GST Refund 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.
A service exporter usually pays GST on rent, software subscriptions, professional fees and other inputs but charges no GST to the overseas client. That leaves credit piling up in the ledger. The GST refund on export of services is how you get that credit back, and it depends on two things: whether the supply really is an "export of services", and whether the foreign payment has actually come in.
A service counts as an export only if all five conditions in section 2(6) of the IGST Act are met, including receipt of payment in convertible foreign exchange (or INR where RBI permits). Most service exporters supply under LUT (FORM GST RFD-11) and claim the accumulated ITC in FORM GST RFD-01 using the Rule 89(4) formula. The export turnover in that formula is based on payments received during the period, and the claim must be filed within two years of the date the payment was received.
Step one: does your supply qualify as an export of services?
Section 2(6) of the IGST Act sets five conditions. All five must hold for every invoice you put into the claim.
| Condition | What it means in practice |
|---|---|
| (i) Supplier located in India | Your registered place of business is in India |
| (ii) Recipient located outside India | The client's business establishment receiving the service is abroad |
| (iii) Place of supply outside India | Worked out under section 13 of the IGST Act |
| (iv) Payment in convertible foreign exchange, or in INR where RBI permits | Evidenced by a BRC, FIRC or e-BRC |
| (v) Not merely establishments of a distinct person | Your own branch abroad does not count as a separate client |
Condition (iii) is where most disputes start. The default rule in section 13(2) puts the place of supply at the location of the recipient, but specific rules override it, for example for services on goods that must be physically made available to the supplier, or services tied to immovable property or events in India. If a specific rule puts the place of supply in India, the supply is not an export, however the client pays.
Two developments help. First, Circular 161/17/2021-GST clarifies that an Indian company and a foreign company are separate legal persons, so services to a foreign parent or group company are not hit by condition (v), provided the other conditions are met. Second, section 13(8)(b) of the IGST Act (intermediary services) was omitted with effect from 30.03.2026. Intermediary services supplied on or after that date follow the default rule and can qualify as exports. See intermediary services and the 2026 refund position.
If you want someone to test your contracts against these conditions before you file, our LUT export refund team does exactly that.
Step two: choose the route
| Point | Under LUT (no IGST charged) | With payment of IGST |
|---|---|---|
| What you claim | Accumulated ITC on inputs and input services | The IGST paid on the export invoice |
| Form | RFD-01, "export of services without payment of tax" | RFD-01, under Rule 96(9) |
| Capital goods ITC | Not refundable through the formula | Can be used to pay the IGST |
| Cash-flow effect | No tax paid up front | Tax paid first, refunded later |
Unlike goods, there is no shipping bill for services, so both routes go through RFD-01 and the jurisdictional GST officer. Most service businesses prefer the LUT route because it avoids paying tax and waiting for it to come back. The LUT is filed online in RFD-11 before the financial year's exports begin and is accepted on generation of the ARN. The mechanics are covered in LUT for exporters.
Step three: compute the refund
Rule 89(4) gives the formula:
Refund = Turnover of zero-rated supply of services × Net ITC ÷ Adjusted Total Turnover
For services, the "turnover of zero-rated supply of services" is not the invoice value for the period. It is:
- payments received during the period for zero-rated services, plus
- services completed during the period for which an advance was received earlier, minus
- advances received during the period for services not yet completed.
"Net ITC" is credit on inputs and input services availed during the period. Credit on capital goods is left out.
Illustration: In a quarter, a design studio receives ₹41 lakh from foreign clients. Of this, ₹6 lakh is an advance for work that will be completed next quarter. The studio also completes a project this quarter for which a ₹4 lakh advance came in last quarter. Domestic turnover is ₹21 lakh and Net ITC is ₹4.2 lakh.
- Zero-rated turnover = 41 + 4 − 6 = ₹39 lakh.
- Adjusted total turnover = 39 + 21 = ₹60 lakh.
- Refund = 39 × 4.2 ÷ 60 = ₹2.73 lakh.
Run your own numbers on the GST refund calculator and compare them with the worked cases in GST refund calculation for export without payment.
Step four: file RFD-01 with the right proof
Rule 89(2)(c) requires a statement of invoice numbers and dates with the relevant Bank Realisation Certificates or Foreign Inward Remittance Certificates. On the portal this goes into Statement 3, which is validated against GSTR-1. The Refunds Handbook notes that where FIRC/e-BRC details are not furnished, the application can be treated as incomplete, so get the certificates before you file.
Typical file for a service exporter:
- Statement 3 with invoice-wise FIRC/e-BRC details (how to prepare Statement 3);
- the LUT acknowledgement;
- copies of export invoices and the service contracts;
- the Net ITC working and the declarations and undertakings under Rule 89(2).
After filing, the officer acknowledges the claim in RFD-02 or issues a deficiency memo in RFD-03 within 15 days. Zero-rated claims qualify for a 90% provisional refund under section 54(6); since 01.10.2025 Rule 91(2) provides for the RFD-04 order within 7 days of acknowledgement, based on system-based risk evaluation. The final order in RFD-06 is due within 60 days of a complete application.
Time limit and the payment trap
Under Explanation 2(c) to section 54, the relevant date for services is the date the payment is received (or the invoice date where payment came in advance). The two-year clock runs from there.
The flip side sits in Rule 96A. If you exported under LUT and the payment is not received within one year of the invoice, or the FEMA period with any RBI extension if that is later (or a further period the Commissioner allows), IGST becomes payable with interest within fifteen days after that period ends. Track old receivables; they can turn a refund file into a demand.
Need help with a service export refund?
Service claims tend to fail on place-of-supply arguments, missing FIRCs or a formula built on invoices rather than receipts. We check the contracts, rebuild the payment-based turnover and file the RFD-01 so the officer has little to question. See our export refund under LUT service or the wider GST refund on exports page.
Key takeaways
- Every invoice in the claim must meet all five section 2(6) IGST conditions; place of supply is the usual point of dispute.
- Most service exporters use the LUT route and claim accumulated ITC in RFD-01; the IGST-paid route for services also goes through RFD-01 (Rule 96(9)).
- The formula counts payments received, adjusted for advances, not invoices raised.
- BRC/FIRC/e-BRC details are part of the application, not an afterthought.
- Two years from receipt of payment is the outer limit; unpaid invoices under LUT can trigger IGST with interest under Rule 96A.
Read next
- GST refund for exporters: both routes explained
- GST refund for software exporters and IT companies
- GST refund for self-employed professionals exporting services
- Rule 89(4): the zero-rated refund formula
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.