Exporter GST Refunds: LUT, RFD-01 and the 60-Day Rule

For Indian exporters, GST refunds can have a significant impact on working capital. Delays may occur when refund applications contain incomplete information, export invoices do not reconcile with shipping bills or bank records, a Letter of Undertaking (LUT) is not valid for the relevant period, or figures reported in GST returns do not match the supporting documents.

Understanding the available refund routes, filing procedures, documentation requirements, and applicable timelines can help exporters manage their cash flow and reduce avoidable compliance issues.

This guide explains the two principal approaches to GST treatment for zero-rated exports, how to file an LUT, and the key considerations when claiming refunds.

Two Routes for Zero-Rated Supplies

Section 16 of the Integrated Goods and Services Tax (IGST) Act, 2017, provides the framework for zero-rated supplies, including exports of goods and services. Eligible exporters can generally choose between supplying under a Letter of Undertaking without payment of IGST and claiming a refund of eligible unutilised input tax credit, or supplying on payment of IGST and claiming a refund of the tax paid, subject to the applicable provisions.

Route A: Pay IGST and Claim a Refund

Under this route, the exporter pays IGST on the export supply and subsequently claims a refund in accordance with the applicable GST provisions.

For eligible exports of goods, the shipping bill is treated as the refund application under Rule 96 of the CGST Rules, subject to the prescribed conditions and data requirements. The shipping bill, export general manifest, and relevant GST return information must be properly aligned for the refund to be processed.

For eligible export services, the refund process generally involves filing Form GST RFD-01 through the GST portal, along with the prescribed information and supporting documents.

Advantages:

• The exporter may claim a refund of eligible IGST paid on the export supply.
• Eligible goods-export refunds can be processed through the shipping-bill-based mechanism, subject to compliance with the applicable requirements.

Considerations:

• The exporter must fund the IGST payment before receiving the refund.
• The temporary cash-flow impact can be significant for businesses with substantial export turnover.
• Refund eligibility and processing depend on the applicable rules and verification requirements.

Route B: Export Under LUT and Claim a Refund of Unutilised ITC

Under this route, an eligible registered exporter furnishes a Letter of Undertaking (LUT) in Form GST RFD-11 and makes eligible export supplies without payment of IGST.

Instead of paying IGST on the export invoice, the exporter may claim a refund of eligible unutilised input tax credit (ITC) accumulated on inputs and input services, subject to Section 54 of the CGST Act, the applicable provisions governing zero-rated supplies, and the prescribed refund formula.

The refund application is generally filed using Form GST RFD-01.

Advantages:

• The exporter does not need to pay IGST on eligible export invoices.
• The approach can help preserve working capital, particularly for businesses that export services regularly.
• Eligible unutilised ITC can be recovered through the prescribed refund process.

Considerations:

• The exporter must maintain a valid LUT and comply with its conditions.
• Refund claims require supporting documentation and reconciliation of eligible ITC.
• Refund amounts may be restricted by the applicable formula, eligibility conditions, and other legal provisions.
• Processing time depends on the completeness of the application, verification requirements, and the applicable statutory procedure.

For many service exporters with recurring international billing, exporting under LUT and claiming eligible unutilised ITC can be a practical option. The appropriate route depends on the nature of the exports, the available ITC, cash-flow requirements, and the rules applicable to the transaction.

Filing the Letter of Undertaking (Form GST RFD-11)

An LUT allows an eligible registered person to make qualifying zero-rated supplies without payment of IGST, subject to the prescribed conditions.

The LUT is generally furnished electronically through the GST portal for the relevant financial year.

Steps to File an LUT

1. Log in to the GST portal: Visit the official GST portal at www.gst.gov.in using your registered credentials.
2. Open the LUT service: Navigate to Services, then User Services, and select the option for furnishing a Letter of Undertaking.
3. Select the financial year: Choose the financial year for which the LUT is being furnished.
4. Complete the declaration: Review the prescribed declarations and enter the information requested by the portal. Provide witness details if required by the applicable form or process.
5. Sign and submit: Complete the required authentication using the permitted electronic verification method. Companies and LLPs should follow the applicable digital-signature requirements.
6. Save the acknowledgement: After successful submission, retain the acknowledgement and reference details for your records.

