Overview
For businesses registered under GST with export turnover, working capital is routinely tied up in the tax paid on procuring the raw materials used to manufacture the goods that get exported. Under GST law, exports of goods and services are treated as “zero-rated supplies.”
The idea behind zero-rating is simple: export turnover attracts a Nil rate of tax, which leaves accumulated input tax credit sitting idle in your ITC ledger. In such cases, you can file an application for refund — but actually receiving the sanction order depends mainly on three things: (1) choosing the right route, (2) correct filings, and (3) knowing the common reasons that cause refunds to get stuck.
As per Section 16 of the Integrated Goods and Services Tax (IGST) Act, 2017, “zero rated supply” means the export of goods or services, or the supply of goods or services (for authorised operations) to a Special Economic Zone developer or unit. A registered person can claim a refund of unutilised input tax credit accumulated on such inputs, provided the claim is filed before expiry of two years from the “relevant date.”
Exporters engaging with these refund routes should also maintain a valid Importer Exporter Code (IEC), and where duty-free imports of inputs are also involved, our Advance Authorisation Services and DGFT Services may be relevant alongside this GST refund process.
We at Kireeti Group handle the end-to-end GST refund compliance process for exporters — from data reconciliation and refund computation through to filing, deficiency memo and show-cause responses, and liaisoning until the sanction order is issued.
Key highlights of the GST refund on exports
- Nature of the benefit: exports are treated as zero-rated supplies under Section 16 of the IGST Act, 2017 — not exempt, but taxed at a Nil rate, which lets exporters claim back tax paid on inputs.
- Time limit: the refund application must be filed before the expiry of two years from the “relevant date” as per Section 54 of the CGST Act, 2017 (read with Explanation 2).
- Two routes available: Export with Payment of IGST (shipping bill acts as the refund application), or Export Under Letter of Undertaking / LUT without payment of IGST (requires a separate FORM GST RFD-01 application).
- Provisional sanction: zero-rated refund claims are generally facilitated to a 90% provisional refund ahead of full verification, sanctioned in FORM GST RFD-04.
- Biggest lever you control: clean, matching data across your shipping bill, GSTR-1 and GSTR-3B is the single biggest factor in avoiding delay.
| Mode of export | Relevant date |
|---|---|
| By air or sea | Date on which the ship or aircraft leaves India |
| By land | Date on which the goods pass the frontier |
| By post | Date of dispatch of goods by the post office concerned to a place outside India |
The two routes to claim a GST refund on exports
There are two routes for exporters to claim GST refund on outward shipments, each with separate documentation and process. There is no eligibility criteria for choosing between them — it depends purely on your business and its impact on cash flow.
Export with Payment of Integrated GST (IGST)
File your shipping bill opting for payment of tax, which is actually paid through your GSTR-3B return. The shipping bill filed with Customs itself acts as the refund application — there is no need to submit a separate application on the GST portal.
Once you have filed GSTR-1 and GSTR-3B with correct details, the data is validated against Customs data (export manifest / export report). If everything matches, the refund goes directly to your registered bank account; if not, you must correct the mismatch before the application can be processed.
Export Under Letter of Undertaking (LUT), Without Payment of IGST
File your shipping bill by furnishing a LUT. No tax is paid upfront at the time of export, but you can claim a refund of unutilised input tax credit accumulated on taxable inputs and input services used for your Nil-rated exports. This route requires a separate application in FORM GST RFD-01.
Route 1 (IGST upfront, claimed back via the shipping bill) is faster once your filings are clean and is processed automatically by the system. Route 2 avoids upfront payment of IGST but requires a separate refund application and involves GST authority intervention to approve and sanction the refund.
The GST refund process for exports
Whichever route applies, the application moves through the same broad sequence of scrutiny, sanction and, where needed, clarification.
Filing of the refund application
Under the IGST-payment route, ensure your shipping bill, GSTR-1, GSTR-3B and export general manifest all carry matching invoice details and value. Under the LUT route, file FORM GST RFD-01 with supporting statements of export invoices, shipping bills and ITC-related documents such as purchase invoices.
