India's economy still relies largely on exports, which boost the country's GDP and drive its competitiveness globally. The Goods and Services Tax (GST) framework handles exports as zero-rated supplies, ensuring that no additional tax burden goes into international pricing in order to support exporters and maintain their edge over competitors.
But handling Input Tax Credit (ITC) and IGST refunds can be challenging. For seamless compliance and consistent cash flow, knowing how to claim refunds under both routes—IGST refunds for exports with tax payment and ITC refunds for exports under LUT/Bond, regardless of whether you export products or services or supply to Special Economic Zones (SEZs).
This guide breaks down the refund process, the statutory rules, and how modern GST software and GST calculator tools help streamline every step.
Understanding zero-rated supplies under GST
Under Section 16 of the IGST Act, the following qualify as zero-rated supplies:
- Export of goods or services
- Supply of goods or services to SEZ units or developers
A zero-rated supply has 0% GST, but unlike exempt products, the exporter can claim input tax credit (ITC) on taxes already paid for raw materials or input services used to manufacture such supplies.
This keeps goods financially competitive in overseas markets by ensuring that Indian exporters are not paying any hidden taxes.
Export options: With IGST payment or without IGST (Bond/LUT)
Section 16(3) of the IGST Act provides exporters with two clear options for making zero-rated supplies:
1. Export with IGST payment and claim refund
Exporters pay IGST on export invoices, ship the goods or render services, and subsequently file a refund claim for the IGST paid.
2. Export without IGST payment using LUT/Bond
Exporters submit a Letter of Undertaking (LUT) or bond, enabling them to export without IGST payment. The refund they claim later relates to the un-utilised ITC accumulated on inputs and input services.
TallyPrime simplifies both pathways by providing accurate tax computations, ready-to-export documentation, and seamless reconciliation of ITC.
Why IGST refunds matter
The GST system supports exporters by ensuring:
- No GST is borne on exported goods or services
- No cascading tax inflates export costs
- Businesses maintain healthy working capital through refunds
Whether you file under LUT or pay IGST upfront, the refund mechanism ensures that taxes paid on inputs or exports do not form part of your cost structure.
IGST refund: Step-by-step overview
The refund cycle begins with filing Form GST RFD-01 on the GST portal. Once filed, the application is forwarded to the jurisdictional officer for scrutiny.
Acknowledgement and verification
- The application is reviewed within 15 days.
- If found complete, an acknowledgement is issued in Form RFD-02.
- If discrepancies exist, a notice in Form RFD-03 is issued.
Timelines for refund release
Under Sections 54(6) and 54(7) of the CGST Act:
- 90% provisional refund is issued within 7 days (using Form RFD-04).
- The balance 10% refund is issued within 60 days (Form RFD-06).
- Delay beyond 60 days attracts 6% interest from the 61st day.
Refunds are credited to the taxpayer’s registered bank account, with payment advice issued in RFD-05. Provisional refunds are not granted to exporters who were prosecuted for offences exceeding ₹2 crore in the past five years.
Refund claim formula for LUT/bond exports
For exporters who file LUT/Bond and do not pay IGST on exports, a refund of ITC is calculated using the statutory formula:
Refund Amount = (Turnover of Zero-Rated Supplies × Net ITC) / Adjusted Total Turnover
Where:
- Net ITC = Total input tax credit availed on inputs during the relevant period
- Adjusted Total Turnover = Total turnover excluding exempt supplies (other than zero-rated supplies)
This helps determine the maximum eligible refund for that period. TallyPrime and GST calculators automate these calculations for exporters, eliminating manual errors in the process.
Documents required for refund application
When filing Form RFD-01, exporters must upload:
- Export invoices
- Shipping bills
- Bank Realisation Certificate (BRC) for goods
- Foreign Inward Remittance Certificate (FIRC) for services
- GSTR-1 and GSTR-2B invoice-wise matching
- Statement 3A and Statement 3 (details of invoices, FOB values, EGM)
- Annexure B listing purchase invoices eligible for ITC
A Chartered Accountant or Cost Accountant certificate is required for refunds exceeding ₹2 lakh (Annexure 2 of RFD-01).
Step-by-step filing of refund on GST portal
- Furnish LUT or bond
Exporters file LUT (valid for a financial year) or a bond, confirming adherence to GST regulations.
- Prepare mandatory documentation
Ensure all export invoices, shipping bills, and BRC/FIRCs are available.
- File monthly/quarterly returns
Refunds cannot be filed without completing applicable returns, such as GSTR-1 and GSTR-3B.
- File refund application (Form RFD-01)
Choose the refund category:
“Refund of ITC on Export of Goods and Services without Payment of Tax.”
Fill all required details in Statement 3 and Statement 3A.
- Auto-population and validations
- Turnover of zero-rated supplies
- Adjusted total turnover
- Net ITC
- Maximum refund amount to be claimed
The system auto-populates values; taxpayers may reduce but not increase them.
- Electronic credit ledger (ECL) checks
The portal performs validations, ensuring:
- Refund does not exceed the ECL balance
- Refund is within the “Maximum Refund Amount”
- Refund is within aggregate ledger limits
- Upload documents
Attach supporting documents as required.
- Save, preview and submit
Applications can be saved for 15 days.
Preview the filled form in PDF format before submission.
- File using DSC or EVC
On verification, an ARN (Application Reference Number) is generated.
Tracking refund status
Taxpayers may track refund progress under “Track Application Status.” Once processed, refunds are credited and visible under “Electronic Credit Ledger” as a debit entry corresponding to the claimed refund.
Common challenges exporters face
Despite clear procedures, exporters often struggle due to:
- Manual entry in Statement 3 (shipping bills, EGM, BRC)
- Missing or mismatched GSTR-1 invoice details
- Errors when uploading Statement 3
- Missing export invoices or BRC/FIRCs
- Time-consuming reconciliations
Here, smart automation becomes a critical asset.
How TallyPrime helps exporters with IGST refunds
TallyPrime is designed to make compliance intuitive and error-free:
- Automates GST computation
- Tracks ITC seamlessly across purchases
- Generates export invoices in compliant formats
- Reconciles GSTR-1 and GSTR-2B effortlessly
- Enables easy export documentation
- Helps classify zero-rated supplies with accuracy
By reducing manual paperwork, TallyPrime ensures exporters remain consistently compliant and refund-ready.
MGR tool: Simplifying LUT export refunds
Many exporters today also use the MGR tool, which works alongside TallyPrime.
It offers:
- Auto-fetch of GST portal data using GSTN
- Automated Statement 3 generation
- Quick refund eligibility computation
- Error-free Statement 3A and Annexure B preparation
- Summary reports that speed up refund filing
This drastically reduces human error and supports accurate refund claims, especially for exporters handling large invoice volumes.
Conclusion
Refunds under LUT, or IGST refunds without a bond, no longer need to be complicated and prone to errors. Exporters may now navigate compliance with confidence and ease due to organized GST procedures, strong automation in TallyPrime, and effective tools like GST calculators and MGR apps.
The GST environment in India is changing, but exporters can focus more on growing their operations globally and less on compliance challenges with the right digital technologies.
