GST Refund Calculation explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
When you export under LUT or bond, you pay no IGST on the export, so the refund you claim is the input tax credit (ITC) stuck in your credit ledger. How much of it comes back is set by the Rule 89(4) formula. This page takes one exporter through a full quarter, invoice by invoice, so you can follow each number from the shipping bill to the refund figure.
Refund under LUT = (Turnover of zero-rated goods + Turnover of zero-rated services) × Net ITC ÷ Adjusted Total Turnover, under Rule 89(4) of the CGST Rules. Take each export at the lower of FOB and invoice value, cap it at 1.5 times the value of like goods sold domestically, and count services on a payment-received basis. The refund actually allowed is the least of the formula amount and the credit-ledger balance at period end and on the filing date. The claim goes in RFD-01 with Statement 3.
The facts for the illustration
A manufacturer in one State exports goods and some consulting services under LUT. It files a refund for the quarter April–June 2026. All figures are round and illustrative.
| Item | ₹ |
|---|---|
| Domestic taxable supplies of goods | 28,00,000 |
| Domestic taxable supplies of services | 4,00,000 |
| Exempt supplies | 2,00,000 |
| ITC on inputs | 7,20,000 |
| ITC on input services | 1,80,000 |
| ITC on capital goods | 2,50,000 |
The formula is only half the job. Getting each input right is where claims succeed or fail, and our GST refund calculator runs the same steps if you want a first figure for your own quarter.
Step 1: value each export invoice
The Explanation to Rule 89(4), inserted by Notification 14/2022-CT, says the value of goods exported is the FOB value in the shipping bill or the value in the tax invoice, whichever is less. Do this invoice by invoice, not on totals.
| Invoice | Invoice value (₹) | FOB in shipping bill (₹) | Value taken (₹) |
|---|---|---|---|
| EXP-101 | 20,00,000 | 19,50,000 | 19,50,000 |
| EXP-102 | 25,00,000 | 25,00,000 | 25,00,000 |
| EXP-103 | 15,50,000 | 16,00,000 | 15,50,000 |
| Total | 60,00,000 |
These are the same values you report in Statement 3. See Statement 3 for export without payment for the column layout.
Step 2: apply the 1.5× cap
"Turnover of zero-rated supply of goods" is the export value or 1.5 times the value of like goods domestically supplied by the same or a similarly placed supplier, whichever is less. Say the same quantity of like goods sells domestically for ₹44,00,000. 1.5 × 44,00,000 = ₹66,00,000, which is more than ₹60,00,000, so the cap does not bite. Zero-rated goods turnover = ₹60,00,000.
Step 3: work out zero-rated services turnover
For services, Rule 89(4)(D) does not use invoices. It takes payments received in the period, adds services completed in the period against advances received earlier, and subtracts advances received for work not yet completed.
| Services item | ₹ |
|---|---|
| Payments received in the quarter for export services | 9,00,000 |
| Add: work completed this quarter against earlier advances | 0 |
| Less: advances received for work not yet completed | 1,00,000 |
| Zero-rated services turnover | 8,00,000 |
Export of services refunds also need the proceeds realised, backed by BRC/FIRC or e-BRC.
Step 4: build Adjusted Total Turnover
ATT is the turnover in the State excluding services, plus zero-rated and other services, minus exempt supplies other than zero-rated supplies. The detail is in adjusted total turnover for GST refund.
| ATT component | ₹ |
|---|---|
| Zero-rated goods (after Steps 1–2) | 60,00,000 |
| Domestic taxable goods | 28,00,000 |
| Exempt supplies | 2,00,000 |
| Zero-rated services (Step 3) | 8,00,000 |
| Domestic taxable services | 4,00,000 |
| Less: exempt supplies | (2,00,000) |
| Adjusted Total Turnover | 1,00,00,000 |
Step 5: take Net ITC
Under Rule 89(4), Net ITC is ITC availed on inputs and input services in the period. Capital goods are left out.
Net ITC = 7,20,000 + 1,80,000 = ₹9,00,000. The ₹2,50,000 on capital goods stays out. More on this in Net ITC meaning in the GST refund formula.
Step 6: run the formula
Refund = (60,00,000 + 8,00,000) × 9,00,000 ÷ 1,00,00,000 = 68,00,000 × 0.09 = ₹6,12,000
Step 7: the least-of-three test and the ledger debit
The formula gives a ceiling. The amount allowed is the least of: the formula amount, the credit-ledger balance at the end of the quarter (after GSTR-3B), and the balance when you file.
| Test | ₹ |
|---|---|
| Formula amount | 6,12,000 |
| Ledger balance at end of June, after GSTR-3B | 7,40,000 |
| Ledger balance on filing day | 6,90,000 |
| Refund claimable | 6,12,000 |
The claim is then debited from the credit ledger, IGST first, then CGST and SGST equally. With filing-day balances of IGST ₹3,00,000, CGST ₹1,95,000 and SGST ₹1,95,000, the debit is IGST ₹3,00,000, then ₹1,56,000 each from CGST and SGST. Total ₹6,12,000.
Provisional refund. For zero-rated supplies, s.54(6) allows 90% on a provisional basis. Here that is 90% × 6,12,000 = ₹5,50,800. Since the substituted Rule 91(2) (w.e.f. 01.10.2025), the RFD-04 order is due within seven days of acknowledgement, based on system risk evaluation. The officer may, for recorded reasons, decline provisional refund and go straight to the final order.
Variant: when the 1.5× cap bites
Change one fact: like goods sell domestically for ₹36,00,000. The cap is 1.5 × 36,00,000 = ₹54,00,000, which is below ₹60,00,000, so zero-rated goods turnover becomes ₹54,00,000. Circular 147/03/2021-GST says the same capped value goes into ATT, so ATT falls by ₹6,00,000 to ₹94,00,000.
Refund = (54,00,000 + 8,00,000) × 9,00,000 ÷ 94,00,000 = ₹5,93,617 (rounded).
The cap cost ₹18,383 of refund here. Exporters selling abroad at a clear premium should keep the domestic price evidence on file.
Need a second pair of eyes on the working?
Most LUT refund deficiencies come from the inputs: FOB values not matched to shipping bills, services counted on invoices instead of receipts, or capital-goods credit slipped into Net ITC. We rebuild the working from GSTR-1, GSTR-3B and ICEGATE data and file it with Statement 3. Start with the GST refund calculator, then see our LUT export refund service or the GST refund hub.
Key takeaways
- Value each export at the lower of FOB and invoice value, invoice by invoice.
- Test the 1.5× domestic-value cap; if it bites, use the capped value in ATT as well.
- Services count on a payment-received basis, adjusted for advances.
- Net ITC under Rule 89(4) is inputs plus input services; capital goods are out.
- The refund is the least of the formula amount and the two ledger balances, and 90% can come provisionally.
Read next
- GST refund formula explained: Rule 89(4) and 89(5)
- Rule 89(4) refund formula and the 1.5 times value cap
- How to claim a GST refund on exports without payment (LUT)
- GST refund calculation in Excel
Disclaimer: Positions stated as on 30 September 2026, based on the CGST Act and Rules as amended, the Finance Act 2026, and the ICAI Handbook on Refunds under GST (January 2026). Verify current notifications before filing.