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In India, a registered supplier making a zero-rated supply generally has two broad refund routes: supply under bond or Letter of Undertaking (LUT) without paying IGST and claim eligible unutilized input tax credit (ITC), or pay IGST on the supply and claim a refund of that tax. The right route depends on the supplier’s eligibility and records—not just on which option appears simpler. Exports of goods or services and qualifying supplies to a Special Economic Zone (SEZ) developer or unit are zero-rated under section 16 of the IGST Act.
What counts as a zero-rated supply?
For Indian GST purposes, section 16(1) of the Integrated Goods and Services Tax Act, 2017 (IGST Act) defines a zero-rated supply to include exports of goods or services, and supplies of goods or services to an SEZ developer or SEZ unit. The definition therefore covers qualifying SEZ supplies as well as exports; it is not limited to goods physically leaving India.
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Zero-rating matters because the Act provides a specific refund framework for registered persons making these supplies. Section 16(3) provides two broad options: make the supply without payment of IGST under bond or LUT and seek a refund of eligible unutilized ITC, or pay IGST on the supply and seek a refund of the tax paid, following section 54 of the Central Goods and Services Tax Act, 2017 (CGST Act) and applicable rules.
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Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Clear out junk files and repair common Windows errorsFree Scan →Scan for outdated or missing drivers - takes under a minuteDriver Scan →That framework does not make every transaction automatically refundable. The supplier must meet the relevant conditions for the chosen route and provide the prescribed evidence. The precise requirements can depend on whether the claim concerns exported goods, exported services, goods supplied to an SEZ, or services supplied to an SEZ.
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The two refund routes, compared
| Decision point | Supply under bond or LUT | Supply on payment of IGST |
|---|---|---|
| IGST on the outward zero-rated supply | Not paid on the supply under this route. | Paid on the supply; the claim is for refund of that IGST. |
| What the refund is for | Eligible unutilized ITC, subject to the statutory conditions and restrictions. | IGST paid on the zero-rated supply, subject to the applicable procedure and conditions. |
| Relevant records | Records supporting the supply, eligible ITC and the applicable export or SEZ evidence. | Records supporting the supply and tax payment, along with the relevant export or SEZ evidence and return information. |
| Exported goods workflow identified in official guidance | General refund applications use the applicable refund procedure; the exact evidence depends on the category. | For eligible exported goods, the shipping bill is treated as the refund application when prescribed return and export-manifest/report conditions are met. |
| Key checks | Check ITC eligibility, export-duty and drawback restrictions, and current rules for the claim. | Check eligibility for the tax-paid route, ensure the required return and export information align, and confirm current rules and notifications. |
This comparison describes the broad statutory routes, not a financial recommendation. The governing material does not establish which route will be better for a particular business. The practical choice depends on facts such as the supplier’s eligible credit, the applicable restrictions, the evidence available and the timing of cash outflows and refunds.
Route 1: claim eligible unutilized ITC under bond or LUT
Under this route, the registered supplier makes the zero-rated supply without payment of IGST under bond or LUT, then applies for refund of eligible unutilized ITC. Section 54 of the CGST Act identifies zero-rated supplies made without payment of tax as a permitted category for an unutilized-credit refund. The word “eligible” is important: a balance in an electronic credit ledger is not, by itself, proof that the amount is refundable.
Restrictions to check before relying on this route
- Export duty: section 54 restricts an unutilized-ITC refund in the stated case where exported goods are subject to export duty.
- Drawback or IGST refund: the statute also states a limit where the supplier avails drawback in respect of central tax or claims refund of IGST paid on those supplies. Check the current statutory wording and applicable notifications for the exact transaction; do not assume that a drawback election and an ITC refund can be combined.
- Evidence and incidence: the applicant must provide prescribed evidence that a refund is due and, where applicable, evidence that the tax incidence has not been passed on.
- Current rules: eligibility and procedural requirements can be affected by amendments and notifications. Confirm the law applicable to the claim period rather than relying on an older summary.
These restrictions make route selection a compliance decision as well as a cash-flow decision. In particular, confirm how a drawback claim is characterized for the goods and taxes involved before preparing the refund application.
Route 2: pay IGST and claim the tax back
On this route, the supplier pays IGST on the zero-rated supply and seeks a refund of the IGST paid under the applicable process. For exported goods, the official CBIC exporter FAQ describes a streamlined shipping-bill-linked process: the shipping bill is treated as the refund application if the exporter has filed the prescribed valid return and the operator of the conveyance has furnished the export manifest or report. Customs processes the claim after receiving return information.
This is a conditional workflow, not an automatic refund for every shipping bill. A shipping bill alone does not establish that the prescribed return is valid or that the required export manifest/report has been furnished. The exporter should reconcile the records that connect the supply, return and export before treating the claim as ready for processing. Current portal and customs steps should be checked against current official guidance, since the FAQ’s description does not establish every present-day screen, status label or exception-handling step.
The shipping-bill process described here concerns an IGST refund on exported goods. It should not be generalized to every zero-rated transaction. Exported services and supplies to SEZ developers or units have their own applicable evidence and refund procedures under the rules.
How to prepare a refund claim
The refund rules identify FORM GST RFD-01 as the electronic application through the common portal for general refund claims. The category-specific procedure determines the supporting evidence and filing conditions. Use the sequence below as a preparation framework, then verify the current form instructions and portal workflow for the particular refund category.
- Identify the supply and claim category. Establish whether the transaction is an export of goods, export of services, supply of goods to an SEZ, or supply of services to an SEZ. Confirm that it qualifies as zero-rated under the applicable law and identify the tax period and refund route.
