How is GST charged on the export of goods from India? Exports of goods are zero-rated under Section 16 of the IGST Act, so no GST is effectively borne. You either export under an LUT without paying IGST and refund the unutilised ITC through RFD-01, or pay IGST and let ICEGATE refund it automatically against your shipping bill. Both keep the input tax credit intact.
Exporting goods should be one of the cleaner GST outcomes: the law is designed so that Indian taxes are not exported along with the cargo. In practice, the refund is where exporters lose weeks of working capital, usually not because they were ineligible but because a single field in a shipping bill did not match the corresponding invoice in GSTR One. The GST refund machinery for goods sits at the intersection of two systems, the GSTN portal and the customs ICEGATE system, and both have to agree before a rupee moves.
This guide is written for merchant exporters, manufacturer-exporters, and their finance teams. It covers the zero-rating law, the two refund routes and when to pick each, the LUT mechanics, the customs and shipping-bill integration that trips most exporters up, the exact GSTR One and GSTR ThreeB reporting, the SB005 and SB006 errors with fixes, and a fully worked Rule 89 4) refund calculation. If you export services rather than goods, the mechanics differ (there is no shipping bill or EGM), so read our counterpart guide on GST on export of services instead.
Zero-Rated Supply: Section 16 of the IGST Act
Section 16 1) of the IGST Act 2017 declares two categories of supply to be zero-rated: the export of goods or services, and supplies to a Special Economic Zone (SEZ) developer or unit. The word "zero-rated" is deliberate and is not interchangeable with "exempt".
An exempt supply carries no output tax but also blocks the input tax credit attributable to it: the embedded tax on your inputs becomes a cost. A zero-rated supply carries no output tax and preserves the input tax credit, which you can then recover as cash. That is the entire policy: taxes should not travel with the goods across the border, so the exporter is made whole for the GST paid up the supply chain.
Section 16 3), read with Section 54 of the CGST Act and Rule 89 and Rule 96 of the CGST Rules, gives an exporter of goods two routes to realise that benefit. You cannot mix routes on a single shipment, but you can use different routes for different consignments.
The Two Routes: LUT vs Payment of IGST
The choice between routes is fundamentally a working-capital decision. Under the LUT route you never part with the tax, but you wait for an ITC refund you have to compute and file. Under the IGST-paid route you fund the tax up front, but the refund is almost entirely automated by customs.
A manufacturer-exporter who accumulates heavy credit on raw materials, packing, and input services typically prefers the LUT route so the working capital is never locked. An exporter with a lean input-credit position, or one who simply wants customs to push the refund without filing anything extra, often prefers the IGST-paid route. Note one structural limit: the IGST-paid route is barred where the exporter has procured inputs at the concessional 0.1% rate for merchant exports or under Advance Authorisation / EPCG, in which case you must use the LUT route.
Letter of Undertaking: Form GST RFD-11
To export goods without paying IGST you must first furnish a Letter of Undertaking in Form GST RFD-11 on the GST portal. The LUT is your written commitment that you will export within the prescribed time and pay the tax with interest if you do not.
Key features every exporter should know:
- Validity: one financial year. File a fresh LUT at the start of each year (from 1 April). If you export before renewing, that consignment is not covered.
- Filing: entirely online at Services > User Services > Furnish Letter of Undertaking (LUT), signed with DSC or EVC. No physical submission to the jurisdictional office is required under the current process.
- Eligibility: available to any registered person who intends to export, except those who have been prosecuted for evasion of tax exceeding Rs 250 lakh under the CGST Act, the IGST Act, or any earlier law. Those exporters must furnish a bond with a bank guarantee (generally up to 15% of the bond amount) instead.
- Export timeline under the LUT: goods must be exported within three months from the date of the export invoice (extendable by the Commissioner). Miss it, and the tax plus interest at 18% becomes payable per Rule 96A.
Customs and ICEGATE Integration: The Shipping Bill as Refund Application
This is the part unique to goods and the reason a separate guide is warranted. When you export goods, three data streams must reconcile before any refund is released:
- The shipping bill filed at customs (through ICEGATE), which carries your export invoice details.
- The Export General Manifest (EGM), filed by the carrier (shipping line or airline) confirming the goods physically left India.
- Your GSTR One Table 6A, where you report the export invoices to the GST system.
In the IGST-paid route, Rule 96 treats the shipping bill as the deemed refund application. You file no RFD-01. Instead, once you have (a) filed the shipping bill with the correct IGST details, (b) the carrier has filed the EGM, and (c) you have reported the same invoice in GSTR One Table 6A and paid the IGST in GSTR ThreeB, ICEGATE matches the three and credits the refund directly to your bank account, usually within a few weeks. The match is done invoice by invoice, so the invoice number, date, taxable value, and IGST amount must be identical across GSTR One and the shipping bill.
Because the process is fully automated, a mismatch does not generate a query letter, it simply stops the refund silently. That is why exporters often discover a stuck refund only when they reconcile their bank credits months later.
GSTR One and GSTR ThreeB Reporting
Correct return reporting is not paperwork, it is the trigger for the refund itself. Two tables matter in GSTR One and one in GSTR ThreeB.
Three reconciliation rules keep the refund flowing:
- In the IGST-paid route, the IGST shown in GSTR ThreeB Table 3.1(b) must be equal to or greater than the IGST in GSTR One Table 6A. If 3B shows less, ICEGATE treats the tax as short-paid and withholds the refund.
