Zero-rated supply is one of the most important concepts under the GST framework, especially for exporters and businesses supplying goods or services to Special Economic Zones. The GST law ensures that taxes do not become a cost for such supplies by allowing eligible taxpayers to claim a refund of tax paid or unutilised input tax credit. However, the refund application process for zero-rated supply follows specific rules, documentation standards, and timelines that must be complied with strictly.
This guide explains the GST
refund application process for zero-rated supply in a clear, structured,
and compliance-focused manner. It is intended for exporters, service providers,
and businesses that want to understand the legal framework and practical steps
involved in claiming GST refunds without facing delays or rejections.
Understanding Zero-Rated Supply Under GST
Zero-rated supply refers to supplies that are taxable under
GST but taxed at a zero percent rate, allowing the supplier to claim a refund
of taxes paid on inputs or input services. Under GST law, zero-rated supplies
include:
- Export
of goods or services
- Supply
of goods or services to a Special Economic Zone developer or SEZ unit
Unlike exempt supplies, zero-rated supplies allow full input
tax credit benefits. This makes zero-rated supply a critical relief mechanism
for exporters and international service providers.
Eligibility for GST Refund on Zero-Rated Supply
A registered taxpayer engaged in zero-rated supply can apply
for a GST refund if the supply meets prescribed legal conditions. Eligibility
depends on the mode of export and tax payment method.
A taxpayer is eligible to claim a refund when:
- Goods
are exported out of India
- Services
are exported and payment is received in convertible foreign exchange
- Supplies
are made to an SEZ unit or developer for authorised operations
- Returns
are filed accurately and within prescribed timelines
Eligibility is also linked to proper
compliance with GST returns, reconciliation of data, and maintenance of
supporting documents.
Options Available for Refund Claim on Zero-Rated Supply
GST law provides two alternative routes for claiming a
refund on zero-rated supplies. The taxpayer must choose one option carefully,
as both routes have different compliance requirements.
Export With Payment of Tax
Under this option, the exporter pays integrated tax on the
export invoice and later claims a refund of the tax paid. The refund is
generally processed based on shipping bill data and return filings.
This option is often preferred when exporters want faster
processing through system-based verification.
Export Without Payment of Tax Under LUT or
Bond
In this option, exports are made without payment of tax
after furnishing a Letter of Undertaking or bond. The exporter can claim a
refund of unutilised input tax credit accumulated on inputs and input services.
This option requires strict reconciliation
of ITC and compliance with conditions prescribed under GST rules.
Time Limit for Filing GST Refund Application
The GST refund application for zero-rated supply must be
filed within two years from the relevant date. The relevant date varies
depending on the nature of supply.
For goods exports, it is linked to the date of shipping bill
or export manifest. For services exports, it is generally the date of receipt
of foreign currency. For supplies to SEZ units, it relates to the date of
invoice endorsement by the authorised officer.
Missing the statutory time limit can lead to permanent loss
of refund eligibility.
Step-by-Step GST Refund Application Process for Zero-Rated Supply
The GST refund application process is fully online and must
be completed on the GST portal. Below is
a structured overview of each step.
Step 1: Login and Refund Selection
The applicant must log in to the GST portal using valid
credentials and select the appropriate refund category related to zero-rated
supply.
Step 2: Selection of Tax Period
The correct tax period for which the refund is claimed must
be selected. Only periods with filed returns are eligible.
Step 3: Statement Upload and Computation
Depending on the option chosen, the exporter must upload
invoice-wise statements, export details, and refund computation. Accuracy in
data matching is essential.
Step 4: Upload Supporting Documents
Documents such as export invoices, shipping bills, LUT
acknowledgement, bank details, and foreign remittance proof must be uploaded as
applicable.
Step 5: Verification and Submission
The application must be verified using a digital signature
certificate or electronic verification code. Once submitted, an acknowledgement
reference number is generated.
Step 6: Tracking Refund Status
The refund status can be tracked online using the
acknowledgement number. Authorities may issue notices if clarification is
required.
Documents Required for Zero-Rated Supply Refund
Proper documentation is the backbone of successful GST
refund claims. Commonly required documents include:
- Export
invoices and shipping bills
- Statement
of outward supplies
- Letter
of Undertaking or bond copy
- Foreign
inward remittance certificates for services
- Input
tax credit ledger details
- Cancelled
cheque or bank account proof
Incomplete or incorrect documents often lead to deficiency
memos or rejection.
Processing and Verification Rules
Once the refund application is filed, the tax authority
conducts preliminary scrutiny to ensure completeness. In eligible cases,
provisional refunds may be granted, especially for exporters with a good
compliance history.
Detailed verification includes cross-checking returns,
export data, and ITC utilisation. Authorities may issue notices seeking
explanation or additional documents. Timely and accurate responses are
essential to avoid rejection.
Timelines for Refund Sanction
GST refund rules prescribe a general timeline of sixty days
from the date of application for refund processing. If the refund is delayed
beyond this period, interest may be applicable subject to legal provisions.
However, delays often occur due to mismatches between
returns, incorrect classification, or unverified bank details.
Common Errors in Zero-Rated Supply Refund Claims
Many refund claims are delayed or rejected due to avoidable
mistakes. Common errors include:
- Mismatch
between export invoices and return data
- Incorrect
selection of refund category
- Excess
claim beyond eligible ITC
- Missing
LUT or incorrect validity period
- Non-receipt
of foreign currency within prescribed time
Regular reconciliation and compliance checks significantly
reduce these issues.
Importance of Professional Assistance
The GST refund application process for zero-rated supply is
technical and documentation-intensive. Businesses often seek professional
support to avoid compliance risks and improve refund timelines.
Engaging structured GST refund services helps in eligibility
assessment, documentation preparation, filing accuracy, and representation
before authorities. A qualified GST
refund consultant can also assist in resolving notices and preventing
rejections. Businesses handling complex export structures often rely on GST
compliance services to ensure smooth processing and accurate input tax credit
refund claims.
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Conclusion
Zero-rated supply plays a vital role in keeping Indian
exports competitive by ensuring that GST does not become a cost burden. While
the refund mechanism is well-defined under law, successful refund claims depend
on strict adherence to rules, timelines, and documentation standards.
By understanding the GST refund application process for
zero-rated supply and following a disciplined compliance approach, exporters
and eligible businesses can secure timely refunds and maintain healthy cash
flow. Proper planning, accurate filings, and professional guidance together
form the foundation of a smooth and compliant refund experience.
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