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For most registered pharmaceutical exporters, the current general method is to export without charging IGST under a bond or Letter of Undertaking (LUT), then claim a refund of eligible unutilized input tax credit (ITC) through FORM GST RFD-01. Paying IGST and obtaining an automated refund through the shipping bill is available only to classes of persons or goods/services notified under the law in force. Section 16 of the IGST Act changed this framework from 1 October 2023, so an older description of two universally available alternatives can mislead exporters.
Your product classification, export date, export-duty status, input-tax records, and any concessions used for imported or domestic inputs determine whether a claim is admissible. Use the procedure below as a practical framework, then verify the current notification, tariff treatment, and portal instructions for the exact medicine or formulation.
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A pharmaceutical export is generally zero-rated when it meets the statutory definition of export and the exporter is registered under GST. The route normally used is:
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- Export the goods without payment of IGST.
- Report the exports consistently in GST returns and customs documentation.
- File FORM GST RFD-01 for the eligible unutilized ITC attributable to those zero-rated exports.
The alternative route—paying IGST on the export and receiving a refund through the shipping-bill mechanism—must be checked against the notified classes permitted under the current section 16 framework. It is not a universal option merely because an older sector FAQ describes it.
Check eligibility before preparing a claim
Confirm registration and zero-rated status
The exporter must be GST-registered and the transaction must qualify as an export of goods. Zero-rating permits eligible ITC to be availed subject to the CGST Act and rules. A pharmaceutical label alone does not establish eligibility: the exporter must verify the supply, export documentation, and place-of-export facts for the shipment.
Identify the exact product and tariff classification
Determine the medicine, formulation, dosage form, packaging, HSN or tariff heading, destination, and export date. These details affect the customs treatment and whether the goods fall within a notified category for any IGST-paid route. Do not assume that all pharmaceutical products share one GST or export-refund treatment.
Check the export-duty bar
Section 54 of the CGST Act does not permit an unutilized-ITC refund where the exported goods are subject to export duty. Section 16 also excludes the relevant zero-rated export refund routes for goods subject to export duty. Confirm the tariff treatment for the actual classification and shipment instead of relying on the general description “pharmaceuticals.” Keep the classification and duty check with the refund file.
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List the purchases used for the export period, including active ingredients, excipients, packaging, testing services, freight-related services and other inputs. Confirm that each credit is eligible, supported by a tax invoice, and reflected in the electronic credit ledger. Record any exemption, concessional import arrangement, or other benefit used for inputs; such arrangements can affect the credit available for refund and the route that should be used.
Check the limitation period
Section 54 generally allows two years from the relevant date to apply for a refund. For goods exported by sea or air, the cited statutory definition uses the date on which the ship or aircraft leaves India. For land exports, it uses the date the goods pass the frontier. Apply the category that matches the shipment and preserve evidence of the relevant date.
Choose the legally available route
| Decision point | LUT or bond, no IGST | IGST paid, Rule 96 mechanism |
|---|---|---|
| Availability | General statutory route for eligible zero-rated supplies | Only for notified classes of persons or goods/services; verify the current notification |
| Tax at export | No IGST charged on the export | IGST is paid on the export invoice |
| Refund application | FORM GST RFD-01 for eligible unutilized ITC | Shipping bill is treated as the refund application, subject to Rule 96 conditions |
| Core evidence | ITC ledger and calculation, purchase invoices, returns, invoices, shipping bills and export reporting | Shipping bill, invoice and export data, export manifest or report, and a valid GST return |
| Export-duty restriction | No refund where the exported goods are subject to export duty | The same export-duty restriction applies |
| Typical delay point | Defective or incomplete RFD-01 claim, unsupported ITC or reconciliation differences | Data mismatch, missing manifest or risk-based withholding |
Do not select the IGST-paid column until the applicable notification confirms that your exporter, product or supply is covered. If that confirmation is absent, the LUT route is the safer general framework.
Route A: export under LUT or bond and claim unutilized ITC
1. Put the LUT or bond in place
Use the prescribed LUT or bond process for the export period and retain the acknowledgement or related records. The file should show that the instrument covered the shipments for which the refund is claimed. If the applicable portal or jurisdiction requires a bond rather than an LUT, follow that requirement before export.