Acknowledgement or deficiency memo
After scrutiny by the proper officer, a complete application is acknowledged in FORM GST RFD-02. If anything is missing or incorrect, a deficiency memo is issued in FORM GST RFD-03, requiring a fresh, corrected application — though the time already spent on the original filing is excluded when recalculating the two-year limit.
Provisional sanction, where applicable
For zero-rated supply refund claims, the law allows a 90% provisional refund ahead of full verification, sanctioned in FORM GST RFD-04, unless the officer records specific reasons to proceed differently. The exact timeline can vary under current risk-based rules — confirm the current position with your GST practitioner before assuming a fixed number of days.
Verification and risk checks
If the jurisdictional authority has concerns, Customs identifies an issue under the Customs Act, 1962, or the exporter is selected for verification based on risk parameters, the refund can be routed for closer scrutiny. This is a normal part of the system for higher-risk profiles and does not by itself mean anything is wrong with the claim.
Show cause notice, if required
If additional documents or clarification are required, a show-cause notice is issued in FORM GST RFD-08, with an order for a personal hearing at a specified date and time. The exporter responds in FORM GST RFD-09 before the final order is passed.
Final order
Once verification is complete, the officer issues a final sanction or rejection order in FORM GST RFD-06, mentioning both the sanctioned and any rejected amount. The payment order is issued in FORM GST RFD-05 only for the sanctioned amount.
A practical example
This is an illustrative example, not an actual client case.
Case profile: a Hyderabad-based garment exporter, IGST-payment route
A Hyderabad-based garment exporter files its shipping bills with payment of IGST and expects the refund to process automatically once GSTR-1 and GSTR-3B are filed.
-
1Shipping bill filed with IGST
Export effected
The shipping bill is filed with payment of IGST; this filing itself will act as the refund application once the return data is validated.
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2GSTR-1 vs shipping bill
A mismatch surfaces
On validation, an invoice value declared in GSTR-1 does not match the corresponding shipping bill / export general manifest value held with Customs.
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3Refund does not activate
Processing is held
Because the shipping bill acts as the refund application under this route, the mismatch prevents the process from initiating until it is corrected.
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4Return amended
Correction filed
The exporter amends the GSTR-1 invoice details to match the shipping bill and export manifest data held by Customs.
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5Validated
Automatic processing resumes
Once the corrected data validates successfully against Customs records, the system automatically processes the refund to the exporter's registered bank account.
Actual timelines and documentation depend on your specific filings and Customs data. This illustration is generic, meant to show how a data mismatch interacts with the IGST-payment route — please confirm with our team before you rely on any of it.
Common reasons GST refund claims get held up or rejected
Most delays we see are avoidable and fall into a handful of patterns.
Data mismatches between returns and shipping documents
Under the IGST-payment route, where the shipping bill acts as the refund application, if GSTR-1 invoice details do not match the shipping bill or export general manifest data with Customs, the route does not activate until the mismatch is corrected. This is the single most common reason for holds or rejections in that route.
Risk-based selection for manual verification
Processing time can increase for exporters flagged through data analytics or risk parameters, which triggers verification of their claims rather than automatic processing. This is not an accusation — it is a system feature.
Deficiency memos on incomplete applications
Missing supporting documents, or an incorrect input tax credit (ITC) computation, will trigger a deficiency memo from the officer, which delays the sanction order until a fresh, corrected application is filed.
What this means for your cash flow
Your cash flow is directly impacted by the route you choose and by how clean your data is across GST returns and shipping documents — that consistency is the single biggest lever you control to avoid delay.
Documents required
The documents required vary depending on the route you choose, and may vary from case to case.