LUT Validity and Renewal

An LUT generally applies to the financial year for which it is furnished. Exporters should submit a fresh LUT for the new financial year before making exports under LUT arrangements in that year.

If an exporter makes an eligible export supply without payment of IGST without having furnished a valid LUT, the exporter should review the applicable provisions and take corrective action as advised by a qualified GST professional. The tax treatment and consequences depend on the circumstances; it should not be assumed that every invoice can automatically be regularised in the same way.

Who Is Eligible to Furnish an LUT?

An eligible registered person making zero-rated supplies may furnish an LUT instead of paying IGST, subject to the applicable conditions.

The relevant provisions restrict LUT eligibility for certain persons who have been prosecuted for an offence under the CGST Act or the IGST Act involving tax evasion exceeding the prescribed threshold. Eligibility should be checked against the current statutory requirements before furnishing the LUT.

Practical tip: Keep the LUT acknowledgement, export invoices, shipping bills where applicable, GST returns, and relevant bank and remittance records organised. Consistent documentation and accurate reconciliation can help reduce avoidable refund queries and support the claim during verification.

Form RFD-01: The GST Refund Application

Form GST RFD-01 is the online application used to claim various GST refunds, including eligible refunds of accumulated input tax credit (ITC) on exports made without payment of IGST. The supporting statements and documents required depend on the type of refund being claimed.

For exporters, accurate invoice reporting, return reconciliation, and supporting documentation are essential to reducing processing delays and avoiding refund queries.

Step-by-Step Guide to Filing Form RFD-01

Step 1: Determine the Refund Period

Identify the tax period or successive tax periods for which you intend to claim a refund. Ensure that the application is filed within the applicable limitation period, generally two years from the relevant date under Section 54 of the CGST Act, subject to the rules applicable to the particular claim.

Step 2: Reconcile GSTR-1 with Shipping Bills

For exports of goods, verify that the export invoices reported in GSTR-1 match the relevant shipping bills or bills of export.

Check the following details carefully:

• Export invoice number and date
• Invoice value and export value
• Shipping bill or bill of export number and date
• Port code and export general manifest (EGM) details, where applicable

Differences between GST returns and customs records can lead to validation errors or additional scrutiny.

Step 3: Reconcile Export Service Invoices with FIRC or BRC Records

For export services, maintain invoice-wise records and the relevant Foreign Inward Remittance Certificate (FIRC) or Bank Realisation Certificate (BRC), as applicable, to support receipt of export proceeds.

Reconcile invoice numbers, dates, amounts, and remittance details with your accounting records and the information required in the refund application. The applicable rules may permit different dates for the invoice and remittance certificate, so a date difference should be assessed against the relevant requirements rather than treated as an automatic ground for rejection.

Step 4: Calculate the Eligible Refund Amount

For eligible exports made under an LUT without payment of IGST, the refund of accumulated ITC is calculated under Rule 89(4) of the CGST Rules, subject to the prescribed conditions and restrictions.

The general formula is:

[
\text{Maximum Refund} =
\frac{\text{Turnover of Zero-Rated Supplies}}{\text{Adjusted Total Turnover}}
\times \text{Net ITC}
]

Net ITC for this calculation generally covers eligible ITC on inputs and input services for the relevant period, subject to the applicable rules. ITC on capital goods is excluded from this formula.

The maximum refund calculated under the formula is not necessarily the amount ultimately sanctioned. The available credit balance, eligible ITC, applicable restrictions, and other prescribed conditions must also be considered.

Step 5: Open the GST Portal

Visit the official GST portal at www.gst.gov.in.

Navigate to Services → Refunds → Application for Refund. Select the relevant refund category and tax period, then complete the application using the information requested by the portal.

Before filing, ensure that the applicable GST returns have been submitted and that the refund period and supporting statements are correct.

Step 6: Upload the Applicable Statements

Upload the relevant statements and supporting documents for the selected refund category.

For example, Statement 3 is used for eligible refund claims involving exports of goods or services without payment of tax. Other statement formats and supporting details may apply to different refund categories or procedures.

Follow the current portal instructions for the specific claim rather than assuming the same statement applies to every export refund.

Step 7: Verify, Sign, and Submit

Review the refund amount, bank account details, declarations, and supporting documents. Complete the required authentication using the permitted Digital Signature Certificate (DSC) or Electronic Verification Code (EVC), as applicable.

