What’s actually slowing this PC down?
Pick the symptom - the matching free tool is one click away.
For a qualifying export of services, LUT is usually the more cash-flow-friendly route because you do not pay IGST on the export invoice upfront. You can instead seek a refund of eligible unutilised input tax credit (ITC). Paying IGST and claiming a refund of that tax may suit a business that can fund the payment and prefers that refund route. Neither option is automatically better: first confirm that the supply legally qualifies as an export, then compare eligible ITC, cash flow, payment timing and filing records.
First confirm that the service qualifies as an export
A customer being outside India, or an invoice being raised in foreign currency, is not enough on its own. Under section 2(6) of the IGST Act, all five conditions must be met:
As an Amazon Associate I earn from qualifying purchases.
- 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 provisions and the actual contract and service arrangement before treating a supply as an export. See the IGST Act, section 2(6).
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 upfront IGST, or pay IGST and claim a refund of that tax. The refund sought is different in each case.
#1 Best Overall
| Consideration | LUT or bond, without payment of IGST | Pay IGST and claim refund |
|---|---|---|
| At the export invoice | No IGST is paid on the export, subject to a valid LUT or bond and compliance with the conditions. | IGST is paid on the exported supply. |
| Refund sought | Refund of eligible unutilised ITC relating to zero-rated supplies, calculated under the applicable refund rules. | Refund of the IGST paid on the exported supply. |
| Working-capital effect | Avoids funding export IGST upfront. Recovery of accumulated ITC can still take time and is limited by eligible credit and the prescribed calculation. | Requires funding the IGST while the refund is pending, which can tie up cash. |
| Payment timing for services | Rule 96A sets a payment-receipt deadline and follow-on tax and interest obligation; see the next section. | The official materials cited here do not establish a comparable service-payment condition specific to this route. Check current law and the facts before filing. |
CBIC’s sectoral FAQ describes the two routes. The applicable refund rules set the calculation and application process; they do not make either route a guaranteed or universally faster refund.
When LUT is likely to fit—and what to track
LUT is often attractive when preserving working capital matters more than receiving a refund of IGST paid, provided the business has eligible accumulated ITC and can meet the LUT conditions. Under Rule 96A, a registered person exporting without payment of integrated tax must furnish a bond or LUT in FORM GST RFD-11 before export.
Track the service-payment deadline
For services exported under LUT or bond, payment must be received in convertible foreign exchange within one year from the invoice date, unless the Commissioner allows a further period. If payment is not received by the applicable deadline, tax due and interest must be paid within 15 days after it. Maintain invoice dates, receipts and any extension granted. See CGST Rules, Rule 96A.
Understand what an ITC refund measures
The refund is not simply a refund of the export invoice’s tax value. Under the refund rules, service export turnover for the relevant period takes account of payments received in that period, completed export services paid in advance in an earlier period, and 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. A business with little eligible ITC should compare the likely value of this route with its cash cost and refund position under the IGST-payment route. See the CBIC refund rules.
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.
When paying IGST may suit your business
Paying IGST can be worth considering if the business can fund the tax while a refund is pending and, after reviewing its own eligible ITC and refund position, prefers to claim back the IGST paid rather than seek a refund of accumulated credit. The relevant comparison is the actual amount of eligible ITC, the amount of IGST that would be funded, and the business’s tolerance for cash being tied up. The official sources cited here do not establish average refund times or a general advantage in refund speed or certainty for either route.
A practical decision checklist
- Test export eligibility. Verify all five statutory conditions, especially place of supply, recipient status and the payment facts.
- Estimate the credit route. Review eligible unutilised ITC and how the refund formula applies to the business’s export services and relevant period.
- Model the cash requirement. Compare avoiding upfront IGST under LUT with funding IGST until a refund is received.
- Check payment timing. If using LUT, build the Rule 96A receipt deadline into invoice follow-up and cash planning.
- Confirm filing readiness. Align contracts, invoices, payment records, LUT acknowledgement, returns and ITC support. Check current law and portal requirements before filing.
Invoice wording and refund records
The invoice rules prescribe different export endorsements depending on the route:
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
- For IGST paid: “SUPPLY MEANT FOR EXPORT ON PAYMENT OF IGST”.
- For LUT or bond: “SUPPLY MEANT FOR EXPORT UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF IGST”.
CBIC’s refund rules provide for electronic applications in FORM GST RFD-01, with evidence appropriate to the refund category. Keep the export contract, support for recipient and place of supply, invoices, payment evidence, LUT acknowledgement, return data and ITC records consistent. Consult the refund rules and invoice rules, and verify the current GST portal instructions and applicable requirements before submitting a claim.
If the LUT was filed late
Rule 96A requires the LUT or bond before export. CBIC Circular 37/11/2018-GST says that substantive zero-rating benefits may not be denied where export is established and that delayed LUT filing may be condoned, with the LUT facility allowed ex post facto depending on the facts. That clarification is fact-specific; it is not a substitute for filing the LUT on time. See CBIC Circular 37/11/2018-GST.
Quick 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.
