Who needs LUT filing and GST refunds
Two kinds of businesses in Gurugram regularly come to us for this work.
- Exporters. Manufacturers and traders exporting goods through ICD Tughlakabad, ICD Garhi Harsaru or the airports, and IT, consulting and back-office companies on Golf Course Road and in Udyog Vihar billing clients abroad.
- Businesses with inverted duty. Where the GST rate on inputs is higher than the rate on the finished goods, credit keeps piling up in the electronic credit ledger and cannot be used.
Exports and supplies to SEZs are “zero-rated” under Section 16 of the IGST Act. This means the tax burden on the export should be zero, and the credit on your inputs should either be used or refunded.
Export with LUT or with payment of IGST
A zero-rated supply can be made in one of two ways. The choice affects your cash flow.
| Point | Without payment of IGST (under LUT) | With payment of IGST |
|---|---|---|
| Document needed | Valid LUT in RFD-11 for the year | No LUT needed |
| Tax on export invoice | Nil | IGST charged and paid through GSTR-3B |
| What is refunded | Accumulated input tax credit | IGST paid on exports |
| Refund route, goods | Application in RFD-01 | Shipping bill is treated as the refund application; refund processed through customs once GSTR-1 and GSTR-3B match |
| Refund route, services | Application in RFD-01 | Application in RFD-01 |
| Best suited for | Most service exporters, and exporters whose inputs are low | Exporters with large input credit who can use the IGST route |
Most service exporters choose the LUT route because it is simpler and no tax goes out of pocket. Exporters of goods sometimes prefer the IGST route because the refund on the shipping bill is largely automated. Some restrictions apply on the IGST route, for example where inputs were obtained under certain concessional schemes. We review your purchase pattern and advise which route fits.
LUT filing in RFD-11
- Filed online on the GST portal, once for each financial year.
- Signed by the authorised signatory with DSC or EVC, with details of two independent witnesses.
- Available to all registered persons except those prosecuted for tax evasion above the limit set in the rules.
- Export of goods must be completed within three months of the invoice date, and payment for services must be received within one year, or a longer period allowed by the department. If not, the IGST must be paid with interest.
We file the LUT before the year starts, so your first invoice in April is covered, and keep the acknowledgement ready for your bank and customs broker.
When a service is an export: Section 2(6) of the IGST Act
A service counts as an export only when all five conditions are met.
| Condition | What it means in practice |
|---|---|
| Supplier is located in India | Your registration and business are in India |
| Recipient is located outside India | The client’s business establishment receiving the service is abroad |
| Place of supply is outside India | Decided under Section 13 of the IGST Act, which differs by type of service |
| Payment received in convertible foreign exchange, or in Indian rupees where RBI permits | Keep FIRC or bank advice for every receipt |
| Supplier and recipient are not merely establishments of the same person | A branch billing its own foreign head office generally does not qualify |
Place of supply is the point most often disputed. Services such as those relating to goods physically made available in India, or to immovable property in India, can have their place of supply in India even when the client is abroad. For intermediary services, the Finance Act, 2026 removed the special rule that earlier placed the supply in India, so the general rule (location of the recipient) now applies. Each contract should still be checked on its facts.
Refund of accumulated ITC: how the amount is worked out
A refund of unused credit is claimed in Form RFD-01 on the GST portal, period by period, with a statement of invoices and supporting documents.
For exports under LUT (Rule 89(4)), in plain words: Refund = Net ITC × (Turnover of zero-rated supplies ÷ Adjusted total turnover)
Net ITC here means the credit on inputs and input services during the period, not capital goods. Adjusted total turnover is your total turnover in the state, excluding exempt supplies other than zero-rated supplies, for the same period.
For inverted duty structure (Rule 89(5)), in plain words: Refund = (Net ITC on inputs × Turnover of inverted rated supplies ÷ Adjusted total turnover) − Tax payable on those inverted rated supplies
Here, net ITC includes only inputs. Credit on input services and capital goods is excluded, which is why some inverted duty claims turn out smaller than expected. Refunds are also not allowed where the output supplies are nil-rated or fully exempt, or for certain goods notified by the government.
We prepare this working in Excel, tie it to GSTR-1, GSTR-3B and GSTR-2B, and keep the invoice-wise statement ready for verification.
