GST on Export & Import – Refund Process and Best Practices

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GST on Export & Import – Refund Process and Best Practices

Global trade is one of the key drivers of economic growth, and with the introduction of Goods and Services Tax (GST), the process of exporting and importing goods has become more streamlined in India. Whether you are an exporter shipping goods abroad or an importer bringing goods into India, understanding GST rules, refund process, and compliance requirements is crucial for smooth operations and cash flow management.

In this blog, we’ll cover everything you need to know about GST on exports and imports, including refund eligibility, procedures, and best practices for hassle-free compliance.

GST on Exports – Zero-Rated Supply

Under GST, exports of goods and services are treated as “zero-rated supplies.” This means exporters are not required to pay GST on goods or services sold outside India. Exporters have two options to claim benefits:

1. Export with Payment of IGST

  • Exporters pay Integrated GST (IGST) at the time of export.

  • They can claim a refund of IGST paid once the shipping bill is processed.

  • The refund is usually credited directly to the bank account linked with the GST registration.

2. Export under LUT/Bond (Without Payment of IGST)

  • Exporters furnish a Letter of Undertaking (LUT) or bond with the GST department.

  • No GST is paid at the time of export.

  • Exporters can later claim a refund of unutilized Input Tax Credit (ITC) on inputs and services used for exports.

GST on Imports – IGST on Imported Goods

When you import goods into India, they attract Basic Customs Duty (BCD) and IGST under GST law.

  • IGST is calculated on the assessable value + customs duty + other applicable charges.

  • The IGST paid on imports is fully available as Input Tax Credit (ITC), which can be used to offset future GST liability.

This ensures that the tax paid on imports does not become a cost for businesses.

Refund Process for Exporters

The refund process has been simplified under GST. Here’s a quick guide:

Step-by-Step Refund Process

  1. File GSTR-1 & GSTR-3B correctly and declare all export invoices.

  2. Shipping Bill & EGM (Export General Manifest) must be filed with Customs.

  3. Once matched, the system processes the refund of IGST automatically.

  4. For refund of unutilized ITC (under LUT route), file RFD-01 form on GST portal.

  5. Submit necessary documents like BRC/FIRC (Bank Realization Certificate), invoices, and supporting documents.

  6. The refund is generally processed within 30 days of application.

Best Practices for Exporters & Importers

Following best practices can save time, avoid errors, and ensure timely refunds:

✅ Maintain Proper Documentation – Keep invoices, shipping bills, LUT/Bond, and payment proofs ready.
✅ Timely Filing of Returns – Always file GSTR-1 and GSTR-3B before the due date to avoid refund delays.
✅ Reconcile Data Regularly – Match data in GST returns with shipping bills and bank realization details.
✅ Use LUT Facility – Small and medium exporters can save working capital by exporting without paying IGST upfront.
✅ Track Refund Status – Use GST portal to monitor refund applications and respond to department queries promptly.
✅ Consult a Tax Professional – Complex cases (like deemed exports, SEZ supplies) should be reviewed by a GST expert.

Conclusion

Understanding GST on exports and imports is crucial for businesses engaged in international trade. By choosing the right route (IGST payment or LUT), filing returns accurately, and following best practices, you can ensure smooth cash flow and compliance. A streamlined refund process under GST helps exporters remain competitive in the global market and avoid unnecessary working capital blockage.

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