Exporting from India is exciting, but high tax costs can erode your margins. Fortunately, GST offers zero-rated and exempt routes that help mitigate these costs. This guide explains how you can maximize the benefits of available GST in 2025 while remaining compliant by understanding GST Exemptions.
What Does GST Exemption Mean for Exporters?
Exports under GST are categorised as zero-rated supplies. That means:
- You either apply a zero tax rate, or
- You pay IGST, then apply for a refund.
Both these routes avoid being burdened by GST on your goods or services, but they involve different paperwork and timelines.
Key GST Exemptions for Exporters
Export Without Paying IGST — Furnish an LUT
A Letter of Undertaking (LUT) lets you export without paying IGST upfront. You simply declare your intent to comply with export rules. Once you’ve submitted it, you can export freely all year. You’ll still claim refunds on input tax credits.
Export Paying IGST, Then Claim Refund
If you choose—or are required—to pay IGST during export, you can claim it back. Customs and GST departments coordinate using your shipping bill details. Refunds typically arrive within about 7–15 days, provided there are no discrepancies.
Supplies to SEZ Units or Developers
Shipments to SEZs are treated as zero-rated. You can either skip tax with an LUT or pay IGST and get it refunded, just like regular exports.
Deemed Exports
These are domestic transactions treated as exports, like supplies to EOUs or government-funded projects. While not physical exports, these are eligible for similar GST refunds.
How to Arrange and Use an LUT
- Who can apply? Any exporter with no severe pending tax cases and a clean compliance record.
- How?
- Log in to the GST portal.
- Go to Services → User Services → Furnish LUT.
- Fill RFD-11 and apply with a DSC/EVC.
- Submit your application annually by 31 March each year.
- Validity and Renewal: Valid for one financial year and must be renewed annually.
Claiming IGST Refund (for Paid IGST)
Here’s how it usually works:
- File GSTR-1, including your export details in Table 6A.
- File GSTR-3B, declaring IGST and zero-rated supplies.
- Fill out your shipping bill on ICEGATE.
- Customs auto-matches your shipping bill and GST filings.
- Refunds are processed—some exporters report it within 7–10 days, although some timelines indicate it will take up to 15 days.
If publication is delayed past 60 days, the government pays 6% interest from the 61st day onward.
Documents You Should Keep Ready
Document | Purpose |
Export Invoice | GSTIN, invoice number, consignor details |
Shipping Bill / Export Manifest (EGM) | Customs and refund matching |
LUT/Bond copy | If exporting without paying IGST |
Bank Realisation Certificate (BRC)/FIRC | Proof of foreign exchange receipt |
GSTR‑1, GSTR‑3B and RFD‑01 (if needed) | Filing and refund records |
These documents ensure smooth processing on both the GST portal and ICEGATE.
Special Considerations for SEZ Supplies
Supplies to SEZ units are zero-rated too. You need:
- A proper LUT before supply, or payment of IGST and subsequent refund,
- SEZ endorsement confirming receipt for authorized operations.
This makes these exports functionally equivalent to other zero-rated shipments.
Watch Out: Common Errors and How to Avoid Them
- Missing LUT or late renewal → IGST paid unnecessarily.
- Mismatch in GSTR vs. shipping bill → Refund delays.
- Incorrect invoice/shipping bill details → stingy with data accuracy.
- Wrong tax route → Plan based on your cash flow.
Tips to Maximise Benefits
- Generally, use LUT to avoid a cash crunch.
- Keep your data organised and reconciled—ports, dates, invoice numbers.
- Monitor filing deadlines—especially for LUT (31 March) and GSTRs.
- Monitor your refund status regularly and address any discrepancies promptly.
- Consider using a tax consultant if export volumes increase substantially.
GST exemptions exist to make Indian exporters competitive on the global stage. A well-managed LUT, careful claim of IGST refunds, and clean documentation can save you time, money, and unnecessary stress.
If your export operations are scaling up, it’s a good idea to invest in professional GST advice to ensure compliance and optimize benefits, all in line with the evolving rules.
FAQs
Q: Do I need to file an LUT every year?
Yes. LUT is valid for one financial year and should be submitted before 31 March following the export year
Q: How quickly are IGST refunds processed?
In most cases, refunds are issued within 7–15 days of filing; however, expect a processing time of up to 60 days if an audit is required. Interest applies after day 61.
Q: What happens if I supply to SEZ without LUT?
You must pay IGST and claim a refund later. With LUT, you skip the IGST payment on supply directly.
Q: Can I export services without registering under GST?
No. For both goods and services, you must have GST registration to claim zero-rating.
Q: What if I miss the 2-year deadline for refund claims?
Your refund claim becomes invalid under Section 54 of the CGST Act—you lose your right.
