Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Exports under LUT
When you make zero-rated exports (or supplies to an SEZ) under a LUT — charging no GST — you still incur GST on your inputs, so credit accumulates with nothing to set it against. That unused ITC is refundable, which is what keeps exports genuinely tax-free.
Inverted duty structure
The other case is an inverted duty structure — where the GST on your inputs is higher than the GST on your output (for example, raw materials at 18% but finished product at 5%). Credit piles up faster than you can use it, and the law allows a refund of that accumulation (with a prescribed formula and some restrictions). The formula and eligibility change — confirm.
A worked example
Example: an exporter under LUT builds up ₹6 lakh of ITC in a quarter with no output tax — it claims that as a refund via RFD-01. A footwear maker buying 18% inputs but selling 5% output similarly accumulates credit and claims an inverted-duty refund. Both keep working capital from being locked in the credit ledger. Our team can compute and file these refunds.