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-1. 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-1 and GSTR-3B 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 for authorised operations (the "authorised operations" condition applies from 1 October 2023). 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.
Since 1 October 2023 (Finance Act 2021, Notification No. 27/2023-Central Tax), Section 16(3) of the IGST Act provides the LUT or bond route with refund of unutilised ITC, and Section 16(4) allows export on payment of IGST with refund of that tax for the classes of persons or goods the Government notifies. Read with Section 54 of the CGST Act and Rules 89 and 96 of the CGST Rules, this gives an exporter of goods two routes to realise the benefit. Section 16(5), inserted by the Finance (No. 2) Act, 2024, denies both refunds where the exported goods are subject to export duty. 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.
| Feature | Route 1: LUT / Bond (without IGST) | Route 2: Pay IGST, claim refund |
|---|---|---|
| Legal basis | Section 16(3) IGST Act, Rule 89, Rule 96A | Section 16(4) IGST Act, Rule 96 |
| IGST on export invoice | Not charged (export under LUT) | Charged and paid via GSTR-3B |
| What is refunded | Unutilised / accumulated input tax credit | The IGST paid on the export |
| Refund application | RFD-01 filed on the portal | Shipping bill itself (deemed application) |
| Processing | Officer-processed, Rule 89(4) formula | Processed by ICEGATE, no RFD-01 |
| Working capital | Not blocked (no tax paid) | Blocked until refund credited |
| Prerequisite | Valid LUT (RFD-11) for the year | Correct GSTR-1 Table 6A and GSTR-3B |
| Best for | Exporters with large input-credit balances | Exporters wanting a hands-off refund |
| Capital-goods ITC | Not refundable (formula excludes it) | Can be used to pay the IGST that is refunded |
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. Older guides say the IGST-paid route is barred where inputs were procured at the concessional 0.1% merchant-export rate or under Advance Authorisation / EPCG / EOU notifications. That restriction was Rule 96(10) of the CGST Rules, which was omitted by Notification No. 20/2024-Central Tax dated 8 October 2024, so it no longer applies to exports after that date.
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, or such further period as the Commissioner allows. If they are not, Rule 96A(1)(a) requires you to pay the tax with interest under Section 50(1) within 15 days after that period ends.
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-1 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-1 Table 6A and paid the IGST in GSTR-3B, 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-1 and the shipping bill. Under the proviso to Rule 96(3)(b), where the shipping bill and GSTR-1 data do not match, the refund application is deemed filed only on the date the mismatch is rectified.
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-1 and GSTR-3B Reporting
Correct return reporting is not paperwork, it is the trigger for the refund itself. Two tables matter in GSTR-1 and one in GSTR-3B.
| Return / Table | What goes here | Why it matters |
|---|---|---|
| GSTR-1 Table 6A | Exports (with payment of tax, WPAY, or without, WOPAY) with shipping bill number, date and port code | The invoice data ICEGATE matches against the shipping bill |
| GSTR-1 Table 6B | Supplies to SEZ units / developers | Zero-rated but domestic; reported separately from physical exports |
| GSTR-3B Table 3.1(b) | Value and IGST of zero-rated supplies (exports and SEZ supplies) | Where the IGST liability (paid route) or the zero-tax value (LUT route) is declared |
Three reconciliation rules keep the refund flowing:
- In the IGST-paid route, the IGST and cess paid in GSTR-3B Table 3.1(b) must be equal to or greater than the total IGST and cess in GSTR-1 Tables 6A and 6B for the same period. If it is less, the GST system does not transmit the data to ICEGATE and the refund stalls. The shortfall can be declared and paid in the next GSTR-3B.
- The invoice number in Table 6A must be the same as in the shipping bill, and the shipping bill number, date and six-character port code must be entered accurately. 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" (WOPAY) flag, so no IGST is expected.
