Export & SEZ Supplies under GST: LUT, Zero-Rated Supply & Refund Process (2026)

What is a Zero-Rated Supply?

Under GST, certain supplies are classified as zero-rated supplies under Section 16 of the IGST Act. This means the tax rate is 0%, but the supplier can still claim ITC on inputs used to make those supplies (unlike exempt supplies, where ITC is blocked). Three types of supplies qualify as zero-rated:

• Export of goods — physical goods taken out of India to a destination outside India
• Export of services — services supplied to a recipient located outside India, with payment received in convertible foreign exchange
• Supply to a Special Economic Zone (SEZ) — goods or services supplied to an SEZ unit or SEZ developer for authorised operations

Zero-rating is the foundation of the export/SEZ tax treatment. It ensures that Indian products and services are not burdened with embedded GST when they compete in global markets, and SEZ units get goods/services without the GST cost.

Two Options for Zero-Rated Supply

The supplier of zero-rated supplies has two options:

Aspect	Option 1: Export with IGST	Option 2: Export without IGST (under LUT/Bond)
Tax on invoice	IGST charged at applicable rate (e.g., 18%)	No IGST charged — invoice shows "Zero Rated"
GSTR-1 reporting	Tile 6/7 — EXPWP (Export with payment)	Tile 6/7 — EXPWOP (Export without payment)
Refund claimed	Refund of IGST paid (auto via shipping bill — RFD-01A)	Refund of unutilised ITC accumulated due to exports (manual — RFD-01)
Processing time	90% refund in 7 days (provisional)	Full refund within 60 days of acknowledgement
Documentation	Shipping bill + LEO + export realisation	LUT + export invoices + Statement of ITC + CA/CMA certificate
ITC impact	ITC is consumed against IGST liability — no accumulation	ITC accumulates in credit ledger — refund is of unutilised ITC
Suitable for	Businesses with high input costs where ITC is high relative to export value	Businesses with high export value relative to input costs (service exporters especially)

Which option should you choose? Evaluate using cash flow: Option 1 requires paying IGST (which is blocked cash) but the refund is faster (7 days provisional). Option 2 avoids cash outflow but the refund takes longer (up to 60 days). For service exporters with minimal input costs, Option 2 is usually better. For goods exporters where inputs attract high GST (e.g., fabric → garments), Option 1 may be simpler.

Letter of Undertaking (LUT) — Filing RFD-11

To export without paying IGST (Option 2), you must file a Letter of Undertaking (LUT) in FORM GST RFD-11 on the portal. The LUT is a binding declaration that you will:

• Export the goods/services within the prescribed time limit (usually 12 months)
• Realise the export proceeds in convertible foreign currency within the time allowed under FEMA
• Pay IGST with interest if the above conditions are not fulfilled

How to file LUT: Go to Services → User Services → Furnish LUT (RFD-11). Enter the financial year, principal place of business address, and self-declaration. No documents need to be uploaded. The LUT is valid for the entire financial year and must be renewed annually. A single LUT covers all exports of the GSTIN for the year. Once filed, you receive an LUT number — use this reference in your export invoices and GSTR-1.

Who can file LUT: Any registered taxpayer who has not been prosecuted for an offence under GST (or certain other laws) in the preceding 12 months. Newly registered taxpayers can also file — the LUT is immediately valid upon filing (no officer approval needed).

Export with IGST Payment — ICEGATE Shipping Bill Matching

If you choose to pay IGST on exports, the process works through an automatic data exchange between GSTN and ICEGATE:

1. You file your export GSTR-1 with the shipping bill details (EXPWP — export with payment of IGST).
2. The shipping bill is filed on the ICEGATE portal (customs), which has the Let Export Order (LEO) and IGST payment details.
3. ICEGATE transmits the shipping bill data to GSTN for matching.
4. When the shipping bill data matches your GSTR-1 data, the system generates a RFD-01A (auto-drafted refund application) in your GST portal.
5. You file the RFD-01A, and 90% of the refund is provisionally sanctioned within 7 days.

The matching criteria: GSTIN of exporter, invoice number, shipping bill number, and IGST amount must match between GSTN and ICEGATE records. Mismatch is the most common reason for delayed refunds.

Export under LUT — 90% Provisional Refund

For exports under LUT (without IGST), the refund of unutilised ITC is filed manually through RFD-01. The claim must include:

• Statement of zero-rated supplies: All export invoices for the period, with shipping bill numbers and dates
• Statement of ITC: Annexure B — net ITC availed on inputs and input services during the period
• Computation: Refund Amount = (Turnover of zero-rated supplies × Net ITC) ÷ Adjusted Total Turnover
• CA/CMA certificate: Self-certified or certified by CA/CMA (mandatory for claims above ₹5 lakh or as prescribed)
• Bank account details for credit of refund

Important: Under Notification 54/2023-CT, exporters can now claim 90% provisional refund for LUT-based exports too (similar to Option 1), subject to certain conditions. This has significantly improved working capital for exporters who choose Option 2.

