GST for exporters: LUT and zero-rated supplies

What zero-rated means for an exporter

Section 16 of the IGST Act treats exports of goods or services, and supplies to SEZ units or developers, as zero-rated. No tax is effectively borne on them, and the input tax credit on goods and services used for them is not lost. This is the key difference from exempt supplies, where credit is lost. See nil-rated, exempt and non-GST supplies.

The two routes

Filing the LUT

1. Log in to gst.gov.in and open the LUT application (Form GST RFD-11) under user services.
2. Select the financial year. An LUT is valid for one financial year, so file a fresh one before the first export of each year.
3. Give the details of two independent witnesses and accept the undertaking.
4. Sign with DSC or EVC and submit. The acknowledgement is your LUT.
5. Quote the LUT reference on export invoices.

Some persons, such as those prosecuted for large tax evasion, cannot use an LUT and must furnish a bond instead. Conditions are set by notification; check the current ones on cbic-gst.gov.in.

The export invoice

• Regular tax invoice details, plus the buyer's name and delivery address outside India.
• For goods, the port code, and shipping bill number and date when available.
• Under LUT, a line such as 'Supply meant for export under LUT without payment of integrated tax'. With IGST, 'Supply meant for export on payment of integrated tax'.
• Currency of the invoice and the INR value used for GST reporting.

A sample layout is in export invoice format.

Time limits that can undo zero-rating

Under LUT, goods must actually be exported within three months of the invoice date (extendable by the department). For services, payment must be received in convertible foreign exchange, or in Indian rupees where RBI permits, within the period allowed under the rules. If the condition fails, you have to pay the IGST with interest. Track every export invoice against its shipping bill and bank realisation.

Example. You invoice handicraft goods worth ₹8,00,000 under LUT on 10 January. If they are not shipped by 9 April and no extension is granted, IGST at the goods' rate becomes payable with interest from the original due date. At 5%, that is ₹40,000 plus interest.

Refund of ITC under LUT: a simple calculation

When you export under LUT, the ITC on your inputs keeps building up. The refund is broadly worked out as: zero-rated turnover × net ITC ÷ adjusted total turnover, for the period of the claim.

Example. In a quarter, a textile unit has export turnover of ₹60,00,000, domestic taxable turnover of ₹40,00,000 and net ITC of ₹5,00,000.

• Adjusted total turnover = ₹1,00,00,000
• Refund = ₹60,00,000 × ₹5,00,000 ÷ ₹1,00,00,000 = ₹3,00,000

The claim is filed online with a statement of export invoices. Keep shipping bills and bank realisation proof ready, as the officer can ask for them.

Reporting in returns

• GSTR-1: the exports table, marked 'with payment' or 'without payment' of tax, with shipping bill details for goods. These must match customs data, or IGST refunds stall.
• GSTR-3B: the zero-rated outward supplies row, with IGST shown only for the with-payment route.
• Refund of ITC under LUT: an online refund application with a statement of invoices.

This is general information, not tax advice.

Reviewing exports with Cashflow OS

Export sales are recorded in TallyPrime. Cashflow OS syncs them, and the GSTR-1 view prepared from that data lets you check the export invoices for the period bill by bill before the return is filed on the portal. The party ledger and bill-wise outstanding show which export invoices are still unpaid, which helps track realisation of service exports.