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In India, a zero-rated supply is not limited to an export: it also includes a qualifying supply to a Special Economic Zone (SEZ) unit or developer. A registered supplier generally has two refund routes: supply without paying Integrated GST (IGST) under a bond or Letter of Undertaking (LUT), then claim eligible unutilized input tax credit (ITC); or pay IGST on the supply and seek a refund of that tax. The right route depends on the transaction, current eligibility rules and supporting records—not simply on which option appears faster.
What counts as a zero-rated supply?
Under section 16(1) of India’s Integrated Goods and Services Tax Act, 2017, zero-rated supplies include exports of goods or services and supplies of goods or services to an SEZ developer or SEZ unit. The category therefore covers more than goods physically leaving India. A qualifying SEZ supply can be zero-rated even though it is not an export in the ordinary sense.
Zero-rated status matters because the Act provides registered suppliers with refund options for these supplies. It does not mean that every related tax amount is automatically refunded, nor does it remove the need to meet the applicable conditions. The Central Goods and Services Tax (CGST) Act and refund rules govern claim procedures and evidence, while IGST is the tax relevant to the tax-paid route described below.
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The statutory description of “zero rated supply” appears in section 16(1) of the IGST Act. The wording covers “export of goods or services or both” and supplies to “a Special Economic Zone developer or a Special Economic Zone unit.” Check the current amended legislation and applicable notifications before relying on a particular transaction’s treatment.
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The two refund routes
Section 16(3) of the IGST Act describes two broad choices for a registered person making a zero-rated supply. The practical distinction is whether the supplier pays IGST on the outward supply and, consequently, what kind of refund is sought. These routes are not interchangeable labels for the same claim.
| Route | Tax on the outward zero-rated supply | Refund being sought | Key process and evidence considerations |
|---|---|---|---|
| Supply under bond or LUT | No IGST is paid on the supply under this route. | Refund of eligible unutilized ITC. | Eligibility limits apply. The relevant export or SEZ evidence and the requirements for the particular refund category must be satisfied. General refund applications use electronic FORM GST RFD-01 through the common portal. |
| Tax-paid supply | IGST is paid on the outward supply. | Refund of the IGST paid, subject to the applicable rules. | For exported goods, the shipping bill is treated as the refund application if the prescribed valid return and export-manifest/report conditions are met. Return and customs/export records must align. |
The Act establishes the two options; it does not establish that one is financially preferable for every exporter. A route decision should account for the amount and availability of eligible credit, the cash needed to pay IGST, the expected timing of the claim, evidence requirements, and restrictions that apply to the transaction. A supplier should also confirm whether later amendments or notifications affect its eligibility.
Route 1: Supply under bond or LUT and claim unutilized ITC
Under this option, the registered supplier makes the zero-rated supply without payment of IGST under a bond or LUT and seeks a refund of eligible unutilized ITC. ITC is input tax credit available to the business; the refund claim is for eligible credit left unutilized in connection with the zero-rated supply, not for IGST paid on that outward supply.
Section 54 of the CGST Act recognizes zero-rated supplies made without payment of tax as a category for an unutilized-credit refund. The entitlement is subject to statutory limits. In particular, the cited text excludes a refund where the exported goods are subject to export duty. It also sets out a restriction in the stated case where the supplier avails drawback in respect of central tax or claims a refund of IGST paid on those supplies. These restrictions make it important to review the precise transaction and claim basis rather than assume that all accumulated credit is refundable.
The applicant must provide prescribed evidence showing that a refund is due and, where applicable, that the tax incidence has not been passed on to another person. The evidence and filing procedure vary by refund category, so there is no single document checklist that can safely be applied to every export and SEZ claim.
Route 2: Pay IGST and claim that tax back
With the tax-paid option, the supplier pays IGST on the zero-rated supply and seeks a refund of the IGST paid. For exported goods, the process has a specific shipping-bill link: CBIC’s exporter FAQ says the shipping bill is treated as the refund application once the exporter has filed the prescribed valid return and the conveyance operator has furnished the export manifest or report. Customs processes the claim after receiving return information.
This described process is for an IGST refund on exported goods; it should not be generalized to every zero-rated supply, every refund category, or SEZ transactions. In particular, the FAQ’s shipping-bill treatment is not a reason to assume that an SEZ supplier can omit the evidence or procedure applicable to its category. Check current portal and customs guidance for the transaction at hand.
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How the claim process works
The refund rules identify FORM GST RFD-01 as the electronic application used for general refund claims through the common portal. The route and category determine how that general mechanism applies and what evidence is required. For the tax-paid IGST refund on exported goods, the shipping-bill-linked process described by CBIC is distinct from a general claim filed through RFD-01; do not file or omit a form based only on another supplier’s route.
- Classify the supply. Confirm whether the transaction is an export of goods or services, or a supply to an SEZ developer or unit. Determine the applicable refund category and whether the intended route is payment of IGST or supply under bond/LUT.
- Check statutory and notification conditions. Review current law for the supplier, goods or services, and claim route. For an unutilized-ITC claim, check the export-duty and drawback/IGST-refund restrictions described under section 54, along with any other applicable conditions.
- Assemble route-specific records. For a general refund application, use the evidence prescribed for the relevant category. The rules require an export of goods claim to follow delivery of the export manifest or report. SEZ goods claims require admission in full for authorized operations and the specified officer’s endorsement; SEZ services claims require evidence of receipt for authorized operations endorsed by that officer.
- File or complete the applicable electronic process. General refund claims use FORM GST RFD-01 through the common portal. For an IGST refund on exported goods, confirm that the prescribed valid return has been filed and that the conveyance operator has furnished the export manifest or report so the shipping bill can operate as the refund application under the FAQ-described process.
