GST Records & Agreements for Export Contracts

Manufacturers exporting goods must keep GST registration details, export invoices, shipping bills, proof of export (like bill of lading or airway bill), and the export contracts or purchase orders that tie the sale to the export. These records are essential for claiming zero-rated supplies (via bond/LUT or refund) and for proving that goods actually left India within the required timeframes. Below is a detailed breakdown of the specific records, agreements, and compliance steps you need.

Formula

The refund amount for an export under bond/LUT (without payment of IGST) is calculated as:

Refund = Invoice Value × (GST Rate / (100 + GST Rate))

Where:

• Invoice Value – the total value of the export invoice in INR (including all taxes and charges as per the invoice).
• GST Rate – the applicable IGST rate (e.g., 18% for most goods).

The FOB value in USD is simply the invoice value divided by the exchange rate.

Worked Example

Using the default values from the calculator:

• Invoice Value = ₹10,00,000
• GST Rate = 18%
• Exchange Rate = ₹83/USD

Refund = 10,00,000 × (18 / 118) = 10,00,000 × 0.152542 = ₹1,52,542

FOB Value = 10,00,000 / 83 = $12,048.19

The calculator shows the refund amount as ₹1,52,542 and the FOB value as $12,048.19.

Why Exports Are Zero-Rated

Under GST, exports are treated as zero-rated supplies. This means no GST is charged on the export, but the manufacturer can still claim input tax credit (ITC) on the inputs used to make the exported goods. There are two ways to export:

• Under Bond/LUT (Letter of Undertaking) – export without paying IGST, then claim refund of unutilised ITC.
• With Payment of IGST – pay IGST on the export invoice, then claim refund of that IGST after export.

Both methods require the same core documentation, but the refund process differs slightly.

Essential Records for Every Export

The following records must be maintained for each export transaction:

• Export Invoice – the commercial invoice issued to the foreign buyer, showing the description, quantity, value, and the words “Supply meant for export” or similar.
• Shipping Bill / Bill of Export – the customs document that proves goods were cleared for export. It contains the invoice number, port, and date.
• Proof of Export – the bill of lading (sea) or airway bill (air) showing the goods left India. Also keep the Foreign Inward Remittance Certificate (FIRC) or bank statement showing receipt of payment in foreign currency.
• Export Contract / Purchase Order – the agreement with the foreign buyer that establishes the commercial terms. This is critical to prove that the transaction is a genuine export and not a domestic sale.
• GST Registration Certificate – the manufacturer’s GST registration (with the correct HSN codes for exported goods).
• LUT / Bond – a copy of the Letter of Undertaking filed on the GST portal (for exports without IGST payment).
• IGST Payment Challan – if exporting with IGST payment, keep the challan showing the tax paid.
• Correspondence with Buyer – emails, letters, or other communication that confirms the order, price, and delivery terms.

Agreements You Should Have in Place

Beyond the export invoice, you should have a written contract with the foreign buyer that clearly states:

• Incoterms – e.g., FOB, CIF, EXW – which determine who pays for freight, insurance, and customs clearance.
• Payment Terms – advance, letter of credit, open account, etc., and the currency of settlement.
• Delivery Schedule – dates and milestones for shipment.
• Product Specifications – quality, packaging, labelling, and any certifications required.
• Dispute Resolution – jurisdiction and arbitration clauses.
• Force Majeure – what happens in case of events beyond control.

Having a signed contract protects both parties and is often required by banks for trade finance and by customs for verification.

How to Claim GST Refund on Exports

The process differs based on whether you exported under bond/LUT or with IGST payment:

1. Under Bond/LUT: After export, file GSTR-1 and GSTR-3B as usual. Then file a refund application in FORM GST RFD-01 on the GST portal, selecting “Refund of unutilised ITC on account of export without payment of tax”. You must upload the statement of invoices and the proof of export (shipping bill and bill of lading).
2. With IGST Payment: After export, the IGST paid is automatically refunded to your bank account after the shipping bill is matched with the export invoice. You need to file GSTR-1 and GSTR-3B, and the refund is processed through the customs system.

In both cases, you must ensure that the shipping bill and the GST invoice have the same invoice number, value, and HSN code. Mismatches are the most common reason for refund delays.

Common Mistakes and How to Avoid Them

• Mismatched Invoice Numbers – the GST invoice and shipping bill must have identical invoice numbers. Always double-check before filing.
• Incorrect HSN Codes – using the wrong HSN can lead to rejection. Verify the correct code for your product.
• Missing LUT – if you export without IGST payment, you must have a valid LUT. It is valid for one financial year and can be filed online.
• Late Filing of Refund – refund applications must be filed within two years from the relevant date (usually the date of export). Missing this deadline forfeits the refund.
• Incomplete Proof of Export – keep all documents, including the FIRC, to prove receipt of payment in foreign currency.

Frequently Asked Questions

Do I need to keep a separate GST record for each export?

Yes, each export transaction must have its own set of documents – invoice, shipping bill, and proof of export. You can maintain a digital folder per shipment, but the records must be traceable and match the GST returns filed.

Can I claim a refund if I export under LUT but haven’t received payment yet?

You can claim the refund of unutilised ITC even before payment is received, as long as the goods have been exported. However, you must receive the payment in foreign currency within the prescribed period (usually 12 months) to satisfy the RBI and GST requirements.

What is the difference between a bond and a LUT?

A bond requires a bank guarantee or surety, while a LUT is a simple undertaking on letterhead. LUT is easier and is the preferred option for most manufacturers. It is valid for one financial year and must be renewed.

What happens if I don’t keep proper export records?

Without proper records, you may lose the right to claim zero-rated benefit and refunds. The GST department can treat the supply as taxable, demand GST with interest and penalties, and even initiate prosecution in cases of deliberate evasion.

Can I export without a written contract?

Technically, you can export based on a purchase order, but a written contract is strongly recommended. It clarifies terms, helps in dispute resolution, and is often required by banks for trade finance and by customs for verification.

Is there a time limit to keep GST export records?

Yes, under GST law, you must maintain all records for at least 6 years from the last date of filing of the annual return. For exports, it is safer to keep records for 8 years to cover any disputes or audits.

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in t | Invoice Value (INR) | INR | 1000000 | 0
in r | GST Rate (%) | % | 18 | 0 | 28
in e | Exchange Rate (INR per USD) | INR/USD | 83 | 0
out refund | Refund Amount (INR) | INR | t * r / (100 + r) | 0
out fob | FOB Value in USD | USD | t / e | 2