Module 5: GST Implications on Exports & Imports – Advance GST Course
🌍 GST on Exports: The Concept of Zero-Rated Supply
Under GST law, exports of goods or services are treated as zero-rated supplies under Section 16 of the IGST Act, 2017. This means:
- No GST is charged on the invoice
- Exporters can claim a refund of the input tax credit (ITC) used
✅ Two Options for Exporters:
| Option | Tax Treatment | Refund Allowed |
|---|---|---|
| 1. Export under LUT/Bond | No GST charged | Refund of ITC |
| 2. Export with payment of IGST | IGST paid on invoice | Refund of IGST paid |
📝 LUT/Bond Filing: Step-by-Step
Exporters who do not want to pay IGST upfront can export under Letter of Undertaking (LUT) or Bond.
Eligibility for LUT:
- Registered taxpayer
- Not prosecuted under any tax law for amount > ₹2.5 Cr
- PAN-based verification
How to File LUT:
- Login to www.gst.gov.in
- Go to Services → User Services → Furnish LUT
- Fill the form, attach supporting documents
- Submit and download acknowledgment
📌 LUT is valid for the financial year and must be renewed annually.
💸 Refund Claim Procedures
Exporters can claim GST refunds either of ITC (under LUT) or IGST paid.
Key Documents Required:
- Shipping Bill / Bill of Export
- GSTR-1 and GSTR-3B returns
- LUT/Bond acknowledgement
- Bank Realisation Certificate (BRC) or FIRC for service exports
- Invoice copy and payment details
Refund Filing Process:
- Login to GST portal → Services → Refunds
- Choose relevant refund application (RFD-01)
- Upload documents
- Submit and track ARN
✅ Refund is usually processed within 15–30 days, if documents are complete.
🚢 GST on Imports: IGST under Customs Act
Imports of goods attract Integrated GST (IGST) under the Customs Act, in addition to Basic Customs Duty (BCD).
Example of Import Tax Calculation:
| Type of Duty | Rate |
|---|---|
| Basic Customs Duty | 10% |
| IGST on total value | 18% |
| Social Welfare Surcharge (on BCD) | 10% of BCD |
✅ The IGST paid on imports is available as Input Tax Credit (ITC), if goods are used for business.
GST on Import of Services:
- Recipient is liable to pay IGST under Reverse Charge Mechanism (RCM)
- Must be reported in GSTR-3B (Table 3.1(d))
🏭 GST Rules for SEZ (Special Economic Zones)
Supplies to SEZ units or developers are treated as zero-rated, just like exports.
Key Points:
- Supplier must obtain endorsement from SEZ officer for supply
- Can supply under LUT/Bond or with IGST payment
- SEZ units must maintain separate records of receipt and utilization
📌 Supplies from SEZ to DTA (Domestic Tariff Area) are treated as normal taxable supplies.
❌ Common Mistakes to Avoid
| Mistake | Impact |
|---|---|
| Exporting without valid LUT/Bond | Treated as taxable supply → IGST liability |
| Missing refund documents | Refund delay or rejection |
| Incorrect reporting in GSTR-1 or 3B | Mismatches → Refund not processed |
| Not claiming IGST on imports | Missed ITC opportunity |
| Ignoring SEZ endorsement requirements | Supply not considered zero-rated |
📊 Latest Updates (FY 2024–25)
- e-BRC integration with ICEGATE for faster refund processing
- Mandatory online LUT filing only; manual applications not allowed
- Tightened refund scrutiny in case of ITC from fake suppliers
- Introduction of auto-refund tracking portal for exporters
📝 Conclusion
GST has streamlined international trade taxation by ensuring exports are zero-rated and imports have clear credit mechanisms. Businesses must stay compliant with LUT filings, refund processes, and reporting accuracy to avoid penalties and cash-flow issues.
Whether you're exporting software services, manufacturing goods for global clients, or importing raw materials—understanding GST implications is crucial for operational and financial efficiency.
📣 Need Help with GST on Exports or Imports?
At Verotus Finlegal Solutions LLP, we assist:
- Exporters in LUT/Bond filing & refund claims
- Importers in ITC reconciliation and IGST optimization
- SEZ units with GST audits & compliances
- Filing and tracking RFD-01 refund applications
📍 Based in Kolhapur, Maharashtra
🌐 Visit: www.verotusllp.com
📞 Call: +91-7066336680
