For exporters, GST is meant to be a pass-through, your supplies are zero-rated, so the tax on your inputs should come back to you. In practice, refunds get delayed, short-sanctioned, or never claimed because the paperwork does not line up. This guide covers the two export routes, inverted-duty refunds, and exactly what the RFD-01 file needs to clear without queries.
What “zero-rated” really means
Exports (and supplies to SEZ) are zero-rated, not exempt. The difference is the whole point:
- Exempt supplies carry no output tax and block the related input credit.
- Zero-rated supplies carry no output tax but preserve input credit, which you can claim back as a refund.
So an exporter should rarely be sitting on accumulated credit. If you are, money is stuck that belongs in your working capital.
LUT vs paying IGST: which route
There are two ways to export under GST:
- Under LUT (Letter of Undertaking), export without paying IGST, then claim refund of the unutilised input tax credit. Best for most exporters; no cash blocked in IGST.
- On payment of IGST, pay IGST on the export, then claim it back (often auto-processed via the shipping bill). Simpler operationally but blocks cash until refunded.
A valid LUT, filed at the start of each financial year, is the foundation. Exporting without it forces you down the pay-IGST route and ties up cash.
Exporters quietly carry the government’s money for months because nobody chases the refund. Here is the part most miss: the law is on your side, there is a 60-day clock, and interest if they miss it, but only if your claim is complete on day one. Nine times out of ten the delay is a deficiency memo for a document that should have been attached. File it clean, track the RFD series, and a refund stops being a favour you wait for and becomes a deadline they owe you.
– Hardik Garg, Founder & Senior AdvisorSitting on accumulated credit?
We file and chase GST refunds end-to-end, LUT, exports and inverted duty, so the money the department owes you stops gathering dust.
Inverted duty structure refunds
An inverted duty structure is where your inputs are taxed at a higher rate than your outputs, so credit accumulates even on domestic sales. Common in textiles, footwear, EV components and several manufacturing lines.
- You can claim refund of the accumulated ITC attributable to the inversion, under a prescribed formula.
- The formula and the treatment of input services have changed over time, so the computation must follow the current rule.
- Getting the formula and the turnover figures right is where most inverted-duty refunds are won or lost.
The RFD-01 process, step by step
1. Confirm eligibility and route
LUT in place, supplies correctly classified as exports/SEZ or inverted, period selected.
2. Compute the eligible refund
Apply the correct formula; reconcile with GSTR-1, 3B and 2B for the period.
3. File Form RFD-01 with annexures
Upload the statement of invoices, shipping bills/FIRC, and the computation.
4. Respond to deficiency memos
If the officer issues RFD-03 (deficiency), fix and re-file promptly, the clock restarts, so speed matters.
5. Track sanction and interest
Refunds delayed beyond the statutory period carry interest; track it rather than leaving it on the table.
Documents that get refunds sanctioned
- Valid LUT for the year.
- Shipping bills and EGM matched to invoices (for goods).
- FIRC / BRC evidencing receipt of foreign exchange (for services).
- Clean GSTR-1 vs 3B vs 2B reconciliation for the period.
- A refund computation the officer can verify line by line.
Why refunds get rejected
- Invoice-to-shipping-bill mismatches.
- Wrong refund formula or period.
- Missing FIRC/BRC for export of services.
- Letting a deficiency memo lapse instead of re-filing.
- ITC claimed that is not reflected in 2B.
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The bottom line
Export refunds are not discretionary, they run on a statutory clock with interest attached. The exporters who get paid fast aren’t lucky; they file complete claims, pick the right route (LUT versus paying IGST), and reconcile every shipping bill so nothing snags. Whether it is unutilised ITC, an inverted-duty structure or an IGST-paid export, the money is yours and there is a deadline on it. Claim it cleanly, track it, and stop financing the department for free.