GST refund for exporters without payment of tax
Exporters can supply goods or services under a Letter of Undertaking (LUT) without paying IGST at the time of export, then claim a refund of the input tax credit that has accumulated on inputs and input services used to make that export. The refund amount is computed using a prescribed formula based on export turnover, net ITC, and adjusted total turnover, and the claim is filed through RFD-01 on the GST portal.
What exporting "without payment of tax" means
Under GST, every registered exporter has two options for exporting goods or services: pay IGST at the time of export and claim it back as a refund, or furnish a Letter of Undertaking (LUT) and export without paying IGST at all. Most regular exporters prefer the LUT route because it avoids tying up working capital in tax that will only be refunded weeks or months later.
Filing the Letter of Undertaking
An LUT is filed on the GST portal (Form GST RFD-11) at the start of each financial year and is generally valid for that year, provided none of the disqualifying conditions (such as prosecution for tax evasion above a specified threshold) apply. Once accepted, it covers all zero-rated exports made during the year without further filing per shipment. See our step-by-step guide to filing Form RFD-11 and who's eligible for the full walkthrough — Shunya now files LUTs directly, starting at ₹499.
How the accumulated ITC refund works
Since no IGST is charged on the export itself, the input tax credit paid on raw materials, components, and eligible input services used to make that export has nowhere to be offset — it simply accumulates in the electronic credit ledger. GST refund rules allow this accumulated credit to be claimed back through a formula that apportions net ITC to export turnover, subject to the adjusted total turnover for the period.
Shunya's CA team handles GST refund filing end to end — eligibility check, RFD-01 filing, and follow-up until credited.
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The refund is filed as RFD-01 under the category "Refund of ITC on Export of Goods and Services without Payment of Tax," along with a statement of export invoices (Statement 3), shipping bill or bill of export details for goods, or Foreign Inward Remittance Certificates (FIRC)/Bank Realisation Certificates (BRC) for services, along with the LUT reference.
Common pitfalls
A frequent issue is a mismatch between the shipping bill details declared in the refund application and what's reflected in the customs (ICEGATE) system for goods exports — since GST refunds for goods exports are often validated against customs records, discrepancies here can hold up or reject the claim. For service exports, delayed or missing FIRC/BRC documentation is a similarly common cause of delay.
LUT route vs paying IGST and claiming refund
Exporters occasionally still choose to pay IGST and claim a refund instead of using an LUT — this can offer a more automated refund process for goods exports, since it can be processed largely based on shipping bill data. The trade-off is that IGST must be paid upfront, which isn't ideal for cash flow. Most businesses evaluate this choice based on their working capital position and export volume, and it's worth a CA's input if you're transitioning between the two.
Do I need to pay IGST first if I don't want to file an LUT?
No — but if you choose not to file an LUT, exporting under GST law requires either the LUT or payment of IGST at the time of export; there isn't a third option. If you skip the LUT and don't pay IGST, the export would not be correctly documented as a zero-rated supply. Filing the LUT is a one-time, straightforward process each financial year, and most exporters find it more cash-flow-friendly than paying IGST upfront and waiting for a refund.
This article is for general information only. For your specific situation, consult a practicing CA.
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