Exports under GST are treated as zero-rated supplies, allowing exporters to supply without payment of IGST under LUT. However, this benefit is conditional upon compliance with Rule 96A of the CGST Rules under the Central Goods and Services Tax Act, 2017.
Statutory Requirement – Time-bound Realisation
Rule 96A clearly mandates that an exporter furnishing LUT undertakes to comply with time conditions. As clarified in CBIC Circular:
“a registered person… is required to furnish… LUT… binding himself to pay the tax due along with applicable interest within a period of… fifteen days after the expiry of one year… if the payment of such services is not received…”( for goods the period is 9 months)
Thus, for export of services/goods, foreign exchange must be realised within 1 year /9 months from invoice date (or extended period).
Consequence of Non-Realisation
The law is strict on non-compliance. If proceeds are not realised:
- Export loses zero-rated benefit
- IGST along with interest becomes payable
- Interest to be calculated from the date of Invoice
- Payment must be made within 15 days after expiry of prescribed period
This position flows directly from Rule 96A and is consistently reiterated in departmental circulars.
Important Relief – Subsequent Realisation
A very practical and important clarification is provided in Circular No. 197/09/2023-GST:
“as long as goods are actually exported or… payment is realized… even if it is beyond the time frames… the benefit of zero-rated supplies cannot be denied…”
Further, it clarifies:
exporter would be entitled to claim refund of the integrated tax so paid earlier… however, no refund of the interest paid… shall be admissible
The same principle was recognised earlier in Circular No. 37/11/2018-GST:
“exports have been zero rated… and as long as goods have actually been exported… payment of Integrated tax first… should not be insisted upon… extension may be granted…”
This establishes that procedural delays should not defeat substantive export benefits.
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Professional Insight
GST law balances strict compliance with equitable relief. While Rule 96A enforces discipline through tax liability, CBIC circulars ensure that genuine exports are not denied zero-rating benefits merely due to timing issues.