For the mechanics of populating these tables correctly, see our GSTR-1 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.
| Error | What it means | Root cause | Fix |
|---|---|---|---|
| SB005 | Invoice mismatch between GSTR-1 Table 6A and the shipping bill | Invoice number or other invoice details differ (a stray prefix, a leading zero) | Amend the invoice in GSTR-1 Table 9A of a later period so the records tie exactly, or take up a shipping-bill-side error with the customs officer |
| SB006 | EGM error | The Export General Manifest is not available or does not match the shipping bill | Ask the shipping line / carrier or your CHA to file or amend the EGM at the gateway port; the refund resumes once the EGM matches |
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-1. 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 + Turnover of zero-rated supply of services) x Net ITC / Adjusted Total Turnover
For a goods-only exporter the services term is zero.
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 the lower of that value and 1.5 times the value of like goods domestically supplied by the same or a similarly placed supplier. The export value itself is the lower of the FOB value in the shipping bill and the value in the tax invoice.
- Net ITC: input tax credit availed on inputs and input services during the period. Critically, this excludes credit on capital goods.
- Adjusted Total Turnover: the turnover in the State as defined in Section 2(112) of the CGST Act (which excludes the GST and cess charged), excluding exempt supplies other than zero-rated supplies. Exports made on payment of IGST stay in this figure, which lowers the LUT refund if you use both routes in one period.
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).
| Item | Amount (Rs) |
|---|---|
| Turnover of zero-rated export of goods (under LUT) | 80,00,000 |
| Domestic taxable turnover | 20,00,000 |
| Adjusted Total Turnover (80L + 20L) | 1,00,00,000 |
| ITC on inputs (raw materials, packing) | 9,00,000 |
| ITC on input services (freight, testing, commission) | 1,50,000 |
| ITC on capital goods (a new machine) | 4,00,000 |
| Net ITC (inputs + input services only) | 10,50,000 |
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
- Evidence of receipt of export proceeds (Bank Realisation Certificates / FIRCs or the equivalent). Under the proviso to Section 16(3) of the IGST Act, an LUT refund must be repaid with interest if the sale proceeds are not realised within the FEMA time limit.
- Statement 3 (the export invoice statement generated on the portal) and the declarations required in RFD-01
- GSTR-1 (Table 6A) and GSTR-3B (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, with the balance after verification. From 1 October 2025 (Notification No. 13/2025-Central Tax), Rule 91(2) has the officer issue the RFD-04 order within seven days of acknowledgement based on the system's risk evaluation, though the officer may refuse provisional refund for recorded reasons. It is not available to a person prosecuted in the preceding five years for evasion above Rs 250 lakh (Rule 91(1)). 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
Before every export consignment:
- Confirm a valid LUT (RFD-11) is on file for the current financial year (LUT route).
- Raise the export invoice once, in one system, and feed the identical record to the CHA and to GSTR-1.
- Match invoice number, date, taxable value, IGST, port code, and shipping-bill number across the shipping bill and GSTR-1 Table 6A.
- Ensure the carrier files the EGM promptly; track it to close out SB006 risk.
- Reconcile GSTR-3B Table 3.1(b) so the IGST declared is not less than Tables 6A and 6B (paid route).
- Export under LUT within three months of the invoice date (or the extended period) to stay within Rule 96A.
- File any ITC refund well within the two-year limitation.
The single most expensive mistake: treating exports as exempt rather than zero-rated, and reversing the input tax credit. Section 16(2) of the IGST Act lets you take credit for making zero-rated supplies even where the supply is exempt, so keep the ITC and route it into a refund.
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(1) to 16(5)); Central Goods and Services Tax Act 2017 (Sections 2(112), 54, 56); Central Goods and Services Tax Rules 2017 (Rules 89(4), 91, 96, 96A); Notification No. 20/2024-Central Tax (omission of Rule 96(10)); Notification No. 13/2025-Central Tax (Rule 91(2)); GST portal FAQs on refund of IGST paid on export of goods (GSTR-1 Table 6A/6B, GSTR-3B Table 3.1(b)); ICEGATE customs system documentation. Verify current thresholds and timelines against the latest CBIC notifications before filing.
