Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Zero-rated, not exempt
Exports are zero-rated — importantly different from ‘exempt’. You charge no GST on the export, but unlike an exempt supply you keep the input tax credit on your purchases, and can get it refunded. This makes Indian exports tax-free in the right sense, preserving competitiveness.
The two routes
Either: (1) export under a Letter of Undertaking (LUT) without paying IGST, then claim a refund of the accumulated ITC; or (2) pay IGST on the export and claim a refund of that IGST. The LUT route avoids blocking working capital, so most exporters prefer it. Service exports must meet conditions like receipt in foreign currency — confirm.
A worked example
Example: an IT services exporter files a LUT, invoices clients abroad with no GST, and each quarter claims a refund of the GST paid on its rent, software and other inputs. An exporter of goods might instead pay IGST and get it refunded automatically on the shipping bill. The LUT route keeps cash unblocked. Our team can set up the LUT and refunds.