SEZ Supplies — Special Rules

Supplies to Special Economic Zone (SEZ) units and SEZ developers for authorised operations are treated as zero-rated supplies under Section 16 of the IGST Act. Key points:

• The supplier can choose either Option 1 (supply with IGST) or Option 2 (supply under LUT without IGST).
• The SEZ unit/developer provides a letter of approval or Letter of Authorisation (LoA) to the supplier to evidence the supply.
• The supply must be for authorised operations of the SEZ — if the goods/services are used for non-authorised purposes, the zero-rating does not apply.
• In GSTR-1, SEZ supplies are reported in Tile 6 (SEZWP — with payment, or SEZWOP — without payment).
• SEZ developers also supply to SEZ units — these transactions are also zero-rated.

SEZ vs Export — Key difference: Exports go OUTSIDE India. SEZ supplies go to a designated SEZ unit WITHIN India (a deemed foreign territory for customs/GST purposes). Both are zero-rated.

Documents Required for Export/SEZ Refund

Document	Export (IGST)	Export (LUT)	SEZ Supply
RFD-01 (or RFD-01A for IGST path)	✓ (Auto-generated)	✓	✓
Export invoices (E-invoice if applicable)	✓	✓	✓
Shipping bill with LEO	✓	✓	—
SEZ approval letter / LoA	—	—	✓
Proof of receipt of goods in SEZ	—	—	✓
Statement of zero-rated supplies	—	✓	✓
Statement of ITC (Annexure B)	—	✓	✓
CA/CMA certificate	—	✓	✓
Declaration of non-availment of drawback	✓	✓	✓
Proof of realisation of export proceeds	✓	✓	—

Deemed Exports — What Are They?

Deemed exports are supplies where the goods do not leave India, but the supplier gets the benefits of export-related treatment (refund of ITC and/or refund of tax paid). Section 147 of the CGST Act defines deemed exports. CBIC notifies specific categories — common ones include:

• Supply of goods to an Export Oriented Unit (EOU) or Electronic Hardware Technology Park (EHTP) or Software Technology Park (STP) or Bio-Technology Park (BTP)
• Supply of goods to a project funded by certain international organisations (like the World Bank, UN agencies)
• Supply of goods to a developer/unit in a Special Economic Zone (covered under zero-rated supply rules as well)
• Supply of goods to defence or strategic projects as notified

The supplier of deemed exports can claim refund of GST paid (Option 1), or the recipient can claim refund of ITC (Option 2). The specific mechanism depends on the notification under which the deemed export is claimed.

Filing Refund on the Portal — RFD-01A Process

For exports with IGST payment, the refund is filed via RFD-01A (auto-drafted from shipping bill data). Steps:

1. ICEGATE-GSTN matching occurs automatically. When matched, the RFD-01A appears in your portal under Services → Refunds → Application for Refund.
2. Open the auto-generated RFD-01A — verify the shipping bill details, invoice details, and refund amount.
3. Add bank account details if not pre-filled.
4. Submit and generate ARN. The claim goes for processing.

Common Export/SEZ Mistakes to Avoid

• Not matching the invoice number: The invoice number in GSTR-1 must exactly match the shipping bill invoice number. Even a single character difference breaks the ICEGATE-GSTN matching and blocks the refund.
• Exporting without shipping bill for goods: For goods, you must have a valid shipping bill with LEO. Without it, the refund cannot be processed even if you paid IGST.
• Missing LUT expiry: LUT must be renewed annually. If you export after the LUT expires, you must pay IGST on those exports.
• Wrong classification of SEZ supply: Reporting SEZ supply as a regular B2B supply means charging GST and losing the zero-rated benefit.
• Not realising export proceeds: Export proceeds must be received in convertible foreign currency within the prescribed time (typically 12 months, extendable). Non-realisation means the export is treated as a domestic supply and tax becomes payable with interest.
• Confusing refund types: Filing a manual RFD-01 when the export is with IGST (system expects auto RFD-01A) leads to application rejection.

Practice Exports and SEZ on IndIaTaxSim

IndIaTaxSim simulates the complete export workflow: filing an LUT (RFD-11), creating export invoices (EXPWP and EXPWOP), reporting them in GSTR-1, generating a shipping bill in the ICEGATE simulation, matching the data, and processing the refund through RFD-01A/RFD-01. You can also practice supplying to an SEZ unit and claiming the corresponding refund — all within a safe learning environment. Explore the SEZ & Exports course modules →

Disclaimer

Export and SEZ provisions are governed by the IGST Act, 2017, and the SEZ Act, 2005, along with CBIC notifications and FTP (Foreign Trade Policy). Rules, time limits, and document requirements may change. Always verify current requirements with your export documentation manual and customs advisories.