GST on exports and the letter of undertaking (LUT)
Updated 11 October 2026
Exports of goods and services are "zero-rated" under GST: no tax is finally collected on them, and the exporter keeps the credit for GST paid on inputs. A registered exporter can either export under a letter of undertaking (LUT) without paying IGST and claim a refund of unused credit, or pay IGST on the export and claim that IGST back. Most small exporters use the LUT route.
Zero-rated is not the same as exempt
An exempt supply carries no GST, and the supplier loses the credit on its inputs. A zero-rated supply also carries no GST, but the supplier keeps the credit and can have it refunded. Zero-rated supplies are exports of goods or services, and supplies to units and developers in a Special Economic Zone (SEZ) for their authorised operations. See input tax credit for how credit works.
Two ways to export
| Point | Route 1: under an LUT | Route 2: with IGST paid |
|---|---|---|
| Tax on the export invoice | None | IGST at the normal rate, paid when you export |
| What you claim back | Unused input tax credit | The IGST paid |
| How to claim | Form RFD-01 on the GST portal | Goods: the shipping bill works as the refund claim. Services: Form RFD-01 |
| Cash flow | No tax paid up front | Tax paid first, refunded later |
What counts as an export
For goods, the goods must leave India. For services, all five conditions in the IGST Act must be met:
- the supplier is located in India;
- the recipient is located outside India;
- the place of supply is outside India;
- payment is received in convertible foreign exchange, or in rupees where the RBI permits;
- the supplier and recipient are not merely establishments of the same person, such as an Indian company billing its own foreign branch.
Services whose place of supply is in India, such as a hotel stay or an event held here, are not exports even when the customer is foreign. Since 30 March 2026, intermediary services, such as an agent arranging sales for a foreign principal, follow the recipient's location, after the Finance Act, 2026 removed the old rule that kept them in India. They can now qualify as exports.
How to file an LUT
- Log in to the GST portal and go to Services, User Services, Furnish Letter of Undertaking (Form GST RFD-11).
- Pick the financial year, enter the details of two independent witnesses and accept the declarations.
- Sign with a digital signature or EVC and submit. Keep the acknowledgement (ARN) as proof.
An LUT is valid for one financial year, so a fresh one is needed for each year, ideally before the year's first export invoice. Any registered person can use it, except one prosecuted for tax evasion above ₹2.5 crore, who must give a bond instead. Each export invoice under an LUT must carry a line such as "supply meant for export under letter of undertaking without payment of integrated tax".
Time limits under an LUT
- Goods must be exported within three months of the invoice date.
- Services: payment must be received within one year of the invoice date.
If a deadline is missed, the exporter must pay the IGST with 18% interest within 15 days after it. Until that is paid, the facility to export under the LUT is treated as withdrawn.
Getting the refund
Under Route 1, claim the unused credit on Form RFD-01 within two years of the relevant date (broadly, the date the goods leave India or, for services, the date payment is received). Since October 2025, refund claims for zero-rated supplies are screened by a system risk score, and low-risk claims can get 90% sanctioned provisionally. Under Route 2 for goods, the shipping bill is treated as the refund application once your GSTR-1 and GSTR-3B are filed, and the IGST is refunded to your bank account. For services, keep the bank's proof of foreign payment for each invoice. Returns are explained in GST returns.
SEZ supplies, deemed exports and merchant exporters
- Supplies to SEZ units and developers are zero-rated and can be made under an LUT, like exports.
- Deemed exports, such as supplies to export-oriented units or against an advance authorisation, are not zero-rated: GST is charged, and the supplier or the recipient claims a refund.
- Merchant exporters can buy goods from domestic suppliers at a concessional 0.1% GST if they export them within 90 days, subject to conditions.
Route 1, under an LUT: no IGST on the export. The ₹1,20,000 credit is unused, so the exporter claims a refund of ₹1,20,000 on RFD-01. Net tax: nil.
Route 2, IGST paid: IGST is 18% of ₹10,00,000 = ₹1,80,000. The exporter uses the ₹1,20,000 credit and pays ₹60,000 in cash, then receives the full ₹1,80,000 back through the shipping bill. Net tax: nil, but ₹60,000 of cash was tied up until the refund arrived.
Changes recommended in October 2026
At its 57th meeting on 8 October 2026, the GST Council recommended treating services supplied to a company's own foreign branch or office as exports, fully system-based refunds for zero-rated supplies, and removing the cap that limits refunds on certain goods exports. These need changes to the law or rules and apply only once notified. The GST calculator can work out the IGST on an export invoice.