Export Invoice Under GST: LUT, Refund and Compliance Guide

What Counts as an Export Under GST

Under Section 2(5) of the IGST Act, "export of goods" means taking goods out of India to a place outside India. "Export of services" under Section 2(6) is more nuanced and requires that all five conditions be satisfied: 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 (or in Indian rupees where permitted by RBI), and the supplier and recipient are not merely establishments of the same person.

If any one condition fails — for example, if a freelancer is paid by an Indian branch of a foreign company — the transaction may not qualify as an export and could attract regular GST.

Zero-Rated Supply Explained

Exports and supplies to Special Economic Zones (SEZ) are "zero-rated" under Section 16. This is different from "exempt" or "nil-rated" supply. Zero-rating allows you to claim a refund of accumulated ITC, whereas exempt supplies do not. This distinction is crucial because it directly affects your working capital.

The Two Routes for Exporting

There are two ways to make a zero-rated supply, and you must choose one before raising your export invoice.

Route 1: Export Under LUT (Without Payment of IGST)

A Letter of Undertaking (LUT) lets you export goods or services without paying IGST upfront. You simply commit, via Form GST RFD-11, that you will fulfil all export conditions. This is the most popular route because it avoids blocking funds in tax that you would later reclaim.

Key points about the LUT:

• It is filed online on the GST portal under Services > User Services > Furnish Letter of Undertaking.
• It is valid for one financial year and must be renewed every year, ideally before 1 April.
• Almost all exporters are eligible, except those prosecuted for tax evasion exceeding Rs 250 lakh.
• No physical submission or bond/bank guarantee is generally required for the LUT route.

Under this route, you export and then claim a refund of unutilised ITC under Section 54.

Route 2: Export With Payment of IGST

Alternatively, you can pay IGST on the export invoice using your ITC or cash ledger, and then claim a refund of the IGST paid. For goods, the shipping bill itself is treated as the refund application, and the refund is processed automatically once the GSTR-1 and GSTR-3B data match with ICEGATE customs records. This route is simpler for goods exporters with a strong ITC balance.

What an Export Invoice Must Contain

A compliant export invoice follows Rule 46 of the CGST Rules, with additional export-specific requirements. Mandatory fields include:

• A consecutive serial number (maximum 16 characters).
• The supplier's name, address, and GSTIN.
• The recipient's name, address, and country.
• An endorsement clearly stating the route chosen: either "SUPPLY MEANT FOR EXPORT ON PAYMENT OF INTEGRATED TAX" or "SUPPLY MEANT FOR EXPORT UNDER LUT WITHOUT PAYMENT OF INTEGRATED TAX".
• Description of goods or services, quantity, and HSN/SAC code.
• Total value, and the currency of the invoice (you can invoice in foreign currency).
• For goods: the shipping bill number and date, and port code (where available at the time of invoicing).
• The conversion rate to INR, since GST records are maintained in rupees.

Example

Suppose a Pune-based software freelancer raises an invoice of USD 5,000 to a client in the United States under LUT. The invoice would carry the endorsement about supply under LUT without payment of IGST, show the value as USD 5,000, and also record the INR equivalent using the applicable RBI/customs exchange rate, say Rs 4,15,000. No GST is charged, but the freelancer can claim refund of ITC on laptops, software subscriptions, and internet expenses used for the service.

Filing and Reporting Export Invoices

Export invoices must be reported in your monthly or quarterly returns.

In GSTR-1

Exports are reported in Table 6A of GSTR-1. You must specify whether they were made with or without payment of tax, along with shipping bill details for goods. Accuracy here is critical, because the refund engine matches this data with customs and GSTR-3B.

In GSTR-3B

The export values and any IGST paid are reported in Table 3.1(b) (zero-rated supplies). The figures in GSTR-1 and GSTR-3B must reconcile; mismatches are the leading cause of refund delays.

E-Invoicing for Exports

If your aggregate turnover exceeds the e-invoicing threshold (currently Rs 5 crore), export invoices must also be reported to the Invoice Registration Portal (IRP) to generate an Invoice Reference Number (IRN). The e-invoice schema has a specific section for export details, including shipping bill and currency.

Claiming the Export GST Refund

Refund of Unutilised ITC (LUT Route)

File Form GST RFD-01 on the portal under the category "Refund of ITC on export of goods and services without payment of tax." The refund amount is computed using a formula prescribed in Rule 89(4), which apportions ITC based on the ratio of zero-rated turnover to total turnover. You must upload supporting documents such as a statement of invoices (Statement 3), FIRC/BRC for service exports, and a declaration.

Refund of IGST Paid (With Payment Route)

For goods, no separate RFD-01 is needed — the shipping bill acts as the application, and the refund flows automatically to your bank account once data matches. For services exported with payment of tax, you file RFD-01 along with bank realisation certificates (BRC/FIRC).

Time Limit

The refund application must generally be filed within two years from the relevant date as defined under Section 54. For service exports, the relevant date is usually the date of receipt of payment in convertible foreign exchange or the date of invoice, depending on which is later.

Common Mistakes to Avoid

Forgetting to Renew the LUT

The LUT lapses at the end of each financial year. If you export in April without a fresh LUT, the supply technically does not qualify for the without-payment route, and you may be asked to pay IGST with interest. Always renew before the new financial year begins.

Missing the Mandatory Endorsement

Leaving out the export endorsement on the invoice is a frequent error. Without it, officers may question whether the supply was correctly treated as zero-rated.

Mismatch Between GSTR-1, GSTR-3B and Shipping Bill

Differences in invoice numbers, shipping bill numbers, or taxable values across these documents stall automatic IGST refunds. Reconcile before filing, and ensure the shipping bill number matches exactly.

Not Receiving Payment in Foreign Exchange for Services

Service exporters often overlook that payment must be received in convertible foreign exchange (or permitted INR) and evidenced by FIRC/BRC. Without proof of realisation, the refund of ITC can be denied.

Treating Supplies to SEZ Incorrectly

Supplies to SEZ units are zero-rated too, but require endorsement by the authorised SEZ officer. Many treat them as ordinary domestic supplies and lose the benefit.

Claiming Refund Beyond the Two-Year Limit

Refund claims filed after two years from the relevant date are time-barred. Track your realisation dates carefully, especially for services where payment trickles in over months.

Incorrect Currency Conversion

Using an inconsistent exchange rate between your invoice, accounting, and GST returns creates reconciliation problems. Apply the rate notified by CBIC/customs for the relevant date and document your method.

Practical Compliance Checklist

Before each export cycle, confirm that your LUT is active, your invoice carries the correct endorsement and currency, your HSN/SAC is accurate, your shipping bill details are captured (for goods), and your GSTR-1 and GSTR-3B will reconcile. Maintain a dedicated file of FIRCs/BRCs, shipping bills, and refund acknowledgements. This discipline turns the refund process from a stressful chase into a routine, predictable inflow that supports your working capital.