- The shipping bill number and date and the port code must be entered accurately in Table 6A. A wrong port code is a frequent cause of unmatched records.
- For the LUT route, report the export in Table 6A with the "without payment of tax" flag and a valid LUT number, so no IGST is expected.
For the mechanics of populating these tables correctly, see our GSTR One filing guide for outward supplies.
Common Errors: SB005 and SB006 (and How to Fix Them)
Two ICEGATE error codes account for the vast majority of stuck IGST-paid refunds. Understanding them saves months.
Two practical points. First, SB005 is nearly always a discipline problem at the invoicing stage: the invoice you gave your Customs House Agent for the shipping bill was not the identical record you later uploaded to GSTR One. The single most effective control is to raise the export invoice once, in one system, and feed the same file to both the CHA and the return. Second, SB006 is usually outside your control, it sits with the carrier, so chase the EGM proactively rather than assuming the refund is being processed.
Refund of Unutilised ITC: The Rule 89 4) Formula
For the LUT route you claim a refund of accumulated ITC in RFD-01, but you do not simply get back every rupee of credit in your ledger. The refund is capped by the formula in Rule 89 4) of the CGST Rules:
Refund Amount = (Turnover of zero-rated supply of goods x Net ITC) / Adjusted Total Turnover
The three defined terms do the heavy lifting:
- Turnover of zero-rated supply of goods: the value of goods exported during the period under LUT (without IGST). It is capped at 1.5 times the value of like goods supplied domestically, where such comparison exists.
- Net ITC: input tax credit availed on inputs and input services during the period. Critically, this excludes credit on capital goods, and excludes credit availed under other refund provisions.
- Adjusted Total Turnover: the total turnover in the state (excluding exempt supplies and the central/state tax and cess) minus the turnover of zero-rated supplies made under the IGST-paid route and non-zero-rated exempt turnover.
Worked Example: ITC Refund Under the LUT Route
Take a merchant-exporter, Meridian Exports, for the quarter April to June 2026, exporting entirely under an LUT (no IGST paid).
Applying Rule 89 4):
- Step 1: Net ITC = 9,00,000 + 1,50,000 = Rs 10,50,000 (the Rs 4,00,000 capital-goods credit is excluded).
- Step 2: Turnover of zero-rated supply of goods = Rs 80,00,000.
- Step 3: Adjusted Total Turnover = Rs 1,00,00,000.
- Step 4: Maximum refund = 80,00,000 x 10,50,000) / 1,00,00,000 = 8,40,00,00,00,000 / 1,00,00,000 = Rs 8,40,000.
So Meridian can claim a refund of Rs 8,40,000. The remaining Rs 2,10,000 (Rs 10,50,000 Net ITC minus Rs 8,40,000) stays in the electronic credit ledger, attributable to the domestic turnover, and the Rs 4,00,000 capital-goods credit remains available against future output tax. This is why exporters are frequently surprised that their sanctioned refund is lower than their total ledger balance: the formula apportions credit to exports and quietly parks capital-goods credit outside the calculation.
Documents, Timeline, and Provisional Refund
The refund is not a formality, but it is predictable if the paperwork is in order.
Core documents for an ITC refund (RFD-01, LUT route):
- Valid LUT (RFD-11) for the financial year
- Shipping bills and export invoices
- Bank Realisation Certificates / FIRCs or the equivalent, evidencing receipt of proceeds
- Statement 3 (the export invoice statement generated on the portal) and the CA/self-certified declarations
- GSTR One (Table 6A) and GSTR ThreeB (Table 3.1(b)) for the period
Timeline and safeguards under Section 54 of the CGST Act:
- Two-year limitation: the refund claim must be filed within two years from the relevant date. For goods exported by sea or air, the relevant date is the date the ship or aircraft leaves India; by land, the date the goods cross the frontier; by post, the date of dispatch.
- Acknowledgement: the proper officer issues an acknowledgement (RFD-02) if the claim is complete; deficiencies come back in RFD-03.
- Provisional 90% refund: for zero-rated supplies, Section 54 6) allows a provisional refund of 90% of the claimed amount, to be granted within seven days of acknowledgement, with the balance after verification. This is the cash-flow cushion that makes the LUT route viable.
- Interest: if the refund is not paid within 60 days of a complete application, interest at 6% runs under Section 56.
For a deeper walk-through of the RFD-01 filing itself and the bond-versus-LUT choice, see our GST refund guide for exporters.
Export Compliance Checklist
Exporting goods under GST is not complicated once you accept that the refund lives or dies on reconciliation. Get the LUT filed, keep one clean invoice per shipment flowing to both customs and the return, watch the EGM, and the zero-rating regime does exactly what it promises: it sends your goods abroad without exporting India's taxes with them. The businesses that struggle are almost never ineligible; they are simply out of sync across two government systems that refuse to release cash until they agree.
Sources: Integrated Goods and Services Tax Act 2017 (Sections 2 5), 2 6), 16); Central Goods and Services Tax Act 2017 (Sections 54, 56); Central Goods and Services Tax Rules 2017 (Rule 89, Rule 96, Rule 96A); CBIC circulars on IGST refunds and SB005/SB006 resolution (including the officer-interface facility); GST portal (Furnish LUT, RFD-01, GSTR One Table 6A/6B, GSTR ThreeB Table 3.1(b)); ICEGATE customs system documentation. Verify current thresholds and timelines against the latest CBIC notifications before filing.