- Choose the route and check restrictions. Decide whether the supply is made under bond or LUT without IGST payment, with a claim for eligible unutilized ITC, or with IGST paid and a claim for that tax. For an ITC claim, check the export-duty and drawback/IGST-refund limits described in section 54. Check current amendments and notifications before filing.
- Reconcile the transaction records. Bring together the records needed to substantiate the supply, the return information and the refund amount. For exported goods using the tax-paid route, ensure the relevant shipping-bill information can be reconciled with the prescribed valid return and the export manifest/report. The exact records vary by category; the rules do not impose one identical checklist on every claim.
- Collect the category-specific evidence. For SEZ goods, the refund rules call for evidence of admission in full for authorized operations, endorsed by the specified officer. For SEZ services, they call for evidence that the services were received for authorized operations, with the specified officer’s endorsement. Other export claims must meet their applicable evidence requirements.
- File through the applicable process. For a general refund claim, the rules provide for electronic FORM GST RFD-01 through the common portal. For an IGST refund on exported goods, follow the shipping-bill-linked process if its return and manifest/report conditions are satisfied. Do not substitute one process for another simply because both concern zero-rated supplies.
- Track the claim and respond to issues. Retain the filed application or relevant shipping-bill details, supporting records and status information. If processing is delayed or the claim is questioned, compare the discrepancy or request with the applicable category’s requirements and correct the underlying return, export or evidence issue where permitted.
Which documents and records matter?
There is no single universal document checklist that can be safely applied to all zero-rated refund claims. The refund rules distinguish categories, and the supporting proof changes with the type of supply and route. Organize records around the facts the claim must establish rather than assuming one form or invoice set is sufficient.
- Supply identity: records identifying the goods or services, recipient and transaction, sufficient to connect the claim to a qualifying export or SEZ supply.
- Chosen route and tax treatment: evidence consistent with whether IGST was paid on the outward supply or the supply was made without payment under bond or LUT.
- Return and tax information: the prescribed return information relevant to the claim; for the exported-goods IGST workflow, a valid prescribed return is one of the stated conditions.
- Export evidence: for exported goods under the shipping-bill-linked IGST process, the export manifest or report furnished by the conveyance operator is a stated condition. Other claim categories follow their own procedures.
- SEZ evidence: for goods, evidence of admission in full for authorized operations with the specified officer’s endorsement; for services, evidence of receipt for authorized operations endorsed by that officer.
- ITC and restriction support: for an unutilized-credit claim, records supporting the eligible credit and checks addressing the statutory restrictions. Where applicable, provide prescribed evidence that the tax incidence has not been passed on.
These are record categories, not a substitute for the current prescribed form, declarations or supporting-document rules. Requirements may differ by claim type and may change; use the rules and official instructions applicable when the claim is made.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Refund timelines: statutory periods are conditional
Section 54 states that a complete refund application should be acted on within 60 days. That is a statutory period tied to a complete application; it should not be read as a guarantee that every claimant will receive money within 60 days of a supply, return filing or initial submission. The applicable legal conditions, the completeness of the claim and the processing facts matter.
The statute 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. Neither statement guarantees a provisional payment to every exporter: eligibility, exclusions, safeguards and the relevant procedural conditions still apply. The seven-day FAQ description concerns the provisional process it describes, not a universal final-refund deadline.
When forecasting cash flow, separate the statutory period for acting on a complete application from the conditional provisional-refund provisions. Do not budget on the assumption that an incomplete, ineligible or category-mismatched claim will meet either timeline.
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Common reasons a claim may not follow the expected path
The claim uses the wrong route or mixes route requirements
Keep the tax-paid IGST refund distinct from the under-bond/LUT refund of unutilized ITC. The former seeks tax already paid on the supply; the latter seeks eligible credit not utilized. Verify that the tax treatment, return data and requested refund correspond to the route selected.
Exported-goods data does not meet the stated conditions
For the shipping-bill-linked IGST process, verify both the prescribed valid return and the conveyance operator’s export manifest/report. If the claim has not progressed, review whether the records required for the process have been furnished and whether the return information can be matched. Consult current customs and portal guidance for the present resolution steps.
SEZ evidence does not show the required authorized-operation connection
The rules specify different proof for goods and services supplied to an SEZ. Goods require evidence of admission in full for authorized operations with the specified officer’s endorsement; services require evidence of receipt for authorized operations endorsed by that officer. A document that does not establish the applicable fact or endorsement may not meet the stated requirement.
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An ITC claim overlooks a statutory limit
Before seeking unutilized credit, check whether export duty applies and whether the supplier has availed the relevant drawback or claimed an IGST refund on those supplies. Also review the current rules and notifications rather than relying on an old circular or an assumption that a past treatment remains valid.
What exporters should verify before filing
- Confirm the transaction is a zero-rated supply under the applicable Indian GST provisions.
- Choose one applicable route and ensure the tax paid or not paid on the supply matches the refund being requested.
- For an unutilized-ITC claim, check credit eligibility, export-duty and drawback/IGST-refund restrictions, and any required evidence about tax incidence.
- For an exported-goods IGST refund, check the prescribed valid return and export manifest/report conditions associated with the shipping bill.
- For SEZ supplies, obtain the category-specific evidence and specified officer’s endorsement described in the rules.
- Use the current refund form, notifications and portal/customs instructions for the relevant claim period; statutory text and procedural guidance can change.
The legal framework described here comes from the CBIC text of the IGST Act and CGST Act, the GST Refund Rules and CBIC’s exporter FAQ. It explains the broad routes and key conditions, not a determination that any particular exporter qualifies. A business should verify current law and the facts of its own supply before filing; this article is general information, not individualized tax advice.
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