A registered exporter of services can claim a GST refund in two ways: export under a Letter of Undertaking (LUT) without paying IGST and claim a refund of the unused input tax credit (ITC), or pay IGST on the export and claim that IGST back. Both claims are filed in Form RFD-01 on the GST portal within two years of the relevant date, usually the date the foreign payment is received.
Most service exporters use the LUT route, because it avoids blocking cash in IGST. The refund of accumulated ITC is then worked out with the formula in Rule 89(4) of the CGST Rules, covered below with an example.
Export refund at a glance
Point | Position |
|---|---|
Legal basis | Section 16 of the IGST Act (zero-rated supply) and Section 54 of the CGST Act |
Routes | LUT without IGST and refund of ITC; or IGST paid and refund of IGST |
Form | RFD-01, filed online with Statement 3 and supporting documents |
Formula (LUT route) | Rule 89(4): zero-rated turnover × Net ITC ÷ Adjusted total turnover |
Time limit | Two years from the relevant date (Section 54(1)) |
Provisional refund | 90% on a system risk basis for claims filed from 1 October 2025 (Rule 91(2)) |
Final order | Within 60 days of a complete application; 6% interest if delayed (Section 56) |
When a service counts as an export
A refund is only available if the supply is an export under Section 2(6) of the IGST Act. All five conditions must hold:
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 RBI permits.
The supplier and recipient are not merely establishments of the same person.
A foreign client alone does not settle it: the place of supply must also be outside India. For consultants, the full treatment is in GST on consultancy services.
LUT route or IGST route?
Point | Export under LUT | Export with IGST paid |
|---|---|---|
Tax at the time of export | None | IGST paid, usually from ITC |
What is refunded | Unused ITC on inputs and input services | The IGST paid on the export |
Refund formula | Rule 89(4) applies | No formula; refund of the IGST paid |
Cash flow | No cash blocked in tax | Cash blocked if IGST is paid in cash |
Filing requirement | LUT in RFD-11 for each financial year | None beyond the refund claim |
Our view: the LUT route suits almost every regular service exporter. File the LUT at the start of each financial year, before the first export invoice; an export invoice issued without a valid LUT has to carry IGST. Our LUT filing service handles the annual filing.
How the Rule 89(4) formula works
For exports under LUT, the maximum refund is: turnover of zero-rated supply of services × Net ITC ÷ Adjusted total turnover. Net ITC is credit on inputs and input services in the period; credit on capital goods is excluded.
Turnover of zero-rated supply of services is the value of export services for which payment was received in the period, adjusted for advances. Adjusted total turnover is the turnover in the state, excluding exempt supplies.
Example: an IT services firm in Gurugram has, for a quarter, export receipts of ₹60 lakh, domestic turnover of ₹20 lakh and Net ITC of ₹6 lakh.
Step | Amount |
|---|---|
Adjusted total turnover: ₹60 lakh + ₹20 lakh | ₹80,00,000 |
Formula: ₹60,00,000 × ₹6,00,000 ÷ ₹80,00,000 | ₹4,50,000 |
Credit ledger balance at the end of the quarter | ₹5,20,000 |
Refund claimable (lower of the two) | ₹4,50,000 |
The claim is capped at the lowest of the formula amount, the credit ledger balance at the end of the period, and the balance when you file. The claimed amount is debited from the credit ledger on filing, and re-credited through PMT-03 if any part is rejected.
Documents for the refund claim
Document | Purpose |
|---|---|
Statement 3 | Invoice-wise list of exports with foreign exchange receipt details |
FIRC, BRC or e-BRC | Proof of payment in convertible foreign exchange |
Export invoices | Marked as supply under LUT without payment of integrated tax |
LUT acknowledgement | Valid for the financial year of the exports |
Contracts or engagement letters | Support the recipient's location and place of supply |
Inward invoices and GSTR-2B | Support the Net ITC used in the formula |
How to file RFD-01 on the GST portal
Go to Services > Refunds > Application for Refund.
Select Refund of ITC on Export of Goods and Services without Payment of Tax, and the period.
Download and fill Statement 3, then upload it with the supporting documents.
Enter turnover and Net ITC; the portal computes the Rule 89(4) amount.
Enter the refund claimed, up to the lowest permitted amount, and the bank account.
Submit with DSC or EVC; the claimed ITC is debited from the credit ledger.
Track the ARN for the acknowledgement, any deficiency memo, and the orders.
The GSTN's refund user manual shows the screens for each refund type.
Timelines after filing
Stage | Timeline |
|---|---|
Acknowledgement (RFD-02) or deficiency memo (RFD-03) | Within 15 days of filing (Rule 90) |
Provisional refund (RFD-04) | 90% of the claim, within 7 days of acknowledgement, where eligible |
Final order (RFD-06) | Within 60 days of the complete application (Section 54(7)) |
Interest on delay | 6% a year beyond 60 days (Section 56) |
Following the 56th GST Council meeting, Rule 91(2) was amended so that, for claims filed from 1 October 2025, the system classifies each application by risk and low-risk claims receive the 90% provisional refund. CBIC Instruction No. 06/2025-GST, dated 3 October 2025, sets out the procedure. A deficiency memo restarts the clock, because the claim is refiled.
Common reasons export refunds are held up
Problem | Prevention |
|---|---|
Invoices without a valid LUT | File the LUT before the first export invoice of each year |
Foreign receipts not matched to invoices | Map each FIRC or e-BRC to invoices in Statement 3 |
Place of supply in India | Check the recipient's location and the nature of the service before invoicing |
Net ITC including capital goods | Exclude capital goods credit from the formula |
Mismatch with GSTR-3B | Report exports in Table 3.1(b) and credit in Table 4 consistently |
If your balance is excess cash rather than credit, the route and rules differ; see refund of excess cash ledger balance. Freelancers exporting services should also read GST registration for freelancers.
Want your export refund prepared, filed and followed through to the final order? Talk to Ankush's team about GST refund services at ComplyLocal →