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2. Issue compliant export invoices
Each invoice should carry the prescribed endorsement:
SUPPLY MEANT FOR EXPORT UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF IGST
Include the foreign recipient’s name and address, delivery address, destination country, and the export-removal application number and date required for the invoice. Match the invoice number, date, description, quantity and value with the shipping bill or bill of export. Correct discrepancies through the permitted amendment process and preserve the audit trail.
3. Complete customs export formalities
Retain the shipping bill or bill of export and evidence of the export manifest or report. The export file should connect every invoice to its customs document and show that the goods actually left India. Keep transport and clearance records that support the relevant-date calculation under section 54.
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4. Report the transaction in GST returns
Enter the export invoices in the applicable GST return tables for zero-rated supplies. Reconcile the return data with the shipping-bill information transmitted from customs. Differences in invoice number, date, taxable value, port code or consignee details can prevent the system from recognising the export correctly.
5. Calculate eligible unutilized ITC
Use the Rule 89 refund framework, not the gross GST shown on all purchase invoices. The prescribed calculation uses the turnover of zero-rated supplies, Net ITC for the relevant period and adjusted total turnover, together with the statutory definitions and exclusions. Segregate ineligible credits, credits unrelated to the export period, and amounts already used for another benefit. Retain the working papers and ledger extract that support each figure.
6. File FORM GST RFD-01
Submit the electronic RFD-01 claim under the category for refund of unutilized ITC on zero-rated supplies made without payment of tax. Upload or provide the statement and evidence required by the current portal, including export invoice and shipping-bill particulars, return information and the prescribed declarations. Portal labels and validations can change, so follow the category-specific instructions displayed when the application is filed.
7. Debit the electronic credit ledger and monitor the claim
The amount claimed is debited from the electronic credit ledger in accordance with the refund rules. Save the application reference, debit entry, acknowledgement and every notice or deficiency memo. If the officer requests clarification, answer within the stated period and attach the reconciliation rather than submitting a second claim for the same amount.
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The refund is limited to eligible unutilized ITC attributable to the zero-rated turnover. The statutory formula uses export turnover, Net ITC and adjusted total turnover for the relevant period, with the definitions in the CGST Rules controlling what belongs in each term. It is not a reimbursement of every rupee of GST paid on purchases.
- Use the tax period and turnover figures required by the rules.
- Remove credits that are blocked, ineligible, reversed, unrelated to the exports, or already refunded.
- Reconcile the opening and closing electronic credit ledger with the ITC claimed in returns.
- Explain currency conversion and invoice-value differences where the commercial invoice, shipping bill and GST return use different presentations.
Prepare a shipment-level schedule linking the refund-period invoices to export documents and a separate ITC schedule linking purchase invoices to the ledger. This makes an eligibility review easier and helps identify duplicate or unsupported credits before filing.
Route B: pay IGST and use the Rule 96 shipping-bill refund
1. Verify that the route is notified for your case
Section 16, as amended from 1 October 2023, limits the IGST-paid refund route to notified classes of persons or goods/services. Check the notification in force for the export date and confirm that your exporter and product fall within it. A historic pharmaceutical-sector FAQ cannot substitute for that check.
2. Pay and report IGST correctly
Issue the export invoice with IGST, pay the tax, and report the transaction in the GST return required for the period. The taxable value, tax amount, invoice number and date must match the shipping-bill data transmitted to the GST system.
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Under Rule 96, the shipping bill is treated as the application for refund of IGST paid on exported goods, provided the required export manifest or report is filed. Ensure that customs receives the correct invoice and export particulars and that the carrier’s manifest or report is accepted.
4. Check return filing and bank details
The system relies on a valid GST return and matching export data. Any payable refund is credited to the bank account recorded in the exporter’s GST registration particulars. Keep that account active and make sure the legal name and registration details match the customs and GST records.
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5. Resolve mismatch or withholding messages
Rule 96 contains withholding conditions, and risk-based verification can pause payment. A held amount is not automatically a substantive rejection. Read the system message, notice or order, identify the missing match or verification item, and submit the requested evidence through the prescribed channel.
