Refund on export of Goods

Refund on export of goods

In India, export of goods is considered as interstate supply and therefore integrated GST is payable. However, under the provisions of the IGST Act, exported goods are treated as zero-rated supplies, allowing the exporter to claim a GST refund on their export.

(Zero rated supplies - Goods or services which are exported or supplied to Special economic zone)

Eligibility Criteria to Claim GST Refunds on Export of Goods

Any registered taxable person, other than Input Service Distributor (ISD), Compounding Taxpayer, TDS Deductor and TCS Collector, can claim a refund for the taxes paid on exports, if the supplied goods meet the following conditions:

  • Supplier is located in India.

  •  The place of supply and the recipient of such goods are located outside India (including SEZs).

  • The supplier has received the payment in convertible foreign exchange

As per Sction 54(3) of the CGST Act, 2017, a registered person may claim refund of unutilized/accumulated Input Tax Credit. Refund of accumulated Input Tax Credit is allowed only in following two scenarios:

1.   Zero rated supplies made with/without payment of tax:tax:

  • Either export with payment of tax and then claim refund of such tax paid or,

  • Export  under bond or LUT (Letter of undertaking) and claim refund of unutilized ITC.

(In order to avail the benefit of export without payment of tax, the exporter is required to furnish a bond or Letter of Undertaking (LUT) prior to the export, which validates the export process.

The exporter is required to submit the bond, supported by a bank guarantee of an amount not exceeding 15% of the bond amount on a non-judicial stamp paper for each export. The LUT is to be submitted on the company letterhead, whose validity period is one year.)

2. Inverted duty structure:  Where the rate of tax on inputs is higher than the rate of tax ooutput supplies and the credit has been accumulated, the supplier can take refund of such accumulated input subject to the provision of GST law.

Where the application of refund of input tax credit is filed, the electronic credit ledger shall be debited by the applicant by an amount equal to the refund so claimed as per Rule 89(3) of CGST Rules, 2017. Also, if there is any delay in sanctioning of Refund beyond the mandated period of 60 days (as per Rule 94 of CGST Rules, 2017), interest will be paid for such delay. The refund and/or interest sanctioned, if any, will directly be credited to the bank account of the applicant.

However, no refund of accumulated Input Tax Credit is allowed, where the goods exported out of India are subjected to export duty. Further, no refund of Input Tax Credit is allowed, if the supplier avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.


On March 8, 2024   /   Uncategorized