For Indian MSMEs, entering the global market is a significant milestone. However, the excitement of international trade often comes with a common hurdle: a blockage in working capital due to tax payments. The Goods and Services Tax (GST) regime is designed to ensure that goods and services exported from India are zero-rated, meaning taxes are not levied on exports.
To maintain your cash flow, it is critical to understand how to claim your rightful refunds efficiently. Whether you are a manufacturer shipping goods or a service provider with overseas clients, this guide details the complete application process, timelines, and how to handle the system without errors.
Understanding your refund options
Under the GST laws, exports are classified as "Zero-Rated Supplies”. As an exporter, you have two primary options to claim a refund, and choosing the right one depends on your cash flow preference:
1. Export on payment of IGST (Rebate Option)
In this model, you pay the Integrated GST (IGST) at the time of export and subsequently claim a refund of the tax paid.
- Best for: Businesses that prefer quicker refunds and have sufficient cash flow to pay IGST upfront.
- Process: Largely automated via customs data.
2. Export without payment of tax (LUT/Bond Option)
Here, you file a Letter of Undertaking (LUT) or a Bond, which allows you to export without paying IGST upfront. You then claim a refund of the unutilised Input Tax Credit on your purchases.
- Best for: Businesses wanting to avoid upfront cash outflows.
- Process: Requires filing Form GST RFD-01.
Step-by-step application process
The procedure varies significantly between the two options mentioned above.
Process A: Refund of IGST paid on exports (automatic route)
This is the simplest route as there is no separate refund application form required for goods exporters.
- File GSTR-1: Enter export invoice details in Table 6A of GSTR-1. Ensure the Shipping Bill Number, Port Code, and Invoice details match your customs documents exactly.
- File GSTR-3B: File your monthly return and pay the relevant tax liabilities.
- Data transmission: The GST portal transmits this data to ICEGATE (Customs).
- Customs validation: The ICEGATE system matches your GST return data with the Shipping Bill and Export General Manifest (EGM).
- Bank credit: Once matched, the refund is automatically processed and credited to your registered bank account.
Process B: Refund of unutilised ITC (LUT route)
This requires a manual application on the GST portal.
- File GSTR-1 and GSTR-3B: Ensure all export supplies are recorded as "Zero-Rated" without tax payment.
- Log in to the GST portal: Navigate to Services > Refunds > Application for Refund.
- Select refund type: Choose "Refund of ITC on Export of Goods and Services without Payment of Tax”.
- Fill Form RFD-01:
- Download the offline utility to enter details of export invoices.
- Upload the generated JSON file.
- The system will use an electronic GST calculator logic to compute the maximum eligible refund based on your turnover and Net ITC.
- Upload documents: Attach scanned copies of the Statement of Invoices (Annexure-B), Bank Realisation Certificates (BRC) or FIRC (for services), and GSTR-2A copies.
- Submit with DSC/EVC: Sign and submit the application. You will receive an Application Reference Number (ARN).
Key timelines you must know
The GST department has set strict timelines for processing refunds to ensure exporters are not left waiting.
- Acknowledgement (RFD-02): Issued within 15 days of filing a complete application.
- Provisional refund (RFD-04): The government mandates that 90% of the claimed amount be granted provisionally within 7 days of acknowledgement. This is a huge relief for working capital.
- Final sanction order (RFD-06): An appropriate officer must verify documents and issue the final order within 60 days of the original application date.
- Interest on delay: If the refund is not sanctioned within 60 days, you are entitled to interest at 6% per annum for the delayed period.
How TallyPrime streamlines your refund claims
One of the primary reasons for refund rejection is a mismatch between the data in your books, the GST portal, and ICEGATE. Using robust GST software like TallyPrime acts as your safeguard against these costly errors.
1. Error-free GSTR-1 for ICEGATE
For IGST refunds, a single-digit error in the Shipping Bill number or Port Code in your GSTR-1 can halt the entire process. TallyPrime validates these specific fields during voucher entry itself, ensuring that the data you export to the portal is 100% compliant with ICEGATE standards.
2. LUT management
TallyPrime allows you to configure your company settings to "Export under LUT”. It tracks the validity period of your Letter of Undertaking and ensures that tax is not wrongly calculated on these invoices, acting as an automated compliance check.
3. Auto-population of refund annexures
Instead of manually filling Excel sheets for Form RFD-01, TallyPrime can help you generate the necessary data summaries required for the refund application statements. This ensures that the ITC figures you claim match perfectly with your filed GSTR-3B returns.
Conclusion
Claiming GST refunds is a right that every compliant exporter should exercise to keep their business healthy. While the process has become more streamlined, the burden of accuracy lies with you. A minor data entry slip can delay your funds for months.
Equip your business with the right tools. Use TallyPrime to maintain precise records, ensure perfect synchronisation between your invoices and returns, and claim your refunds with confidence.
