Should I export services under an LUT or pay IGST and claim a refund?
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Short answer
Most service exporters use the Letter of Undertaking (LUT) route, because it lets a registered person invoice without IGST and claim a refund only of unutilised input tax credit, under section 16(3) of the IGST Act and rule 96A of the CGST Rules.12 Section 16(4) also allows notified exports on payment of IGST with a refund of the tax paid, but that ties up cash until the refund arrives and the claim must be made within two years of the relevant date.13
Every registered service exporter makes this choice, often without noticing. A translation agency, a SaaS company and a solo data analyst all reach the same point: their export is zero-rated, but there are two ways to handle it on the invoice.
What are the two routes?
Section 16 of the IGST Act gives a registered exporter two options for a zero-rated supply:1
- Under an LUT (section 16(3)). You file a Letter of Undertaking in FORM GST RFD-11 before exporting, invoice without IGST, and may claim a refund of unutilised input tax credit (ITC).12
- On payment of IGST (section 16(4)). You charge and pay IGST on the export invoice, then claim a refund of the IGST paid, for notified persons or supplies.1
Each route has its own rule 46 endorsement on the invoice: "under bond or letter of undertaking without payment of integrated tax", or "on payment of integrated tax".4
How do the routes compare?
The routes compare as follows, under sections 16 and 54 and rules 89 and 96A:135
| Point | LUT route | IGST-paid route |
|---|---|---|
| Tax paid on the export invoice | None | IGST paid by you |
| What you claim back | Unutilised ITC, by the rule 89(4) formula | The IGST paid |
| Cash flow | Nothing paid upfront | Cash tied up until the refund |
| Annual filing | LUT each financial year | None for the route itself |
| Risk if the client never pays | Tax with interest under rule 96A | Refund depends on proof of payment |
Which exporters choose which route?
Most freelancers, agencies and SaaS businesses choose the LUT route because nothing is paid upfront and the ITC refund formula already returns credit on inputs and input services in proportion to export turnover.5 The LUT route is also the only one covered by the rule 96A undertaking, so an LUT holder must make sure each client pays within the rule 96A period.2
The IGST route is mostly used where an LUT was missed and the exporter prefers certainty over relying on condonation, or where an adviser recommends it for a specific reason. See forgot to file an LUT.
What deadlines apply to the refund?
A refund under either route must be claimed within two years from the relevant date under section 54(1) of the CGST Act.3 For services exported, the relevant date turns on when payment in foreign exchange is received and when the service was completed.3 The GST refund guide and the IGST-paid route guide cover the forms and evidence. A chartered accountant (CA) can model the cash-flow difference for your volumes.
How did we verify this?
We checked this page against the sources below on 28 October 2026. Read our methodology or report an error.
- [1]CBIC: IGST Act, 2017, section 16 (zero rated supply)
- [2]CBIC: CGST Rules, 2017, rule 96A (export under bond or Letter of Undertaking)
- [3]CBIC: CGST Act, 2017, section 54 (refund of tax)
- [4]CGST Rules, 2017 (consolidated), rule 46 (tax invoice), export proviso, CBIC
- [5]CBIC: CGST Rules, 2017, rule 89 (application for refund), sub-rule (4)
Frequently asked questions
Does the foreign client pay the IGST if I choose the IGST route?+
In practice the exporter bears it until the refund, because foreign clients do not expect Indian GST on an export invoice. Agree pricing on that basis.
Is there a minimum refund amount?+
Yes. Section 54(14) of the CGST Act says no refund is paid if the amount is less than ₹1,000.3
Can I switch from the IGST route to an LUT during the year?+
Yes. Rule 96A only requires the LUT before the exports it covers, so you can file one and use it for later invoices.2
This page is general information for Indian service exporters, not tax or legal advice. Rules change and outcomes depend on your facts, so confirm with a chartered accountant before acting.
Keep reading
How do you file an LUT for export of services on the GST portal?
Step-by-step guide to filing a Letter of Undertaking in FORM GST RFD-11 for export of services: eligibility, validity, late filing and the ARN on invoices.
GSTHow do you export services by paying IGST instead of filing an LUT?
How the IGST-paid route works for service exporters without an LUT: the October 2023 change, invoice wording, GSTR-3B reporting and the RFD-01 refund with Statement 2.
GSTHow do you claim a GST refund on export of services?
The two GST refunds open to service exporters, the two-year deadline, documents, the RFD-01 steps and processing times, including rule changes from 1 November 2026.
GSTHow is the refund of unutilised ITC calculated for export of services?
How exporters of services under an LUT calculate the refund of unutilised input tax credit under rule 89(4): each term defined, a worked example, and 2026-27 changes.