GST Refund for Exporters in India: LUT vs IGST Payment Route

Why Exporters Are Entitled to GST Refund

Under the GST framework, exports are treated as "zero-rated supplies" — meaning no GST is charged on the final export. However, exporters do pay GST on their inputs (raw materials, services, etc.) and are entitled to recover this through a refund. If this refund is not claimed properly, it gets locked up as working capital, hurting your business cash flow.

Two Routes for GST Refund on Exports

Route 1 — Export Under LUT (Letter of Undertaking): You export goods without paying IGST and claim a refund of the accumulated Input Tax Credit (ITC) on your inputs. This is the preferred route for most exporters as it avoids upfront payment.

Route 2 — Export with Payment of IGST: You pay IGST on your export invoice and claim a refund of that IGST paid. The refund is processed based on shipping bill data matched with your GSTR-1 filing.

What is LUT and How to File It?

A Letter of Undertaking (LUT) is a declaration filed on the GST portal stating that you will comply with all export conditions without paying IGST. It must be filed before each financial year (April onwards) and is valid for the entire year.

Filing LUT: Log into GST portal → Services → User Services → Furnish LUT → Fill details → Sign and submit. The entire process takes under 30 minutes and is free of charge.

How to Claim ITC Refund (LUT Route)

Step 1: Ensure all purchases are correctly reported in GSTR-2B and your GSTR-3B shows the ITC claimed.

Step 2: Export goods under LUT and report all exports correctly in GSTR-1 with shipping bill number and date.

Step 3: Wait for shipping bill data to be auto-populated in your GST portal from ICEGATE (this takes 2–3 days after LEO).

Step 4: File GST Refund application using Form RFD-01 on the GST portal. Select "ITC accumulated due to zero-rated supplies" as the refund type.

Step 5: Upload supporting documents — GSTR-1, GSTR-3B, shipping bills, and export invoices.

Step 6: GST officer issues acknowledgement (RFD-02) and processes the refund. If deficiency memo (RFD-03) is issued, respond promptly with corrections.

Common Reasons for GST Refund Rejection

• Mismatch between shipping bill data and GSTR-1 (invoice number, value, GST number)
• LUT not filed or expired at time of export
• Export proceeds not realised within prescribed period
• Incorrect refund type selected in RFD-01
• Supporting documents incomplete or not uploaded correctly

Our team at Soumya Enterprises ensures deficiency-free applications, dramatically reducing processing time and avoiding rejections.