Exporting without a GST LUT — paying IGST and claiming it back
An LUT isn't mandatory to export — it's simply the faster of two options. Without one, you pay IGST on your export invoice at the applicable rate, then file a separate refund application in Form RFD-01 to get that tax back. This is entirely legal, but it ties up working capital for as long as the refund takes to process, unlike an LUT which avoids the outflow in the first place.
How the pay-and-refund route works
You charge IGST on the export invoice as you would on a domestic sale, deposit it with your regular GST liability, and then file Form RFD-01 on the GST portal, backed by your shipping bill or export documentation, to claim the amount back. Even exporters who do file an LUT still deal with RFD-01 for a different reason — claiming back accumulated input tax credit on their exports, which an LUT doesn't eliminate.
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Check my eligibility →Why most exporters prefer LUT instead
The core trade-off is cash flow: an LUT means the IGST never leaves your account, while the refund route means it's locked up — sometimes for weeks, sometimes longer if the refund claim faces queries — before it comes back. For any business exporting regularly, that difference compounds invoice after invoice.
When paying and claiming a refund might still make sense
Rare edge cases — such as an exporter who is disqualified from LUT under the ₹2.5 crore prosecution rule, or a genuinely one-off export shipment where filing an LUT feels like unnecessary overhead — are really the only scenarios where this route gets chosen deliberately. For everyone else, filing an LUT upfront is the simpler path.
Is it illegal to export without an LUT?
No. Paying IGST upfront and claiming a refund is a fully legal alternative to filing an LUT — it's simply slower and ties up cash that an LUT would have let you keep.
This article is for general information only. For your specific situation, consult a practicing CA.
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