Updated for the changes notified on 26 October 2026 after the 57th GST Council meeting.
An exporter who ships under a Letter of Undertaking pays no IGST on the export, but still pays GST on everything bought to make it. That input tax credit builds up in the ledger with nothing to set it off against, and the only way to get it back is a refund in Form GST RFD-01. Done properly, the claim is routine, and from November 2026 most of it can come back within days of filing. Done carelessly, it gets stuck in deficiency memos for months. This note is the checklist we work through before an export refund is filed.
Two routes, two different processes
It helps to be clear first which kind of refund you are claiming.
- Export with payment of IGST. For goods, the shipping bill itself is treated as the refund application, and the IGST comes back through the customs system once the shipping bill, the export general manifest and Table 6A of GSTR-1 match. No RFD-01 is filed. Problems here are usually data mismatches between GSTR-1 and the shipping bill. If you have a pending demand to recover IGST refunds under Rule 96(10), because inputs were imported under Advance Authorisation or a similar scheme, note that CBIC’s Circular No. 264/10/2026-GST, following the Supreme Court’s August 2026 ruling, treats the omission of that rule as effective from 23 October 2017, so pending demands on that ground cannot be sustained.
- Export under LUT or bond, without payment of tax. The refund is of the accumulated input tax credit, claimed under Section 54(3) read with Rule 89(4), in RFD-01. This note deals with this route.
Before the first export of the year
The LUT is filed online in Form GST RFD-11 and is valid for one financial year. It has to be in place before the first export invoice of the year is raised. An LUT filed in May does not cover exports made in April. Those April exports become exports with payment of tax, and you are left paying IGST and claiming it back through a different route. This is a small thing that causes real trouble. Renew the LUT in March, before the year starts.
The LUT also carries conditions under Rule 96A. Goods must actually be exported within three months of the invoice date. For services, the payment must be received in convertible foreign exchange (or in Indian rupees where RBI permits) within one year of the invoice. If either condition fails, IGST becomes payable on that supply, with interest. CBIC’s Circular No. 263/09/2026-GST of October 2026 clarifies that payment for services received through SNRR or INR Vostro accounts, as permitted by RBI, counts as receipt of export proceeds, and that for goods, the refund is not to be recovered where the authorised dealer bank has written off the unrealised amount under RBI rules. Keep a register of export invoices against shipping bill dates and realisation dates, and look at it every month rather than at refund time.
How the amount is worked out
The refund under Rule 89(4) is not simply the balance in your credit ledger. It is calculated as:
Refund = (Turnover of zero-rated supply × Net ITC) ÷ Adjusted total turnover
Three things in that formula catch people out, and one restriction has just gone.
- Net ITC excludes capital goods, for now. Credit on machinery or equipment does not go into the calculation today. Only inputs and input services count. The rules notified in October 2026 bring in capital goods credit availed on or after 1 April 2027, spread over 60 months, and the Council has recommended a matching change to Section 54(3). Credit on capital goods bought before that date will not qualify.
- Export turnover is the lower of the invoice value and the shipping bill value. If your invoice says one figure and the FOB value on the shipping bill says less, the lower figure is used. Differences in exchange rates and freight treatment are the usual cause. Reconcile them before filing.
- Adjusted total turnover covers all your supplies in the period, including domestic sales and exempt supplies. If you sell both in India and abroad, only the export share of the credit comes back.
- The 1.5 times cap is gone. Rule 89(4)(C) used to limit the turnover of zero-rated goods to 1.5 times the value of like goods supplied in India. That restriction was removed with effect from 1 November 2026 by Notification No. 05/2026-Central Tax. It does not reopen claims already decided.
The documents
The application is made on the portal with Statement 3 (the list of export invoices) and Statement 3A (the computation). From 1 December 2026, a revised Form RFD-01 captures invoice details in a system-readable format, and adds a statement of invoices received with the credit taken on them, and a declaration that you have not been prosecuted for tax evasion above ₹2.5 crore in the preceding five years. Alongside, keep ready:
- A copy of the LUT acknowledgement for the year
- For goods: shipping bill numbers and dates, and EGM details, for every invoice in Statement 3
- For services: bank realisation certificates or foreign inward remittance certificates against each invoice
- A statement of inward supplies on which credit has been taken, with supplier GSTINs and invoice details. The credit claimed should be reflected in your GSTR-2B. Credit that does not appear there will be questioned.
- GSTR-1 and GSTR-3B for the period, showing export turnover consistently in both
The single most common reason for a deficiency memo in our experience is a mismatch: export turnover in GSTR-3B not matching Table 6A of GSTR-1, or Statement 3 not matching either. Reconcile all three before you press submit.
What happens after filing
This is where the most recent changes are. Following the 57th GST Council meeting on 8 October 2026, Notification No. 05/2026-Central Tax amended Rules 90 and 91 with effect from 1 November 2026.
- Acknowledgement in 10 days. The officer now has 10 days, down from 15, to issue the acknowledgement in RFD-02 or a deficiency memo in RFD-03. If neither is issued in that time, the application is deemed acknowledged, and the 60-day period for the final order runs from the filing date.
- Automatic provisional refund. The 90% provisional refund for low-risk zero-rated claims, introduced from 1 October 2025, is now generated by the portal itself in RFD-04, on the basis of the system’s risk evaluation, within three working days of the acknowledgement or deemed acknowledgement. It no longer waits for the officer. The payment order in RFD-05 is also issued through the portal.
- Deficiency memos still reset the application. A deficiency memo means the application is treated as not filed, and a fresh, corrected application has to be filed. Clean data is what keeps a claim in the automatic lane.
The same 90% provisional treatment applies to inverted duty structure refunds, now backed by an amendment to Section 54(6) made by the Finance Act, 2026 and brought into force from 1 November 2026. The Council has also recommended a second phase in which acknowledged zero-rated claims are sanctioned in full automatically, after adjusting dues and subject to risk checks. That phase has not yet been notified.
The final order in RFD-06 has to be passed within 60 days of the acknowledgement. If the refund is delayed beyond that, interest is payable under Section 56.
The two-year limit
The application must be filed within two years from the “relevant date”. For refunds of unutilised credit, there has long been an argument about what that date is. Some officers compute it from the date of export. The Delhi High Court held in April 2026 that for refunds of unutilised credit, the relevant date is governed by Explanation 2(e) to Section 54, which ties it to the due date of the return for the period in which the claim arises, and not to the date of export, which applies only to refunds of tax paid.
That is helpful, but it is better not to rely on it. File within two years of the export date wherever you can. The argument is there if you need it, but a refund filed comfortably in time never has to make it.
A few practical habits
- File refunds every month or quarter, not once a year. Smaller, regular claims with clean data are what the risk system treats as low risk, and low-risk claims are the ones the portal now pays provisionally without waiting for an officer.
- Keep export documents filed invoice-wise: invoice, shipping bill, EGM, BRC or FIRC in one place.
- Do not take credit on invoices you are unsure about in the same period as a large refund claim. A questionable credit can pull the whole application into detailed scrutiny.
- Track the LUT, the three-month export window and the one-year realisation window in one sheet.
If you export and your credit has been piling up, or a refund has been stuck at the deficiency memo stage, send us the last few months of returns and the refund history. We will tell you how much is realistically claimable and what is holding it back.
Related service: GST notices and refunds.
This note reflects the law, notifications and circulars as of mid-November 2026. It is general information and not advice on any particular case.