Indian technology exporters can generally claim GST refunds through one of two routes: export qualifying services under a bond or Letter of Undertaking (LUT) without paying IGST and seek a refund of eligible unutilised input tax credit (ITC), or pay IGST on the export and claim a refund of that tax where the route is available. Before choosing either route, confirm that the particular supply meets the legal definition of an export of services; having an overseas customer is not enough.
Does your technology service qualify as an export?
The label on a contract—software development, IT consulting, SaaS, implementation, support or data processing—does not determine its GST treatment. Under the IGST Act’s export-of-services definition, the statutory conditions include that the supplier is in India, the recipient is outside India, the place of supply is outside India, qualifying consideration is received, and the supplier and recipient are not merely establishments of the same person in the circumstances covered by the Act.
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Check the actual contract and delivery arrangement against each condition, especially place of supply, the identity and location of the recipient, and how consideration is received. A foreign customer or an offshore project, by itself, does not establish an export. The Act’s place-of-supply and export provisions must be applied to the particular facts; unusual SaaS, licensing, support or group-company arrangements merit advice from a qualified Indian GST professional.
A qualifying export is a zero-rated supply under section 16 of the IGST Act. Zero-rated does not mean that there are no GST obligations: registration, invoicing, returns and the applicable refund procedure still matter. CBIC’s GST FAQs state that registration is needed to claim export refunds.
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Choose the applicable refund route
The two statutory routes have different cash-flow and credit consequences. Do not assume that the IGST-paid option is available to every exporter: restrictions and notifications may affect it, so check the current rules for the exporter and transaction before selecting it.
| Route | What the exporter does | What the refund claim covers | Practical consideration |
|---|---|---|---|
| Export under LUT or bond without IGST | Furnish the required bond or LUT before export and make the qualifying zero-rated supply without payment of IGST. | Eligible unutilised ITC, subject to the refund formula and rules. | Avoids paying IGST on the export invoice, but input credits may remain tied up while a claim is prepared and processed. |
| Export on payment of IGST | Pay IGST on the qualifying zero-rated supply and follow the applicable refund procedure. | The IGST paid, subject to applicable restrictions and procedure. | Requires payment before claiming the tax back; availability and suitability depend on current law and the exporter’s circumstances. |
The routes arise under section 16 of the IGST Act; the unutilised-ITC calculation is set out in the GST Refund Rules. The cash-flow comparison is an operational consequence of the routes, not a guarantee of refund timing.
How the LUT route works for service exports
Furnish the LUT before exporting
Under Rule 96A of the CGST Rules, a registered person choosing to export without payment of integrated tax must furnish a bond or Letter of Undertaking in FORM GST RFD-11 to the jurisdictional Commissioner before export. Treat this as a pre-export requirement, not a formality to complete after making the supply.
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Track receipt of payment against the invoice date
For a service export under LUT or bond, Rule 96A addresses what happens if payment is not received in convertible foreign exchange, or in Indian rupees where the Reserve Bank of India permits, within one year from the export invoice date. In that case, the rule provides for payment of tax and applicable interest within fifteen days after the one-year period, unless the Commissioner allows a further period.
This is a compliance deadline for the LUT/bond route. It should not be confused with a blanket rule that any late customer payment automatically removes export status. The export definition’s qualifying consideration condition and Rule 96A’s consequences should be considered together, against the payment facts and any permitted extension.
Use the correct invoice endorsement
The export invoice endorsement must reflect the route actually used. The GST Invoice Rules specify these alternatives:
- IGST-paid route: “SUPPLY MEANT FOR EXPORT ON PAYMENT OF IGST”
- LUT/bond route: “SUPPLY MEANT FOR EXPORT UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF IGST”
How to prepare and file a refund claim
- Confirm registration and export eligibility. Verify registration and assess the contract and service facts against the statutory export conditions before treating the supply as zero-rated.
- Select the route. Compare the available route with the exporter’s ITC position and cash flow. Check current restrictions before relying on an IGST-paid refund.
- Complete the LUT step where applicable. For export without payment of IGST, furnish FORM GST RFD-11 before export and maintain a process to track service-payment receipts and any relevant Rule 96A deadlines.
- Issue correctly endorsed invoices. Use the endorsement matching the route, and keep invoice details consistent with outward-supply returns and the refund claim.
- Reconcile claim-period records. Align export invoices, returns, eligible ITC records, evidence of payment receipt, and the service completion and payment calculations used for the claim. The exact supporting evidence depends on the claim category and current portal and rule requirements.
- Apply electronically in FORM GST RFD-01. The refund rules provide for the electronic application and documentary-evidence framework. Respond to any deficiency memo or verification request through the prescribed process.
For service claims, do not mistake the goods-export process for the services workflow. The GST Refund Rules separately address export manifests or reports for goods; that goods-specific step is not a substitute for the applicable service-export claim requirements.
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How the unutilised-ITC refund is calculated
A refund under the LUT/bond route is capped by a rule-based formula; it is not necessarily equal to all credit appearing in the electronic credit ledger. The GST Refund Rules express the maximum as:
(Turnover of zero-rated supply of goods + turnover of zero-rated supply of services) × Net ITC ÷ Adjusted Total Turnover
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The terms “Net ITC” and “Adjusted Total Turnover” have rule-specific meanings, and the relevant period affects the computation. For service exports, the zero-rated service turnover calculation generally adds payments received during the relevant period for zero-rated services and payments received in an earlier period for services completed during the relevant period, then subtracts advances received for services not completed during that period. Apply the definitions and exclusions in the rules rather than treating every credit or invoice amount as refundable.
Which filing deadline applies?
The CGST Act generally provides a two-year limitation period for a refund application, counted from the applicable “relevant date.” That date is not a universal export date. For service exports, the statutory definition distinguishes cases where the service is completed before payment from cases where payment is received before completion. Determine the relevant date for the specific transaction and refund type before calculating the deadline.
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Records to keep aligned
- Service contracts, statements of work and records that support the recipient, supplier, delivery and place-of-supply analysis.
- Export invoices with the endorsement for the route used, matched to outward-supply returns.
- For the LUT route, the furnished RFD-11 and records used to monitor payment receipt against invoice dates.
- Evidence of remittance or permitted INR receipt, along with records linking receipts to the relevant invoices and services.
- Eligible ITC records and the period-specific figures used for the refund formula.
- Service completion and advance-payment records supporting the zero-rated service turnover calculation.
Keep the records consistent across the invoice, return, bank or remittance evidence, ITC ledger and refund computation. A mismatch can prompt questions or a deficiency request; the precise documents required depend on the claim and current rules.
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