of foreign exchange in case of services
Incorrect LUT filing
Important Practical Points
Ensure invoice number and date in shipping bill exactly match GST return.
Reconcile export turnover with books and returns.
Track refund status using ARN.
Maintain proper documentation for departmental verification.
Conclusion
GST law provides a clear refund mechanism for exporters to ensure zero tax burden. Exporters can either claim refund of IGST paid or refund of unutilized Input Tax Credit under LUT. Proper compliance with return filing, documentation, and reconciliation is essential for smooth and timely refund processing.
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