After successful submission, an Application Reference Number (ARN) is generated. Save the acknowledgement and use the portal’s application-tracking facility to monitor the refund status.

The 15-Day and 60-Day GST Refund Timelines

Understanding the statutory timelines helps exporters plan cash flow and respond promptly to requests from the GST department.

15 Days: Acknowledgement or Deficiency Memo

The proper officer generally issues an acknowledgement in Form GST RFD-02 within 15 days if the refund application is complete in all respects.

If the application is found deficient, the officer may issue a deficiency memo in Form GST RFD-03. The applicant may then need to correct the deficiencies and submit a fresh application in accordance with the applicable procedure.

This makes it important to check the refund category, supporting statements, invoice details, and declarations before submission.

60 Days: Processing of a Complete Application

Under Section 54(7) of the CGST Act, the proper officer is generally required to issue the refund order within 60 days from receipt of an application that is complete in all respects, subject to the applicable statutory provisions.

Where a refund remains unpaid beyond the prescribed period, interest may become payable under Section 56, subject to the applicable conditions and rules. The relevant interest rate and the date from which interest is calculated should be verified against the provisions applicable to the claim.

The 60-day period should not be interpreted as a guarantee that every refund will reach the exporter’s bank account within 60 days of the initial submission. Deficiencies, verification, and other procedural requirements can affect the processing timeline.

Provisional Refund: The 90% Mechanism

Section 54(6) of the CGST Act provides for provisional refunds of up to 90% of an eligible refund claim involving zero-rated supplies, subject to prescribed conditions, exclusions, and safeguards.

Where the requirements are met, Rule 91 provides for provisional sanction within seven days of acknowledgement, with the final amount determined after further verification.

This mechanism is intended to ease working-capital pressure for eligible exporters. However, provisional sanction is not automatic for every refund application, and eligibility should be confirmed for the specific claim.

Documentation Required for Export Refunds Under LUT

Maintaining a complete, consistent record of export transactions helps support refund claims and respond to departmental queries.

Documents for Zero-Rated Supplies Without Payment of IGST

Depending on the nature of the export and the applicable refund procedure, the records may include:

• Export invoices: Copies or details of invoices issued for the exported goods or services.
• Shipping documents for goods: Shipping bills or bills of export, along with relevant export general manifest details and transport documents where required.
• Service export and remittance records: Relevant FIRC or BRC details and supporting agreements, contracts, or other evidence of the supply, where applicable.
• Statement 3: Invoice-wise export details required for the relevant refund category.
• Valid LUT details: The reference number and records relating to the Letter of Undertaking furnished in Form GST RFD-11.
• GST return records: Relevant GSTR-1 and GSTR-3B information and reconciliation records.
• Bank details: Correct account information for receiving the refund.
• Required declarations: Declarations and undertakings prescribed for the applicable claim, including those concerning duplicate claims where relevant.

The exact documents required depend on the refund category and the information already available through the GST and customs systems.

Is a Chartered Accountant’s Certificate Required?

A Chartered Accountant’s certificate concerning unjust enrichment is not required for certain refund categories covered by the exceptions in Section 54(8) of the CGST Act, including specified refunds of tax paid on zero-rated supplies and eligible unutilised ITC refunds.

However, documentation requirements vary by claim type and amount. Exporters should check the current provisions and portal requirements rather than assume that every refund application is exempt from every certificate or declaration.

Documentation for Refunds Due to an Inverted Tax Structure

For eligible refunds of accumulated ITC arising because the tax rate on inputs is higher than the rate on output supplies, the applicant may need to provide:

• The applicable inward and outward supply statements, including the prescribed annexures
• Invoice details supporting the ITC claimed
• Relevant GST return and credit-ledger information
• Required declarations and undertakings
• Additional supporting records requested under the applicable rules or portal procedure

An inverted-duty refund is distinct from a refund of accumulated ITC on zero-rated exports. The applicable eligibility conditions, calculation, and documentation should therefore be assessed separately.

Common Issues Examined During GST Refund Verification

GST refund applications may be scrutinised for inconsistencies between the claim and the underlying transaction records. Exporters should pay particular attention to the following areas.

