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How the two export routes work
Section 16(3) of the IGST Act, 2017, as reproduced by the Central Board of Indirect Taxes and Customs (CBIC), provides for both routes, subject to prescribed conditions, safeguards and procedures. The routes differ mainly in what is paid at export and what the refund claim is based on.
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Export under LUT without payment of IGST
Before exporting without payment of IGST, a registered person furnishes a bond or LUT in FORM GST RFD-11 under Rule 96A. The exporter does not pay IGST on the export at the outset. Instead, the exporter may claim a refund of eligible unutilized ITC under the refund rules. Rule 89 sets a maximum-refund formula linked to zero-rated turnover and net ITC; the amount is not simply all ITC shown in the books. Eligibility, supporting records and the applicable formula determine the claim. CBIC CGST Rules
Export on payment of IGST
With this route, the exporter pays IGST on the zero-rated supply and seeks a refund of the tax paid, subject to the applicable conditions and safeguards. For goods exported out of India, CBIC describes the shipping bill as the refund application once the required export manifest or report and a valid return are in place. That goods mechanism should not be assumed to apply to service exports; their refund procedure differs. CBIC IGST Act CBIC GST FAQs
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Compare the routes before choosing
| Consideration | LUT: no IGST paid at export | IGST paid at export |
|---|---|---|
| Payment at export | No IGST payment on the export at the outset, provided the bond or LUT requirements are followed. (Rule 96A, CBIC CGST Rules) | Pay IGST on the zero-rated supply, then seek a refund. (CBIC IGST Act) |
| Refund basis | Eligible unutilized ITC, subject to the refund rules and their formula. (CBIC CGST Rules) | IGST paid, subject to applicable conditions and procedures. (CBIC IGST Act) |
| Cash-flow question | Does the exporter have eligible accumulated ITC, and can the business manage the timing of an ITC refund? | Can the business fund the IGST payment while the refund is processed? |
| Key checks | RFD-11 bond or LUT, export evidence, refund application and current eligibility. | Eligibility for this payment route, export evidence, return status, refund mechanism and any current restriction. |
The cash-flow comparison follows from the payment and refund sequence; it does not establish which route produces a faster refund. The sources cited here do not establish a general comparative refund-time figure, so a typical number of days or guaranteed speed advantage should not be assumed.
Check the LUT timing and export conditions
Rule 96A requires the bond or LUT in FORM GST RFD-11 before export. It also provides that tax and interest may become payable if goods are not exported within the prescribed period after the invoice, or if payment for exported services is not received within the prescribed period, subject to any further time allowed by the Commissioner. The applicable period and consequences should be checked against the current rule text and the facts of the supply rather than reduced to one deadline for every case. CBIC CGST Rules
A late LUT filing is not an automatic extension or routine grace period. CBIC Circular No. 37/11/2018-GST says the substantive benefit may not be denied where export is established and that delay may be condoned case by case. Whether that clarification helps depends on the circumstances and evidence; do not treat it as permission to file late. CBIC Circular No. 37/11/2018-GST
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Use the correct invoice endorsement
CBIC’s invoice rules specify different endorsements for the two routes. Use the one that matches the transaction:
- For export without payment of IGST: “SUPPLY MEANT FOR EXPORT UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF IGST”.
- For export on payment of IGST: “SUPPLY MEANT FOR EXPORT ON PAYMENT OF IGST”.
Make the decision from your ITC, cash flow and transaction
- Assess the LUT route if you have eligible accumulated ITC and prefer not to fund IGST on the export upfront. Check the allowable refund amount, records and timing needs.
- Assess the payment route if you can fund the IGST until a refund is available and the transaction qualifies for that route. Confirm which refund procedure applies to your supply.
- Check the transaction type and current rules before choosing. Goods and services do not necessarily follow the same refund process, and restrictions or procedural requirements may depend on the exporter’s circumstances and procurement pattern.
Before filing, verify the current CBIC rules, notifications and GST portal instructions that apply to the transaction. For a particular exporter’s eligibility and records, a qualified Indian GST practitioner can assess the facts.
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