How to Correctly Classify Your Export Invoices as "Zero-Rated" Under India's GST

By Invoicessy Team September 26, 2025

Introduction

Under India's Goods and Services Tax (GST) regime, exports and supplies to Special Economic Zones (SEZs) are classified as "zero-rated" supplies. This means they attract a 0% tax rate while allowing businesses to claim Input Tax Credit (ITC) on inputs used. Proper classification is crucial for compliance and to avail GST benefits. This guide explains the complete process with official references.

1. Legal Framework for Zero-Rated Supplies

1.1 Definition Under the IGST Act

Section 16(1) of the IGST Act, 2017 defines zero-rated supplies as:

Exports of goods or services
Supplies to SEZ developers or units

These supplies are taxed at 0% GST, allowing full ITC recovery (CBIC).

1.2 Why Zero-Rating Matters

Prevents tax cascading
Keeps Indian exports globally competitive
Allows refund of input taxes

2. Zero-Rated Exports: Complete Process

2.1 Qualifying Conditions

An export qualifies as zero-rated if:

Supplier is located in India
Recipient is outside India
Place of supply is outside India

(Sections 2(5), 2(6), and 11-13 of IGST Act)

2.2 Two Export Options

Export under LUT/Bond:
- Submit Letter of Undertaking (LUT) in Form GST RFD-11
- No IGST payment required
- Claim ITC refund later
Export with IGST Payment:
- Pay IGST at applicable rates
- File refund claim using Form RFD-01

2.3 Key Documents Required for Zero-Rated Exports

Document	Purpose	Issued By	GST Relevance
Letter of Undertaking (LUT)	To export without paying IGST	Exporter (Form GST RFD-11)	Mandatory for zero-rated exports without tax payment
Shipping Bill/Bill of Export	Proof of export of goods	Customs Department	Serves as proof of export for GST refund
Bill of Lading/Airway Bill	Evidence of shipment	Shipping Company/Airline	Supports export claim with shipment details
Export Invoice	Commercial document for transaction	Exporter	Must contain specific GST-related declarations
Foreign Inward Remittance Certificate (FIRC)	Proof of receipt of foreign exchange	Authorized Dealer Bank	Required for service exports to claim refund
Bank Realization Certificate (BRC)	Confirmation of foreign currency receipt	Exporter's Bank	Alternative to FIRC for some cases
GSTR-1 Return	Details of outward supplies	Exporter (Filed on GST Portal)	Must correctly report zero-rated supplies in Tables 6A/6B

2.4 Invoice Requirements

For exports under LUT:
"SUPPLY MEANT FOR EXPORT UNDER LUT WITHOUT PAYMENT OF IGST"

For exports with IGST payment:
"SUPPLY MEANT FOR EXPORT ON PAYMENT OF IGST"

Must include:

Shipping bill number and date
Port code
Correct HSN/SAC codes

3. Supplies to SEZs: Special Considerations

3.1 SEZ Supply Requirements

SEZ must be government-notified
Must be for authorized operations
Requires SEZ authority endorsement

3.2 Invoice Captions

For LUT-based supplies:
"SUPPLY TO SEZ UNDER LUT WITHOUT PAYMENT OF IGST"

For IGST-paid supplies:
"SUPPLY TO SEZ ON PAYMENT OF IGST"

Must mention:

SEZ unit/developer GSTIN
SEZ address
Authorization details

4. Compliance and Refund Process

4.1 GSTR-1 Reporting

Table 6A: Export invoices
Table 6B: SEZ supplies
Ensure invoice details match shipping documents

4.2 Refund Timeline

Normally processed within 60 days
Subject to document verification
Can track status on GST portal

5. Common Mistakes to Avoid

Incorrect invoice captions
Missing shipping bill details
Late LUT submission/renewal
Wrong place of supply determination
Incomplete SEZ documentation

6. Conclusion

Properly classifying exports and SEZ supplies as zero-rated requires:

Understanding legal provisions
Maintaining accurate documentation
Using correct invoice formats
Timely filing of returns and refund claims

By following these guidelines, businesses can ensure GST compliance while maximizing their working capital through ITC refunds.

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