• GSTR-1 and shipping bill mismatches: Differences in invoice numbers, dates, values, or shipping bill details can create reconciliation issues.
• Incomplete export realisation records: Service exporters should ensure that the required FIRC or BRC information and evidence of receipt of export proceeds are available where applicable.
• ITC discrepancies: Credit claimed in GSTR-3B should be reconciled with the relevant purchase records and available GSTR-2B information. Any discrepancy should be examined under the applicable ITC eligibility provisions rather than automatically treated as eligible or ineligible.
• Capital goods included in Net ITC: Capital goods ITC should not be included in Net ITC for the export refund calculation under Rule 89(4).
• Incorrect refund period or calculation: The selected period, turnover figures, eligible credit, and formula inputs should agree with the relevant returns and records.
• Missing LUT or supporting declarations: Ensure that the applicable LUT and required declarations are valid and available for the relevant period.
• Duplicate refund claims: Verify that the same export supplies or tax amounts have not been claimed twice through different refund routes.

A well-prepared refund application, supported by reconciled returns and reliable export documentation, can help reduce avoidable delays and make it easier to respond to queries during processing.

Important: GST refund procedures, timelines, forms, and supporting-document requirements can change through amendments, notifications, and portal updates. Confirm the latest rules and instructions applicable to your specific refund category before filing.

Inverted Duty Structure Refund

Under Section 54(3)(ii) of the CGST Act, businesses may claim a refund of eligible unutilised Input Tax Credit (ITC) when the tax rate on inputs is higher than the tax rate on output supplies, subject to applicable conditions and restrictions.

For example, a manufacturer may pay 18% GST on inputs such as chemicals, dyes and packaging materials while charging 5% GST on finished goods. This rate difference can lead to an accumulation of ITC, making an inverted duty structure refund relevant.

Key restrictions include:

• Input services: Refund of accumulated ITC attributable to input services is not available under the inverted duty structure mechanism. The Supreme Court upheld the relevant statutory restriction in Union of India v. VKC Footsteps India Pvt. Ltd. (2021).
• Capital goods: ITC on capital goods is excluded from the Net ITC used in the inverted duty refund calculation.
• Refund calculation: Rule 89(5) prescribes the formula for determining the maximum eligible refund, subject to the applicable rules and amendments.

The formula is:

Maximum Refund = (Turnover of inverted-rated supply × Net ITC ÷ Adjusted total turnover) − (Tax payable on inverted-rated supply × Net ITC ÷ ITC availed on inputs and input services)

Businesses should verify the applicable formula, eligibility conditions and exclusions for the relevant refund period before submitting a claim.

Common GST Refund Errors and Notice Triggers

Errors in documentation, invoice reporting and ITC reconciliation can delay GST refunds or lead to notices. Businesses should watch for the following issues:

• LUT not filed for the relevant financial year: Exporting goods or services without payment of IGST generally requires a valid Letter of Undertaking (LUT), where applicable. Businesses should complete the filing before making supplies under this route.
• Shipping bill and GSTR-1 mismatches: Differences in shipping bill details, invoice numbers or reported values can delay export refunds. Under the applicable procedure, the shipping bill serves as the refund application for eligible exports of goods, subject to prescribed conditions.
• Foreign exchange realisation issues: For export of services, businesses should maintain the required evidence of realisation of export proceeds and check the applicable conditions. Where partial realisation is permitted, the eligible refund may need to be adjusted proportionately.
• Capital goods ITC included in the calculation: ITC on capital goods must be excluded from Net ITC for both export refunds under the relevant formula and inverted duty structure refunds.
• Duplicate refund claims: The same supplies must not be used to claim both an IGST-paid export refund and a refund of unutilised ITC under the LUT route. Businesses should reconcile invoices against the refund route selected.

Action Plan for an Export-Heavy Business

A consistent refund management process can help exporters reduce errors, avoid unnecessary delays and maintain better control over working capital.

