Two Routes Out, and You Choose at the Start
Exports are zero-rated, and there are two ways to realise that. Pay IGST on the export and claim it back, where the shipping bill commonly serves as the refund application for goods. Or export under a Letter of Undertaking without paying IGST, and claim refund of the input tax credit that accumulates on your purchases, in Form RFD-01. The choice is made when you furnish the LUT, before the exports, and it determines how your working capital behaves for the whole year.
Route 1: export on payment of IGST
You charge IGST on the export invoice and pay it. The refund of that IGST follows, and for goods the process is largely data-driven, flowing from the shipping bill and the returns rather than from a separate application.
Advantage: simple, and the refund covers the output tax directly.
Disadvantage: your cash is with the government until the refund arrives.
Route 2: export under LUT, refund of accumulated credit
You furnish a Letter of Undertaking in Form RFD-11 for the financial year and export without paying IGST. Credit accumulates on your purchases, and you claim it back in Form RFD-01.
Advantage: no output tax blockage at all.
Disadvantage: you still claim a refund, so the process does not disappear. It moves from the output side to the input side.
For service exporters this is usually the better route. See our article on LUT filing.
The third category: inverted duty structure
Where the rate of tax on inputs is higher than on outputs, credit accumulates even without exports. That accumulated credit is refundable, subject to the prescribed formula and conditions.
This affects whole sectors rather than individual businesses, and it is frequently unclaimed by smaller businesses who assume refunds are an export matter.
The deadline that governs both
Two years from the relevant date, under Section 54.
The relevant date differs by category, and for an LUT-route credit refund sources report it as the end of the financial year in which the export was made, which is different from the date used for a goods export. Confirm yours for the specific claim.
Documents
Common to both routes: export invoices, GSTR-1 and GSTR-3B for the period, and a reconciliation between the claim and the returns.
Goods exports: shipping bills and the export general manifest data.
Service exports: proof of receipt of foreign exchange, such as FIRC, FIRA or eBRC. This is the item most commonly missing, and without it a service export refund does not proceed.
LUT route: the LUT for the relevant financial year, which must have been furnished before the exports.
Inverted duty: the computation under the prescribed formula.
The process and timeline
Form RFD-01, acknowledgement in RFD-02 within fifteen days where complete, a deficiency memo in RFD-03 where not, provisional refund in RFD-04 reported at ninety per cent for zero-rated supplies, and the final order in RFD-06 within sixty days, with interest at six per cent under Section 56 if that is exceeded.
Full detail is in our article on the GST refund application process.
Where export refunds fail
The LUT was furnished after the exports, which does not cure exports already made
No proof of foreign exchange receipt on service exports
The claim does not reconcile to GSTR-1 and GSTR-3B for the period
Filed late, beyond the two-year limit
A deficiency memo restarts the process, which is why completeness at first filing matters
How Northrop LLP helps
Northrop LLP advises on the route before the financial year begins, files and renews the LUT, assembles complete refund claims, and tracks them through to credit.