Refund timelines and process
| Stage | What happens | Time limit |
|---|---|---|
| Filing | Application in RFD-01 with statements and documents | Within two years from the relevant date |
| Acknowledgement | RFD-02 if the application is complete | Within 15 days of filing |
| Deficiency memo | RFD-03 if documents or details are missing | Within 15 days of filing |
| Provisional refund | Up to 90% for zero-rated supplies; extended to inverted duty claims from November 2025 on a risk-based basis | Generally within seven days of acknowledgement for eligible claims |
| Show cause notice | RFD-08 if the officer proposes to reject any part | You reply in RFD-09 |
| Final order | RFD-06 sanctioning or rejecting the refund | Within 60 days of a complete application |
| Interest on delay | Payable to you if the refund is not paid within 60 days | As prescribed under Section 56 |
Common reasons refunds are cut or rejected
- Export invoice details in GSTR-1 not matching the shipping bill or the foreign exchange receipt.
- Wrong turnover figures in the Rule 89 formula, such as including domestic exempt supplies or excluding SEZ supplies.
- Input tax credit claimed in the refund that does not appear in GSTR-2B.
- Payment for services received after the permitted time, or without proper FIRC or bank advice.
- Place of supply of the service actually falling in India.
- Inverted duty claims that include input services or capital goods credit.
- No reply, or a weak reply, to the show cause notice in RFD-08.
If a refund is rejected, the order can be challenged before the appellate authority. Our appeal and case management service handles the appeal and the personal hearing.
How KSV handles your refund work
- Review. We look at your exports, purchases and returns to see what is refundable and which route suits you.
- LUT. Filed for the year before your first export.
- Working and documents. Rule 89 working, invoice statements, BRC, FIRC or shipping bills, and declarations.
- Filing and follow-up. Application filed, deficiency memos and notices answered, and the officer followed up until the RFD-06 order and bank credit.
- Monthly hygiene. Export invoices reported correctly in GSTR-1 every month through our GST return filing service, so future claims go smoothly.
If you have not yet taken an Importer Exporter Code, see our IEC registration service. For fees, visit the pricing page or contact us on WhatsApp with your GSTIN and export details.
Frequently asked questions
What is an LUT under GST?
A Letter of Undertaking in Form GST RFD-11 lets a registered person export goods or services, or supply to an SEZ, without paying IGST. In the LUT you undertake to complete the export and to pay tax with interest if the conditions are not met. Without it, you must pay IGST on the export and claim it back as a refund.
Do I have to file an LUT every year?
Yes. An LUT is valid for one financial year. A fresh LUT should be filed on the GST portal before the first export invoice of each new financial year. If you export without a valid LUT and without paying IGST, the department can demand the tax with interest.
Is there a fee for filing an LUT?
No. The GST portal does not charge a fee for an LUT, and it is filed online with a DSC or EVC. Our fee depends on whether we are only filing the LUT or also handling your refund claims.
I give software or consultancy services to a client abroad. Is it an export?
It is an export of services only if all five conditions in Section 2(6) of the IGST Act are met, including that the place of supply is outside India and payment is received in convertible foreign exchange or in Indian rupees where RBI permits. The place of supply depends on the type of service, so we check this before you start billing without GST.
What is the time limit to claim a GST refund?
A refund application must generally be filed within two years from the relevant date. For export of goods, the relevant date is linked to the date the goods leave India. For export of services, it is linked to the date of receipt of payment or the date of the invoice, depending on which comes later. For inverted duty, it is linked to the due date of the return for the period.
What is a deficiency memo?
If the officer finds the refund application incomplete, a deficiency memo in Form RFD-03 is issued. The application is then treated as not filed, and you must file a fresh application after correcting the deficiency. Time already taken still counts against the two-year limit, so we reply quickly.
Export refund kitne din mein aata hai?
The law requires a refund order within 60 days of a complete application. For zero-rated supplies and, now, inverted duty claims, up to 90% can be sanctioned provisionally after a risk-based check. Where the department delays beyond 60 days, interest becomes payable to you.
Can I get a refund if my purchases attract a higher GST rate than my sales?
Yes, if the accumulated credit is due to an inverted duty structure on inputs. Credit on input services and capital goods is not counted in the formula, and refund is not allowed for some notified goods. We work out whether a claim is worth filing before you spend time on documents.