1. File the LUT before making eligible exports without payment of IGST. Renew it for each financial year and schedule the filing early in April to avoid last-minute delays. Confirm that the LUT is valid before issuing invoices under this route.
2. Maintain a GST refund register. Record each export invoice, shipping bill or foreign remittance reference, the applicable refund route, the claim period and the application status. This helps prevent duplicate claims and missing documentation.
3. Reconcile GSTR-1 with shipping bills every month. Check invoice numbers, dates, taxable values and other relevant details. Resolve discrepancies early rather than waiting until the refund application is prepared.
4. Choose an appropriate refund filing frequency. Prepare eligible refund applications monthly or quarterly, as applicable to the business and the relevant GST provisions. Regular reconciliation can make claims easier to review, although filing frequency alone does not guarantee faster processing.
5. Monitor the refund processing timeline. Track the date on which a complete refund application is received and follow up with the proper officer if the applicable statutory timeline is exceeded. Interest under Section 56 may be available where its legal conditions are satisfied.
6. Keep supporting statements and documents ready. Prepare the relevant statements, export invoice lists, shipping bill details, remittance evidence and ITC reconciliations according to the refund category. Respond promptly if the department issues a deficiency memo or requests additional information.
7. Reconcile ITC with GSTR-2B and the applicable eligibility rules. Verify that the credit claimed meets the conditions under Section 16 and other relevant provisions of the CGST Act and Rules. GSTR-2B reconciliation is an important compliance check, but credit eligibility must be assessed under the applicable legal requirements rather than assuming that every reflected entry is automatically refundable.

For more details, refer to our GSTR-2B Reconciliation Guide to understand ITC eligibility and common reconciliation issues.

Disclaimer

This content is for informational purposes only and reflects provisions of the Income Tax Act as amended up to FY 2025–26. Please consult a Chartered Accountant for professional advice.

Frequently Asked Questions About Exporter GST Refunds

1. What is a GST refund for exporters?
A GST refund for exporters allows eligible businesses to claim a refund of accumulated input tax credit or IGST paid on exports, subject to applicable GST laws and conditions.

2. What is an LUT under GST, and why do exporters need it?
A Letter of Undertaking (LUT) allows eligible exporters to supply goods or services outside India without paying IGST, subject to prescribed conditions. It helps exporters avoid paying IGST upfront and subsequently claiming a refund.

3. What is Form GST RFD-01?
Form GST RFD-01 is the application used to claim eligible GST refunds, including refunds of accumulated input tax credit on zero-rated supplies made under an LUT, subject to the applicable rules.

4. What is the 60-day rule for GST refunds in India?
Under Section 54 of the CGST Act, eligible refund applications are generally required to be processed within 60 days of receipt of a complete application. Interest may be payable if a qualifying refund is not granted within the statutory period, subject to applicable provisions.

5. How can exporters claim a GST refund under an LUT?
Exporters generally need to furnish a valid LUT, make eligible zero-rated supplies without payment of IGST, maintain supporting documents, and file Form GST RFD-01 for the eligible refund of accumulated input tax credit.

6. Is LUT mandatory for exporting goods or services without paying IGST?
An eligible exporter wishing to make zero-rated supplies without payment of IGST generally needs to furnish an LUT or, where applicable, a bond under the prescribed provisions. Exporters should confirm the requirements applicable to their circumstances.

7. What documents are required to claim a GST refund for exports?
Depending on the refund category, documents and records may include export invoices, shipping bills or bills of export, bank realization evidence where applicable, LUT details, statements of eligible input tax credit, and other supporting information required under GST rules.

8. Can exporters claim a refund of input tax credit accumulated under an LUT?
Yes. Eligible exporters can generally claim a refund of unutilized input tax credit attributable to qualifying zero-rated supplies made without payment of IGST, subject to statutory restrictions and prescribed calculations.

9. What happens if a GST refund application is delayed or rejected?
If an application is delayed, the exporter can check its status and follow up with the relevant tax authority. If the refund is rejected, the exporter should review the rejection order and consider the available remedies, including filing an appeal where permitted.

10. When should exporters file Form GST RFD-01?
The general limitation period for claiming a GST refund is two years from the relevant date, subject to the applicable statutory provisions and exceptions. Exporters should identify the correct relevant date for their refund category and avoid waiting until the deadline.

11. Is interest payable if the GST department delays a refund beyond 60 days?
Interest may be payable where an eligible refund is not granted within the prescribed period, subject to the applicable legal conditions and the date from which interest becomes payable.

Written by

Asha Ahuja Sethi (Head Admin at Jatin Sethi & Co., Chartered Accountants)