For a qualifying export of services, use an LUT to avoid paying IGST upfront and claim a refund of eligible unutilised input tax credit (ITC). Pay IGST instead if your cash flow and credit position make paying the tax first, then claiming that tax back, workable. Neither route is automatically better: first confirm that the supply legally qualifies as an export, then compare eligible ITC, cash tied up, payment timing, and filing records.
First confirm that the service qualifies as an export
A foreign customer or an invoice in foreign currency does not, by itself, make a service an export. Section 2(6) of the IGST Act requires all five conditions below:
- The supplier is located in India.
- The recipient is located outside India.
- The place of supply is outside India.
- Payment is received in convertible foreign exchange.
- The supplier and recipient are not merely establishments of a distinct person under the Act.
Place of supply depends on the service and can be affected by statutory exceptions, including rules for intermediary services. Check the applicable rule against the actual service, contract, recipient establishment, and payment facts before choosing a tax route. IGST Act, section 2(6) (CBIC)
How the two zero-rating routes differ
CBIC describes two routes for zero-rated exports: export under a bond or Letter of Undertaking (LUT) without paying IGST, then claim eligible unutilised ITC; or pay IGST on the export and claim a refund of that tax. Zero-rating does not mean the refund is automatic: the applicable conditions, calculations, and supporting records still matter. CBIC sectoral FAQs
#1 Best Overall
| Issue | LUT or bond, without IGST | Pay IGST, then claim refund |
|---|---|---|
| Tax at export | No IGST is paid on the export supply, subject to a valid LUT or bond and compliance with its conditions. | IGST is paid on the export supply. |
| Refund sought | Eligible unutilised ITC attributable to zero-rated supplies, calculated under the refund rules. | IGST paid on the export supply. |
| Working capital | Avoids funding export IGST upfront. Any ITC refund still depends on eligible credit and the prescribed formula. | Requires funding the IGST while the refund is pending. |
| Service-payment timing | Rule 96A requires payment in convertible foreign exchange within one year of the invoice date, unless the Commissioner allows a further period. If payment is not received by the applicable deadline, tax and interest are due within the following 15 days. | The reviewed CBIC materials do not establish a comparable service-payment condition specific to this route. Check the current law and refund rules for your facts before filing. |
| Records | Furnish the LUT before export and support the export, payment, and eligible ITC claimed. | Ensure the invoice and returns show IGST paid and that the refund claim matches the export and tax payment. |
When an LUT is likely to suit your business
An LUT is commonly attractive when preserving working capital matters, because you do not first pay IGST on each export invoice. But the refund is for eligible accumulated ITC, not the IGST amount on the export invoice. The amount you can claim is therefore constrained by eligible credit and the refund formula; a business with little eligible ITC should compare the likely recovery with its alternatives rather than assuming the LUT creates a full refund.
Track the payment deadline
Under Rule 96A, a registered person exporting without payment of integrated tax must furnish a bond or LUT in FORM GST RFD-11 before making the supply. For services, payment must be received in convertible foreign exchange within one year from the invoice date, unless the Commissioner allows a further period. If it is not received by the applicable deadline, the tax due and interest must be paid within 15 days after that deadline. Track invoice dates, receipts, and any approved extension. CGST Rules, Rule 96A (CBIC)
Understand what affects an ITC refund
The refund rules calculate export turnover for services in a period using payments received during that period, adding completed export services paid for in an earlier period and subtracting advances for export services not completed during the relevant period. The refund of accumulated ITC is then subject to the prescribed formula and eligible net ITC. This makes payment timing and service completion relevant to the period in which turnover enters the calculation. CBIC refund rules
When paying IGST may be a reasonable choice
Paying IGST may suit an exporter that can fund the tax while a refund is pending and prefers to seek a refund of the IGST paid rather than recover accumulated eligible ITC under the LUT route. Compare the actual funds required, the credit available, and the records needed for the claim. The available sources do not establish that this route is faster, more profitable, or more certain to result in a refund.
Quick wins for a faster PC:
Repair Windows errors before they cause bigger problemsFix Now →Scan for outdated or missing drivers - takes under a minuteDriver Scan →Rank #3
- AN EASY & EFFICIENT WAY TO CONTROL YOUR FINANCES: Created for both small business and personal use, this horizontal accounting ledger book has spacious pages to log payments and deposits, so that you can monitor your finances and spot errors easily.
