BooksIQExports and supplies to SEZ are ZERO-RATED. The supplier may either (a) supply under a LETTER OF UNDERTAKING (LUT) / bond WITHOUT paying IGST and claim refund of unutilised ITC, or (b) PAY IGST and claim refund of the tax paid. Export of services additionally requires payment in convertible foreign exchange.
Key points
- §16 IGST makes the following ZERO-RATED: (a) EXPORT of goods or services;
- (b) supply to a SEZ developer / unit.
- Zero-rated means the OUTPUT is taxed at 0% but INPUT TAX CREDIT remains fully available.
- Two routes (§16(3)): (1) supply under a LETTER OF UNDERTAKING (LUT) in FORM GST RFD-11 (or bond) WITHOUT payment of IGST, and claim REFUND OF UNUTILISED ITC;
- (2) supply ON PAYMENT of IGST and claim REFUND of the IGST paid.
- LUT is filed annually, online, and is available to all exporters (a bond + bank guarantee is required only for those who have been prosecuted for tax evasion above ₹2.5 crore).
- EXPORT OF SERVICES (§2(6) IGST) requires ALL of: supplier in India;
- recipient outside India;
- place of supply outside India;
- payment received in CONVERTIBLE FOREIGN EXCHANGE (or INR where RBI permits);
- and supplier & recipient not merely establishments of the same person.
- Refund claims are filed in FORM GST RFD-01 (RFD-11 is the LUT).
Reference: §16 IGST Act 2017 read with Rule 96/96A & RFD-11
This page is general information for Indian businesses, current as of the
financial year shown above — not legal or tax advice. Tax law changes,
and how a provision applies depends on your specific facts. Confirm the
current position with a qualified professional before you act.
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