- Reconcile records and monitor the claim. Check that the return information, shipping bill and export manifest/report correspond to the same transaction. For other claims, confirm that the application and category-specific endorsements or evidence are complete. Follow the current portal and customs instructions for status and any action required.
This sequence is a decision and records framework, not a universal filing checklist. The refund rules specify different evidence and procedural conditions by category, and the current portal process may include steps not set out in the cited FAQ or rules text.
Evidence and reconciliation by supply type
For exported goods, the export manifest or report is material in both the general refund rules and the shipping-bill-linked process. In the IGST-paid route described by CBIC, the operator’s manifest/report and the exporter’s prescribed valid return are conditions associated with treating the shipping bill as the application. If the information is missing or does not correspond, the claim cannot be assumed to proceed merely because a shipping bill exists.
SEZ supplies have their own evidence requirements in the refund rules. For SEZ goods, the cited rules call for admission in full for authorized operations and an endorsement by the specified officer. For SEZ services, they call for evidence of receipt for authorized operations, also endorsed by that officer. These conditions underscore why a goods-export workflow should not be copied wholesale for SEZ goods or services.
For an unutilized ITC refund, keep the records needed to establish that the credit is eligible and that the refund is due. Where relevant, the applicant must also establish that the tax incidence has not been passed on. The exact evidence depends on the category and applicable prescribed procedure; the sources do not establish one exhaustive set that fits all claims.
- Match the supply classification to the chosen refund route.
- Confirm that returns and relevant export or SEZ records support the same claim.
- For exported goods, verify that the required export manifest/report has been furnished and the valid-return condition is met where the shipping-bill process applies.
- For SEZ goods and services, obtain the distinct authorized-operations evidence and endorsement specified for the relevant type of supply.
- For unutilized-credit claims, test the credit against applicable exclusions and retain evidence required to substantiate entitlement.
Timelines: statutory periods are conditional
Section 54 of the CGST Act states that a complete refund application should be acted on within 60 days. That is a statutory period tied to a complete application; it is not a guarantee that every claim will be paid within 60 days of the original filing, regardless of route, completeness, verification or other applicable conditions.
The statutory text also provides for a provisional refund of 90% for qualifying zero-rated claims, subject to exclusions and prescribed safeguards. CBIC’s exporter FAQ describes a provisional process within seven days of acknowledgement for eligible claims. Both qualifications matter: these provisions do not mean that every exporter receives 90% within seven days, nor that the final balance is automatic on a fixed date.
For a specific claim, check the current law, relevant notifications, completeness requirements and portal guidance. The time a taxpayer needs to correct a mismatch or supply missing evidence can affect the practical path even where a statutory or provisional procedure is available.
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Choosing a route without assuming one is better
The sources establish the available routes and important process distinctions, but they do not determine which route is more advantageous for a particular taxpayer. The choice should be made using current facts about the transaction and the supplier’s position, with tax advice where needed.
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- Cash flow: The tax-paid route requires IGST to be paid on the outward supply before a refund is sought. The bond/LUT route avoids that outward IGST payment but seeks eligible unutilized ITC instead.
- Credit position: Consider whether the supplier has eligible unutilized ITC and whether statutory restrictions affect its recovery. Do not treat all available credit as automatically refundable.
- Supply and evidence type: Exported goods, exported services, SEZ goods and SEZ services do not necessarily use the same evidence or procedural path.
- Reconciliation readiness: For the IGST refund process on exported goods, return information, shipping-bill details and manifest/report conditions are central to the FAQ-described method.
- Current restrictions: Review the applicable version of the legislation and notifications, including whether export duty, drawback or another relevant restriction applies.
A route that reduces an immediate payment may still carry a different eligibility or credit-recovery consideration. Conversely, paying IGST does not itself guarantee a prompt refund. Compare the consequences against the supplier’s records, cash-flow needs and current legal position rather than relying on a general claim that one route is always faster or better.
Common mistakes to avoid
- Treating zero-rated as unconditional refund eligibility. Zero-rated status identifies a category and enables statutory refund options; the supplier must still satisfy conditions and restrictions.
- Mixing the two routes. A claim for eligible unutilized ITC after a bond/LUT supply is not the same as a claim for IGST paid on the outward supply. Drawback and IGST-refund restrictions can matter to the ITC route.
- Assuming every claim uses RFD-01 in the same way. The rules identify RFD-01 for general electronic refund applications, while the FAQ describes a shipping-bill-as-application process for eligible IGST refunds on exported goods.
- Using the exported-goods process for an SEZ supply. SEZ goods and services have separate evidence and endorsement requirements in the refund rules.
- Reading a timeline as a payment promise. The 60-day period applies to a complete application; the 90% provisional refund and FAQ’s seven-day description are conditional.
- Relying on an old clarification as current law. CBIC Circular 125/44/2019-GST, dated 18 November 2019, contains historical refund clarifications. Rules may have changed since then, so its specific historical restrictions should not be treated as current without checking later amendments.
Official sources and the limits of this guide
The governing references for the points above are the CBIC text of the IGST Act, section 16; the CBIC text of the CGST Act, section 54; CBIC’s Sectoral FAQs on exporter refunds and zero-rated supplies; the CBIC GST Refund Rules; and CBIC Circular No. 125/44/2019-GST dated 18 November 2019. The FAQ and circular provide procedural or historical guidance, while current amended statutes, rules and notifications control a claim where they differ.
Refund eligibility and required evidence depend on the taxpayer’s facts, supply type and current law. This guide explains the broad routes and process distinctions; it is not individualized tax advice. Before filing, verify the current statutory text, notifications and portal or customs instructions that apply to the claim.
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