The Complete Guide to GST Refunds on Exports Without Payment of Tax (LUT)

If you are an exporter or serving global clients, understanding how to claim your unutilized Input Tax Credit (ITC) is critical for maintaining healthy working capital.

Here is a detailed breakdown of how to claim your GST refund for exports made without payment of tax under a Letter of Undertaking (LUT).

1. What is Export Without Payment of Tax?

Under Section 16 of the IGST Act, exports of goods or services are classified as “Zero-Rated Supplies.” An exporter has two options to claim a refund:

1. Export with payment of IGST (and claim a refund of the IGST paid).

2. Export without payment of IGST under a Letter of Undertaking (LUT) or Bond, and claim a refund of the accumulated Input Tax Credit (ITC) on the raw materials and services used.

The LUT route is highly preferred by service providers and goods exporters because it does not require you to block your cash flow by paying IGST upfront.

2. The Refund Formula (Rule 89(4))

When exporting under LUT, you cannot just ask for your entire ITC ledger balance. The refund is calculated proportionately based on your export turnover versus your total turnover.

Maximum Refund Amount = (Export Turnover of Zero-Rated Supply of Goods/Services × Net ITC) ÷ Adjusted Total Turnover

• Net ITC: ITC availed on inputs and input services during the relevant period (excluding ITC on capital goods).

• Export Turnover: The value of zero-rated supplies made without payment of tax during the period.

• Adjusted Total Turnover: Turnover of Zero rated supply + The total value of all taxable supplies (excluding the value of exempt supplies) in the State/Union Territory.

3. Essential Documents Required

To successfully file for a refund, you must have your documentation perfectly aligned. Discrepancies here are the number one cause of departmental notices.

For Export of Goods:

• Copy of the valid LUT for the relevant financial year (Not required in some cases).

• Shipping Bills / Bill of Export.

• Export Invoices, GST Invoices

• Statement – 3, Annexure – B, GSTR-2B, Declarations

For Export of Services :

• Copy of the valid LUT.

• Tax Invoices issued to foreign clients.

• FIRC / BRC proving that the payment was received in convertible foreign exchange.

• A declaration stating that the place of supply rules dictate the service is indeed an export.

4. Step-by-Step Filing Process (Form GST RFD-01)

1. Log into the GST Portal: Navigate to Services > Refunds > Application for Refund.

2. Select Refund Type: Choose “Refund of ITC on Export of Goods & Services without Payment of Tax”.

3. Select the Tax Period: Choose the month or quarter for which you are filing the claim.

4. Fill Statement 3A: Download the offline utility for Statement 3A. Enter the details of your export invoices, shipping bills, and FIRC details. Validate and generate the JSON file, then upload it.

5. Enter Formula Values: Enter your Net ITC, Export Turnover, and Adjusted Total Turnover. The portal will automatically calculate the maximum eligible refund.

6. Upload Supporting Documents: Upload your invoices, FIRC copies, and the required CA certification (in few cases, if the refund exceeds ₹2 Lakhs).

7. Sign and Submit: File the application using your DSC or EVC. An Application Reference Number (ARN) will be generated.

5. Common Pitfalls to Avoid

• Mismatch in GSTR-1 and GSTR-3B: Ensure your export turnover reported in GSTR-1 (Table 6A) exactly matches the zero-rated supply figures in your GSTR-3B.

• Expired LUT: A LUT is only valid for one financial year. Always renew it before April 1st. If you export without an active LUT, you will be forced to pay IGST.

• FIRC Delays: For service exporters, you cannot claim the refund until the foreign currency is realized and you have the FIRC in hand.

Need Expert Assistance?

Navigating GST refund rules, calculating proportional ITC, and handling departmental notices can be complex. If you want to ensure your refund is processed without delays, connect with verified Chartered Accountants right here on the ProSansaar marketplace to handle your compliance seamlessly.