Documents to assemble
| File area | Documents and checks |
|---|---|
| Registration and route | GST registration, LUT or bond records for the period, route-eligibility notification check, product classification and export-duty determination |
| Commercial supply | Export tax invoices, foreign recipient and destination details, prescribed LUT endorsement where applicable, purchase orders and commercial invoices |
| Customs export | Shipping bills or bills of export, export manifest or report evidence, invoice-to-shipping-bill mapping and proof of the ship, aircraft or land departure date |
| GST reporting | Filed returns, export tables, acknowledgement numbers and reconciliation of invoice values, dates and identifiers |
| ITC support | Purchase invoices, eligible-credit analysis, electronic credit ledger extracts, reversals, period calculation and Rule 89 working papers |
| Payments and banking | IGST payment records for the Rule 96 route, registered bank-account details and evidence of any customs or GST communications |
Deadlines, processing and withholding
Two-year filing limit
File within two years from the applicable relevant date under section 54. The date differs by transport mode, so calculate it shipment by shipment where necessary rather than using the invoice date automatically.
Sixty-day order period
Section 54(7) states that the proper officer shall issue an order within 60 days from receipt of an application complete in all respects. This is an order deadline, not a guarantee that money will reach the bank account within 60 days. Deficiencies, eligibility review, withholding, risk checks or related proceedings can affect payment.
Risk-based verification
CBIC Instruction No. 04/2022-GST describes risk-based verification of exporter credentials and the associated withholding process. Respond to a verification request with registration evidence, business records, invoices, shipping documents and the ITC reconciliation relevant to the claim. Do not treat a temporary hold as proof that the underlying export is ineligible.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Troubleshooting a delayed or deficient claim
Invoice and shipping-bill mismatch
Compare every identifier in the GST return, invoice and shipping bill. Correct permitted data errors, document the correction, and ensure the amended information is transmitted and acknowledged before asking for release.
Manifest or export-report not available
Ask the carrier, customs broker or relevant customs authority for the manifest or export-report status. The Rule 96 system cannot complete its matching logic when the required report has not been filed or accepted.
RFD-01 deficiency memo
Read the deficiency memo carefully and respond with the missing statement, ledger extract, invoice schedule or export proof. A fresh claim may be required under the applicable procedure; do not assume that resubmitting an unchanged application cures the defect.
ITC exceeds the eligible amount
Recheck blocked credits, reversals, credits from another period and credits already used for a refund or other benefit. Recalculate with the statutory Net ITC and turnover definitions before submitting a revised explanation.
Export-duty concern
Obtain the tariff classification and duty position for the actual product. If the goods are subject to export duty, the relevant export-refund restriction may apply even when the shipment is otherwise zero-rated.
Bank-account or registration mismatch
For an IGST-paid claim, verify that the bank account in the GST registration particulars is correct and operational. Resolve legal-name or registration discrepancies before relying on an automated credit.
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Pharmaceutical-sector points that need special care
CBIC’s sector FAQ explains that drugs and formulations are assessed on transaction value at each level of supply and discusses exporter ITC and LUT/bond exports. Its description of an IGST-paid alternative predates the 1 October 2023 amendment to section 16, so use the amended statute and current notifications for route selection.
Pharmaceutical supply chains often combine domestic purchases, imported ingredients, contract manufacturing, testing, cold-chain services and varied packaging. Keep the ITC allocation method transparent where one input supports both domestic and export supplies. If an imported-input concession or other scheme changes the tax actually paid, document how that affects the credit included in the refund calculation.
Practical decision examples
Example: standard LUT claim
A registered manufacturer exports a formulation without IGST under a valid LUT, has no export duty on the confirmed classification, and can reconcile its invoices, shipping bills, returns and eligible ITC. The exporter prepares the Rule 89 calculation and files RFD-01 within two years of the relevant export dates.
Example: IGST route not yet established
An exporter wants to pay IGST because an older FAQ describes that option, but has not checked whether the current notification covers the product or exporter. The exporter should not assume eligibility. It should verify the notification first or use the LUT route if the general conditions are met.
Example: apparent zero-rating blocked by duty
An exporter has a complete ITC file but discovers that the product classification carries export duty. The duty finding must be resolved before claiming the export refund because the statutory restriction can bar the relevant route.
Quick Recap
Final filing checklist
- Product, HSN or tariff heading and export-duty status are confirmed.
- Exporter GST registration and LUT or bond coverage are documented.
- Invoice endorsement, recipient, destination and export-removal details are correct.
- Shipping bill or bill of export is mapped to each invoice.
- Manifest or export report evidence is available.
- GST returns agree with customs data.
- Eligible Net ITC and turnover figures are supported by ledger and invoice schedules.
- No incompatible refund, drawback or other recovery has been claimed for the same tax or credit.
- The two-year limitation date is recorded for every relevant shipment.
- All acknowledgements, deficiency memos, notices and replies are retained.
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