Trade evidence
- Shipping Bills
- Export General Manifest details
- Bank Realisation Certificates / e-BRC copies
GST returns
- GSTR-1 with matching invoice-level export details
- GSTR-3B with correct IGST payment / turnover reporting
LUT route filing
- FORM GST RFD-01 application, where the LUT route applies
- Statement of export invoices and shipping bills, where the LUT route applies
ITC-related documents
- Purchase invoices supporting the input tax credit claimed
- Net ITC and Adjusted Total Turnover workings, for the LUT-route formula
Response documents, if required
- Reply to a deficiency memo (FORM GST RFD-03), if issued
- Reply to a show-cause notice (FORM GST RFD-09), if issued
Registration details
- Valid GST registration and export-turnover details
What is the role of Kireeti Group?
| Area | What we do |
|---|---|
| Reconciliation of data | We review your data against source documents and reconcile shipping bills, GSTR-1 and GSTR-3B to identify mismatches, along with verification of shipping bills, purchase invoices and e-BRC copies for LUT-route claims. |
| Filing of GST refund application | After verification, we calculate the eligible refund amount as per the formula prescribed under GST law, arrange all the required documents, and file an error-free refund application in the proper manner. |
| Responding to deficiency memos or show cause notices | We study the reasons a deficiency memo was issued and fix the mismatches, or file a fresh refund application with the required documents; for a Show Cause Notice, we draft and submit a proper reply. |
| Liaisoning until approval | Our liaisoning team meets the respective officers, submits required documents, and clarifies queries raised at personal hearings — helping refunds get approved on time. |
| Filing of appeals | Where required, we submit appeals before expiry of deadlines, along with the supporting documents, in the proper manner. |
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Not sure which refund route fits your export business, or already stuck with a deficiency memo? Book a free consultation and we'll walk through your specific filing with you.
FAQs
The refund application must be filed before the expiry of two years from the “relevant date” as per Section 54 of the CGST Act, 2017.
With IGST payment, you pay IGST on export and claim it back once your GST filings match Customs data, with your shipping bill treated as the refund application. Under LUT, you avoid paying IGST upfront, but must separately file FORM GST RFD-01 to claim a refund of unutilised input tax credit.
The most frequent cause is a mismatch between GSTR-1 invoice data and the shipping bill or export manifest details filed with Customs, under the IGST-payment route. Risk-based selection for verification and incomplete supporting documents are common causes under the LUT route.
A deficiency memo is issued when a refund application is missing information or contains errors. You will need to file a fresh, corrected application. The time spent on the original filing is excluded when recalculating the two-year time limit for the refiled claim.
Zero-rated supply refund claims are generally facilitated to a 90% provisional refund ahead of full verification, sanctioned in FORM GST RFD-04, though the exact processing timeline can vary under current risk-based rules.
A Show Cause Notice is issued in FORM GST RFD-08 when additional clarification or documents are required with respect to a refund application. The exporter must identify the requirement and submit clarifications or documents by filing a reply in FORM GST RFD-09.
A Refund Sanction Order is the document through which the proper officer approves the refund. It is issued in FORM GST RFD-06, along with the payment order in FORM GST RFD-05 for the sanctioned amount.
There is no need to submit a separate application under the IGST-payment route — the shipping bill itself acts as the refund application. The condition is that invoice details match between the shipping bill and the GST returns. If there is a mismatch across the shipping bill, GSTR-1 and GSTR-3B, you must fix it and correct your GST returns; once the data validates successfully against Customs, the system processes the refund automatically.
No. There is no specific eligibility criteria for choosing the route. It depends purely on the exporter, based on the impact on their cash flow.
The refund process under the LUT route generally takes around 60 days from the date of application.
Official source references
- Integrated Goods and Services Tax (IGST) Act, 2017, Section 16 — Zero-rated supply.
- Central Goods and Services Tax (CGST) Act, 2017, Section 54 and Explanation 2 — refunds and “relevant date.”
- CBIC GST portal (cbic-gst.gov.in) — for current sectoral FAQs and forms (FORM GST RFD-01 through RFD-09).
