GST & International Trade
Crossing Borders with Confidence: Understanding GST on Exports, Imports and Refund Mechanisms
A practical guide to zero-rated exports, GST refund routes, LUT, IGST refunds, import GST, RCM on services and documentation for cross-border trade.
NRS Editorial Desk · Published 2026-06-09 · Updated 2026-08-25 · 4 min read
Businesses today are increasingly engaging in international trade and therefore understanding the GST implications on exports and imports has become essential. A clear understanding of the applicable provisions can help businesses ensure compliance, optimize working capital, and efficiently manage tax refunds.
In this article, we explain the GST treatment of exports and imports, including the available refund options and important points businesses should keep in mind while dealing with international trade.
Understanding GST on Export Transactions
Under GST, exports of goods and qualifying export services are zero-rated supplies. Eligible exporters may claim a refund of unutilised input tax credit under the LUT/bond route, or use the IGST-paid route where the current Section 16 notifications permit it. Refund entitlement remains subject to the statutory conditions, excluded goods, documentation and portal matching.
Refund Options Available to Exporters
The two statutory routes are outlined below, but they are not an unrestricted election in every case. The IGST-paid route is available only for the classes notified under Section 16(4), while the LUT/bond route and every refund claim remain subject to eligibility and procedural conditions.
1. Export under LUT/Bond without Payment of IGST
An eligible exporter can furnish a Letter of Undertaking (LUT) or bond and export goods or qualifying services without paying IGST. The exporter may then claim eligible unutilised Input Tax Credit (ITC) attributable to the zero-rated supplies through Form GST RFD-01, subject to the Act, rules and portal validations.
This route can reduce the upfront cash outflow that would arise from paying IGST before seeking a refund.
2. Export with Payment of IGST
With effect from 1 October 2023, Section 16(4) makes the IGST-paid refund route notification-controlled. Notification 01/2023-Integrated Tax, as amended by Notification 05/2023, generally notifies exports of goods or services and authorised supplies to SEZ units or developers, but excludes specified goods and remains subject to the prescribed conditions.
Where the notification covers the supply and the statutory conditions are fulfilled, the supplier may pay IGST and claim refund of the tax paid. Businesses should verify the current notification, product classification, export-duty position and portal eligibility for the relevant period before using this route.
Claiming GST Refund: Goods vs Services
| Export Type | Refund Available | How to Claim |
|---|---|---|
| Eligible export of goods with payment of IGST | Refund of IGST paid | For eligible goods, the shipping bill is normally treated as the refund application after the prescribed export, return and customs conditions are met. Specified or export-duty goods may be restricted. |
| Eligible export of services with payment of IGST | Refund of IGST paid | Where the notified route and export-of-service conditions are satisfied, file Form GST RFD-01 with the prescribed evidence, including receipt-of-proceeds documentation where applicable. |
| Export of Goods under LUT (Without Payment of IGST) | Refund of unutilized ITC | File Form GST RFD-01 on the GST portal and claim refund of accumulated ITC. |
| Export of Services under LUT (Without Payment of IGST) | Refund of unutilized ITC | File Form GST RFD-01 along with FIRC/BRC and other supporting documents. |
Important Note
For export of goods, the shipping-bill, Export General Manifest and GST-return details must satisfy the applicable matching requirements. For export of services, the export-of-service conditions and evidence of receipt of proceeds, commonly through FIRC/BRC or other accepted banking evidence, must be checked for the claim.
GST Treatment of Imports
Unlike exports, imports are taxable under GST.
Import of Goods
When goods are imported into India, GST is collected along with customs duties at the time of customs clearance.
Generally, the importer is required to pay:
Basic Customs Duty (BCD)
Integrated GST (IGST)
Other applicable duties and charges
The IGST paid on import of goods is generally available as Input Tax Credit (ITC), subject to the conditions prescribed under the GST law.
Import of Services
When services are procured from a supplier located outside India and the place of supply is in India, the transaction is generally treated as an import of services under GST. In such cases, GST is payable by the recipient in India under the Reverse Charge Mechanism (RCM).
Under RCM, the recipient is required to discharge the applicable IGST directly to the Government and may avail the tax paid as Input Tax Credit (ITC), subject to eligibility.
Common examples of import of services include cloud computing services, foreign consultancy and professional services, technical support, online advertising, digital marketing services, royalty payments, and management or administrative services received from overseas entities.
Important Note
Under Schedule I of the CGST Act, 2017, Import of services by a taxable person from a related person or from any of its establishments located outside India, for business purposes, is treated as a supply, even if no consideration is charged. Accordingly, such transactions may attract GST under the Reverse Charge Mechanism (RCM).
Key Considerations for Businesses Engaged in International Trade
Businesses involved in exports and imports should keep the following points in mind:
Maintain proper documentation such as invoices, shipping bills, Bills of Entry, LUTs, FIRC/BRC, and customs records.
Ensure timely filing of GST returns to avoid delays in refund processing and ITC availment.
Verify refund eligibility and supporting documents before filing refund applications.
Monitor Input Tax Credit reconciliations to ensure credits are correctly reflected and claimed.
Evaluate Reverse Charge Mechanism (RCM) applicability on services received from overseas suppliers.
Review transactions with foreign group entities carefully, as certain services may be taxable even when no consideration is charged.
Maintain consistency between customs records and GST returns to facilitate smooth processing of export refunds.
Keep track of changes in GST and customs regulations that may impact international transactions.
Conclusion
As businesses expand beyond domestic markets, GST treatment depends on the exact supply, place-of-supply rules, current notifications and records. Exports may qualify for zero-rating and refunds, while imports of goods and services may attract GST; input tax credit is available only where its conditions are satisfied. Documentation, timely returns and transaction-specific review reduce avoidable filing and refund issues.