GST Refund for Exporters: LUT vs IGST Route Explained

Exports of goods and services are treated as zero-rated supplies under GST, which means exporters should not permanently bear GST cost on their outward shipments. But this benefit only reaches your bank account if you follow the right refund route and file the correct forms.

In this guide we explain the two GST refund routes for exporters, the Rule 89(4) refund formula, the documents you need, and how to estimate your refund before you file.

If you want to calculate your estimated refund right away, use our Free GST Refund Calculator for exporters.

GST Refund Calculator — LUT Route vs IGST-Paid Route

Why Exports Are Zero-Rated Under GST

Under Section 16 of the IGST Act, exports of goods and services (and supplies to SEZ units) are classified as zero-rated supplies. This means no GST is charged on the value of the export itself, and the exporter is entitled to claim a refund of the tax paid on inputs used to make that export possible.

The Two GST Refund Routes for Exporters

1. Export Under LUT (Letter of Undertaking)

Under this route, the exporter furnishes a Letter of Undertaking to the department and ships goods or services without paying IGST at the time of export. The accumulated Input Tax Credit (ITC) on raw materials, packing and other inputs is then claimed back in cash using the Rule 89(4) formula.

2. Export With IGST Paid

Here, the exporter charges and pays IGST on the export invoice exactly like a normal taxable supply, then claims a refund of that IGST amount after shipment. This route is usually processed faster because it is largely automated — once your shipping bill data matches your GSTR-1 and the Export General Manifest (EGM), the refund is credited without a separate application in most cases.

GST Refund Formula for Exporters (Rule 89(4))

For the LUT route, the maximum refund amount of unutilised ITC is calculated using the formula prescribed under CGST Rule 89(4):

Where:

• Turnover of Zero-Rated Supply — value of exports and SEZ supplies made without payment of tax during the period.
• Net ITC — input tax credit availed on inputs and input services during the relevant period (excluding certain restricted credits).
• Adjusted Total Turnover — total turnover of the registered person for the period, excluding certain exempt supplies.

You can plug your own numbers into our GST Refund Calculator to get this instantly, along with the IGST-paid route calculation.

Documents Required for GST Refund on Export

• Shipping bill / bill of export (treated as the refund application for the IGST route).
• Export invoices matching GSTR-1 declarations.
• Letter of Undertaking (LUT) reference, for the LUT route.
• GSTR-3B and GSTR-1 for the relevant tax period.
• Bank Realisation Certificate (BRC) / Foreign Inward Remittance Certificate (FIRC), where applicable.
• Statement of relevant invoices in the prescribed format when filing Form RFD-01.

Common Reasons GST Export Refunds Get Delayed

1. Mismatch Between Shipping Bill and GSTR-1

Even a small mismatch in invoice number, value or IGST amount between the shipping bill and GSTR-1 can hold up automatic processing on the IGST route.

2. EGM Not Filed by the Carrier

The Export General Manifest (EGM) must be filed by the shipping line or airline. If this is delayed, your refund is held up even though your own filings are correct.

3. Rule 96(10) Restrictions

Exporters who have availed certain other benefits (like duty-free imports under specific schemes) may face restrictions on using the IGST-paid route and should check eligibility before choosing a route.

4. Errors in Net ITC or Turnover Figures

Since the Rule 89(4) formula is turnover and ITC driven, incorrect classification of exempt or non-GST supplies in "adjusted total turnover" is a common source of refund short-payment or query notices.

Which Route Should You Choose?

There's no single right answer — it depends on your cash flow and shipment volume.

• Frequent, high-volume exporters generally prefer the LUT route to avoid tying up working capital in IGST payments every shipment.
• Occasional or first-time exporters sometimes find the IGST-paid route simpler, since the refund is largely automatic once shipping bill data is matched.

Use the Free GST Refund Calculator

Manually applying the Rule 89(4) formula for every tax period can be error-prone. Our GST Refund Calculator lets you switch between the LUT and IGST-paid routes and get an instant estimate of your eligible refund.

Frequently Asked Questions About GST Refund for Exporters

Conclusion

GST refund on exports is a right, not a favour — but it only comes through if you choose the correct route, keep your GSTR-1, GSTR-3B and shipping bill data consistent, and file within the time limit.

For a quick estimate, use the free GST Refund Calculator on ExportImportTools. You can also explore our export business tools for other export incentive and pricing calculations.