LUT filing mistakes that break zero GST on exports

LUT filing mistakes that break zero GST on exports

Zero GST on exports is not automatic. It needs two checks.

Your work must qualify as export of services under GST law and must follow the LUT route in the right way.

- Export of services is a zero-rated supply under IGST Act and has five conditions.

- One key condition is receipt in convertible foreign exchange or INR where RBI permits INR receipt.

If you want to export without paying IGST, you must furnish LUT in Form GST RFD-11 before export under Rule 96A.

When Rule 96A conditions fail, you must pay IGST with interest.

Mistake 1: LUT filed after export invoices

Rule 96A requires LUT before export. An invoice raised before LUT creates a dispute for that period.

Do this: File LUT at the start of the financial year. Save the ARN and acknowledgement pdf from the GST portal.

Mistake 2: Last year LUT used after 31 March

LUT validity is for the financial year in which it is furnished. An LUT for FY 2025-26 does not cover FY 2026-27 invoices.

Do this: File a fresh LUT for each financial year.

Mistake 3: Export invoice missing the Rule 46 export endorsement

Rule 46 requires an exact endorsement on export invoices. Since you are using an LUT, use this exact wording:

*"SUPPLY MEANT FOR EXPORT UNDER LETTER OF UNDERTAKING WITHOUT PAYMENT OF IGST".*

Do this: Add the above line on each export invoice as a header. Keep one invoice format for the year.

Mistake 4: "Foreign client" treated as export, but export of services conditions fail

Export of services requires all five conditions in IGST Act section 2(6). One condition is place of supply outside India.

Breakpoints in remote work:

- Contract and invoice are in the name of an Indian entity.

- Recipient has an office in India that receives the service.

- You are supplying service to your own entity in another country (as a founder or otherwise)

Do this: Ensure you are not providing services to an Indian office.

Mistake 5: Export payment not received within Rule 96A time limit

For export of services under LUT, Rule 96A requires receipt within:

- one year from invoice date, or

- FEMA time period with RBI extension, whichever is later, and

- any further period allowed by the GST Commissioner.

When receipt does not happen within this time, Rule 96A requires IGST with interest within 15 days after the due date.

Do this: If any of your clients pays slow, track invoice ageing. Track receipt date for each invoice. Keep invoice-wise remittance proof.

Mistake 6: Payment received in INR without RBI permission

Export of services requires receipt in convertible foreign exchange or INR where RBI permits INR receipt.\ A normal INR transfer between Indian bank accounts does not meet this condition.

Do this: Collect payment in convertible foreign exchange. Use INR receipt route when RBI permission exists for that receipt mode. Keep bank advice and remittance proof.

Mistake 7: No invoice-wise linkage of e-FIRC

This can be managed in case you get a notice. But, dealing with GST officers is frustrating and expensive. Refund checks need invoice-wise linkage. Officers ask for 1:1 invoice and payment linkage.

Do this: Link each export invoice to the transaction advice/e-FIRC by asking your client(before transaction or bank(after transaction) to add your invoice number:

Mistake 9: No GST registration

Rule 96A applies to a registered person. Without registration, LUT filing does not apply.

Do this: You are not required to get GST registration unless your revenue is crossing 20LPA. Track turnover for the financial year. Take GST registration when required. File LUT before export invoices under LUT.