and LUTs are examples of documents that serve as evidence of a taxpayer's commitment to exporting. Here, we provide a detailed explanation of when to choose bonds over LUTs. Not only that, but there are also instructions on how to get a refund of IGST that was paid on exports.

Background to Exports and GST

Any developing economy's government has the goal of increasing its export market. The same is justified by the need to preserve the balance of payments, foster employment, and accelerate economic growth. The government encourages commerce by giving exporters specific privileges and reliefs. Exporters can take advantage of these advantages and reliefs and conduct profitable and free commerce as a result. On the same vein, exporters receive a number of perks from the government through the GST system. When an export ships products or services out of India, there is no tax incidence (net effect).

Under GST regime, the exporter has either of the two options:

  • Exports made with a bond exempt from tax

  • Export while paying taxes, then subsequently request a refund

Brief on refund of IGST paid on Exports

The exporter can choose to pay IGST on exports and then request a refund under the GST laws. The export dealers now have an easier way to submit a refund claim. There is no requirement to file a refund application (GST RFD-01) separately for the export of goods, services, or both.

The exporter's shipping cost is a claim for a reimbursement in and of itself. The exporter adds IGST at the appropriate rate to the export invoice (rates specified for different goods and services). The following two items are eligible for a refund after IGST payment:

IGST paid on exports of goods or services; input tax credits on commodities and services that went unused.

The law states that once the following two requirements are met, the shipping charge will be treated as a refund claim.

The individual transporting export items must submit an export manifest, and the applicant must have correctly submitted the returns on form GSTR-3B. On submitting table 6A in form GSTR-1, a refund is started.

The department processes the refund after receiving the above documents properly.

Read more about LUT Bill for Letter of undertaking (LUT) Filling