- LARGE FORMAT LEDGER WITH PLENTY OF WRITING SPACE: This accounting book ledger comes in a large format, measures 10 by 7 inches, and has 129 pages with 3,100 entry lines total.
- TRACK ACTIVITY IN MULTIPLE ACCOUNTS WITH JUST ONE BOOK: This accounting log book will be perfect if you want to track activity in multiple accounts. To do so, use the dedicated column to add the bank account number every time you make a record.
- PREMIUM DESIGN FOR COMFORTABLE DAILY USE: This accounting journal book has a durable eco-leather hardcover, thick 120gsm paper, sturdy elastic closure, pen loop, ribbon bookmark, and back pocket for extra notes, checks, and receipts.
- 60-DAY MONEY-BACK GUARANTEE: We will exchange or refund your small business log book if you aren’t satisfied with your business bookkeeping ledger for any reason. Reach out to us via message to refund your monthly accounting ledger book.
Choose using these practical checks
- Verify export status. Apply all five statutory tests, particularly the service-specific place-of-supply rule and the distinct-establishment restriction.
- Estimate eligible unutilised ITC. For an LUT claim, assess eligible credit and the refund formula rather than treating export invoice value as the refund amount.
- Check cash availability. For the IGST route, determine whether you can fund the tax until the refund is processed.
- Check payment evidence and timing. For an LUT export, track convertible-foreign-exchange receipts against each invoice and the Rule 96A deadline.
- Compare filing and reconciliation work. Make sure invoices, returns, payment records, and refund evidence will agree for the route you select.
Invoice wording and filing records
The invoice rules prescribe an endorsement for the selected route. Use the wording that matches the transaction:
- For payment of IGST: “SUPPLY MEANT FOR EXPORT ON PAYMENT OF IGST”.
- For export under LUT or bond without payment: “SUPPLY MEANT FOR EXPORT UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF IGST”.
CBIC refund rules provide for electronic refund applications in FORM GST RFD-01, with evidence appropriate to the refund category. Keep contracts, evidence of the recipient and place of supply, invoices, payment records, the LUT acknowledgement where applicable, return data, and ITC support aligned with the claim. Confirm current GST portal instructions and form requirements before filing. CBIC invoice rules CBIC refund rules
Rank #4
- Easy To Track Your Finances: HAUTOCO accounting ledger book keeps you on top of your expenses and income! Help you keep your money organized, spend well, and set and achieve financial goals
- Premium Material: The accounting ledger book has a total of 120 pages and 3,000 lines of entries. It is made of 100gsm thick paper to reduce ink leakage; it is equipped with a waterproof and sturdy PP cover to protect the inner pages
- Practicality: The expense tracker notebook measures 10.1 x 7.8'', and the large size gives you enough space to record each of your transactions; there are 2 PVC large pockets at the back of the account book to store important tickets and loose items
- Manage Your Finances Effectively: Undated accounting books with number, date, description, account, payment or deposit amount, and total balance. You will be able to easily analyze your financial activities and quickly prepare accurate financial statements
- Ideal For Small Business or Personal Use: An accounting log journal can track your business or personal financial status. With a clear record of transactions, you can find unnecessary expenses or fraudulent charges
If you furnished the LUT after export
Rule 96A sets the default requirement to furnish the LUT or bond before export. However, CBIC Circular 37/11/2018-GST says substantive zero-rating benefits should not be denied where the export is established, and that delayed LUT filing may be condoned with the LUT facility allowed ex post facto depending on the facts. This is a fact-specific clarification, not a substitute for timely filing. CBIC Circular 37/11/2018-GST
Check current rules before you file
The statutory definition and route conditions depend on applicable legislation, notifications, place-of-supply provisions, and GST portal requirements. Check the current consolidated rules and instructions for the filing period and your transaction; older FAQ or rules pages may not reflect later changes. The correct route and refund eligibility depend on the supply and the exporter’s facts.
Do these 3 things before closing this tab:
1Scan for outdated or missing drivers - takes under a minute2Clear out junk files and repair common Windows errors3Fix the driver behind crashes, sound loss and screen glitchesQuick Recap
Best Value
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
