Exports are zero-rated under GST. India does not want to export its taxes, so an exporter can either supply without paying IGST, or pay IGST and claim it back. The first route, under a Letter of Undertaking (LUT), keeps cash free and is the one most small and mid-sized exporters use.
01The two routes
| Route | How it works | Cash effect |
|---|---|---|
| Export under LUT | No IGST on the export invoice. Claim a refund of the input tax credit you could not use. | No tax paid on exports |
| Export on payment of IGST | Charge and pay IGST on the export, then claim a refund of that IGST | Tax paid first, refunded later |
Both routes also apply to supplies to SEZ units and developers for their authorised operations.
02Who can use an LUT
Any registered person can export under LUT, except someone prosecuted for tax evasion of more than ₹2.5 crore under the GST law or the earlier laws. Those cases use a bond with a bank guarantee instead.
03Filing the LUT
- Log in to the GST portal and open Services, User Services, Furnish Letter of Undertaking (LUT).
- Choose the financial year.
- Confirm the declarations and give two witnesses' names and addresses.
- Sign with a digital signature or EVC.
The portal issues an acknowledgement at once. The LUT covers every export in that financial year. File it before the first export of the year: a Jaipur exporter planning shipments in April 2027 should file the 2027-28 LUT in March 2027.
04The export invoice
An export invoice under LUT follows Rule 46, with additions:
- The endorsement "SUPPLY MEANT FOR EXPORT/SUPPLY TO SEZ UNIT OR SEZ DEVELOPER FOR AUTHORISED OPERATIONS UNDER LETTER OF UNDERTAKING WITHOUT PAYMENT OF INTEGRATED TAX".
- The buyer's name and address, the delivery address and the country of destination.
- No IGST charged.
- The amount in foreign currency, if you invoice in it, with the rupee value.
In GSTR-1, export invoices go in the exports table with the place of supply shown as 96, other countries.
05Time limits you must watch
| Export | Condition | If missed |
|---|---|---|
| Goods | Exported within 3 months of the invoice date, or a longer period the department allows | Pay IGST with interest within 15 days |
| Services | Payment received in convertible foreign exchange, or in rupees where RBI permits, within 1 year of the invoice, or a longer period allowed | Pay IGST with interest within 15 days |
Interest is 18% a year. If the goods are later exported or the money later arrives, the IGST paid can be claimed back.
06When a service counts as an export
Section 2(6) of the IGST Act lists five conditions, all of which must be met:
- The supplier is in India.
- The recipient is outside India.
- The place of supply is outside India.
- Payment is received in convertible foreign exchange, or in rupees where RBI permits.
- The supplier and recipient are not merely establishments of the same person.
A Pune software firm building an app for a London company meets all five. A Pune firm doing data entry for the Indian branch of a London company does not, because the recipient is in India.
The place of supply guide covers the cases, such as work on goods physically in India, where the place of supply stays in India.
07Worked examples
Goods
A Jaipur block-print exporter ships fabric and garments to a New York buyer. Invoice value: USD 12,000, entered at ₹10,08,000. Under LUT, no IGST is charged. Goods leave within three weeks of the invoice, well inside the three-month limit.
The exporter paid ₹72,000 of GST on fabric, dyes and job work during the quarter, and has little domestic sale to use it against. It claims the unused credit as a refund.
Services
An Ahmedabad design studio bills a Dubai client AED 30,000 for a brand identity. Under LUT, no IGST. The client pays in two parts: half in 20 days and half after 8 months. Both arrive within one year of the invoice, so nothing further is due.
08Claiming a refund of credit
Refunds of unused credit on exports under LUT are claimed in Form RFD-01 on the portal, within two years of the relevant date: the date the goods leave India, or the date payment is received for services.
The amount is worked out by a formula in rule 89(4): your net input tax credit for the period, multiplied by the share of zero-rated turnover in your adjusted total turnover. Export invoices, shipping bills or bank realisation certificates and a statement of invoices go with the claim.
Exporters who pay IGST on goods exports get the refund through the shipping bill, which is treated as the refund application once GSTR-1 and GSTR-3B are filed and match.
09Common mistakes
- No LUT on file for the new year when the first April invoice goes out.
- Charging IGST on an export invoice by habit and then claiming the refund route without meaning to.
- Leaving out the endorsement on the invoice.
- Losing track of payment timelines for services, especially on retainers.
- Treating supplies to a foreign company's Indian office as exports.
10Records to keep
Keep the LUT acknowledgement, export invoices, shipping bills, bank realisation certificates or foreign inward remittance certificates, and the refund workings. Refund officers ask for these first.
This guide is general information as of October 2026 and does not amount to tax advice.
MatruOS makes export invoices in foreign currency, with place of supply 96 and a prompt for your LUT.