IGST Refund on Export – A Complete Guide for Exporters
Table of Contents
Overview of IGST Refund on Export
The Integrated Goods and Services Tax (IGST) refund on export is a crucial mechanism in the Indian GST regime aimed at ensuring that exports remain zero-rated and competitive in the international market. When exporters pay IGST on inputs or input services used in export products or on goods cleared for export from an inland container depot (ICD), they become eligible to claim a refund of the IGST paid, making exports free from cascading tax effects.
The history of IGST refund aligns with the rollout of GST in India in July 2017, replacing multiple taxes and ensuring a uniform tax structure. The procedure and rules for IGST refund claims are provided in the CGST Act, Rules and further clarified under Foreign Trade Policy (FTP) and Handbook of Procedures (HBP) issued by the Directorate General of Foreign Trade (DGFT).
This refund mechanism supports export competitiveness by refunding the tax paid on exports under bond or LUT (Letter of Undertaking), without which exports become costly. The FTP/HBP reiterates these compliance norms to enable exporters to smoothly claim their rightful input credits and refunds.
Who Needs IGST Refund on Export?
- Exporters of goods and services who are registered under GST and export supplies outside India.
- Exporters who have paid IGST on goods or services used in manufacturing export products.
- Businesses that have exported goods under bond or LUT without payment of IGST but have accumulated input tax credit.
- Exporters clearing goods from customs ports, airports, inland container depots, and Export Oriented Units (EOUs).
- Companies availing duty exemption schemes linked to export and intending to recover taxes paid on inputs.
- Service exporters providing zero-rated supplies who have paid IGST on common input services.
IGST refund is applicable for both merchandise and service exports, ensuring smooth liquidity for exporters.
Key Benefits of IGST Refund on Export
- Improved Cash Flow: Exporters get timely refund of taxes paid, improving their working capital position.
- Boosts Export Competitiveness: Refund of IGST reduces export costs and boosts international market competitiveness.
- No Cascading Tax Effect: Ensures GST is a tax on value addition only, preventing tax on tax.
- Single Window Refund: Online refund claims and processing through GST portal and Customs Single Window facilitate ease of doing business.
- Compliance with WTO norms: IGST refund supports India’s zero-rated export policy aligned with international best practices.
- Transparency and Efficiency: Automation under GSTN and integration with Customs systems increases transparency and reduces delays.
- Supports MSME Exporters: Prompt refunds reduce liquidity challenges typical for micro, small, and medium-sized exporters.
- Legal Recourse and Appeal Mechanism: Exporters have clear channels to resolve refund delays or disputes under GST laws.
The IGST refund system fosters an export-friendly tax environment critical for India’s export growth.
Procedure to Claim IGST Refund on Export
- Ensure Registration: Exporter must be a GST-registered entity engaged in exporting goods/services.
- Export Supply Documentation: Maintain export invoices, shipping bills, bills of export, ICEGATE filings and transport documents.
- Maintain Input Tax Credit Records: Properly account for IGST, CGST, SGST, and input tax credits in GSTR-3B filings.
- File Refund Application: Login to the GST portal and file refund claim in FORM GST RFD-01 under “Export of Goods or Services or Both”.
Attach Required Documents: Attach export shipping bills, LUT/bond copy, tax payment challans, GST returns, and bank details.
- Refund Processing: Refund is processed by GST authorities within 60 days; can be tracked through GST portal.
- Customs Interface Verification: Customs authorities verify export shipments electronically via ICEGATE integration.
- Appeal and Revision: In case of rejection or delay, exporters can appeal against refund order or resubmit clarifications.
Following prescribed formats and timelines ensures smooth and successful refund processing
Documents Required for IGST Refund
Export Invoice issued for goods/services
Shipping Bill or Bill of Export from customs
Copy of LUT or Bond submitted to customs and GST authorities
Tax payment challan reflecting IGST payment (if applicable)
GST Returns filed (GSTR-1, GSTR-3B) substantiating export data
Bank account details for refund credit
Bank Realization Certificate (BRC) or Foreign Inward Remittance Certificate (FIRC) for exports under export proceeds realization
Export promotion council membership certificates (if claiming incentives)
Declaration on export of goods or services and self-certified documents
Update and Compliance for IGST Refund Claims
- Timely Filing: Refund claims should be made within two years from relevant tax period to avoid rejection.
- Accurate Return Filing: Consistent and error-free GST return filings (GSTR-3B, GSTR-1) are mandatory to substantiate claims.
- Maintain Transaction Records: Keep all export and tax payment documentation for audit and verification for at least five years.
- Update LUT or Bond: Renew LUT annually and maintain valid bonds to continue zero-rated export benefits.
- Respond Promptly: Address queries or deficiency letters from GST authorities promptly within stipulated deadlines.
- Systematic Reconciliation: Regularly reconcile export data between customs and GST systems to avoid discrepancies.
- Compliance with DGFT FTP Updates: Adhere to any changes in Foreign Trade Policy impacting processing or eligibility.
Why Choose Us for IGST Refund Assistance?
- Expertise in GST & Export Laws: We understand GST refund intricacies and coordinate with customs and GST authorities seamlessly.
- End-to-End Processing: From documentation, LUT filing, online refund submission to follow-up until refund receipt.
- Accurate Documentation: Avoid common pitfalls with expert verification of invoices, shipping, and GST filings.
- Timely Updates & Support: Stay informed of policy changes and refund timeline alerts.
- Customized Solutions: Tailored services for MSMEs, large exporters, and service providers.
- Efficient Dispute Resolution: Assist in handling refund rejections and appeals to maximize recoveries.
Frequently Asked Questions (FAQs)
What is IGST refund on export?
Refund of Integrated GST paid on goods and services used in export or on exports made under LUT/Bond.
Who can claim IGST refund on exports?
Any GST-registered exporter of goods or services who has paid IGST or exports under LUT/bond can claim.
What is LUT and its importance in export refunds?
LUT (Letter of Undertaking) allows exporters to export without paying IGST, facilitating cash flow.
What documents are necessary for IGST refund claim?
Export invoices, shipping bills, LUT/bond, GST returns, tax payment challans, bank details and export proofs.
How long does IGST refund processing take?
Typically within 60 days of filing if documents and data are accurate.
Can pending refunds be claimed?
Yes, refunds pending from earlier periods can be claimed within the prescribed time limits.
What if refund claim is rejected?
Exporters can file an appeal or comply with notices from the GST department to resolve issues.