Smart GST Planning for Exporters: Pre-Export Purchases in India

Why Every Rupee Counts for Exporters    
Exporters often struggle with working capital tied up in GST paid before shipment—a burden that cramps cash flow and growth. Fortunately, the GST law lets you legally avoid upfront tax on purchases from Indian suppliers, easing compliance and unlocking funds for expansion.    
In this guide, you'll learn:

• How to procure GST-free using schemes like LUT or concessional routes
• Common pitfalls to avoid

What Are the Best Ways Exporters Can Skip GST Before Exporting Goods?

Why Avoiding GST on Purchases Matters for Exporters    
Avoiding GST on inputs-leveraging India’s zero-rated export provisions, enables exporters to claim Input Tax Credit (ITC), helping reclaim taxes paid on inputs. This preserves working capital, reduces export costs, and strengthens competitiveness abroad 

• Improved Cash Flow - No funds locked up waiting for refunds.
• Cost Advantage - Lower procurement expenses support globally competitive pricing
• Simpler Compliance – Skips refund delays and reduces the documentation hurdle

Legal Structure: Zero-Rated Exports

Exports of goods and services from India are categorized as zero-rated supply under Section 16 of the IGST Act, 2017. In other words, exporters can claim input tax credit (ITC) on all GST paid for inputs used in those exports, either by exporting under a bond or Letter of Undertaking (LUT) or by paying IGST and then requesting a refund. This means that no GST is payable on exports.

What is a zero-rated supply under GST?  

Supply at Zero Rate (GST) -These are supplies that are subject to 0% GST, such as exports or deals with Special Economic Zones (SEZs), but still enable the supplier to claim the Input Tax Credit (ITC) for the inputs used in those supplies.    
Under Section 16 of the IGST Act (2017)    
Exports and supplies to SEZs are classified as zero-rated supplies, meaning no GST is charged on them. Yet importantly, the supplier can still claim a refund of unutilised input tax credit—either by exporting under a bond/Letter of Undertaking (LUT) without paying IGST or by paying IGST and claiming the refund later.    
Under Section 16 of the IGST Act, exports are treated as zero-rated supplies. Exporters get two options:    
1. Export with IGST payment - Claim refund later.    
2. Export without IGST payment (using LUT/Bond)- Avoid GST upfront.

Export with IGST Payment - Claim Refund Later 

When exporters pay IGST on exported goods or services, they can reclaim it- automatically, using the shipping bill and GST returns (GSTR-1 & GSTR-3B), without filing a separate refund application. Refunds are processed by ICEGATE, typically within 60 days. If delayed, interest is payable    
● You pay IGST at the time of exporting goods/services.    
● Once export is completed, you can file a refund claim with GST authorities to get back that IGST.

Problem: This blocks your working capital until the refund is credited, which may take    
weeks or months.

Example:    
If you export machinery worth ₹10 lakh, IGST @18% = ₹1.8 lakh.    
You pay ₹1.8 lakh upfront - Export - Later claim refund.

Export without IGST Payment (Using LUT/Bond) - Avoid GST Upfront    
● Instead of paying IGST and then waiting for a refund, you can furnish a Letter of    
Undertaking (LUT) or, in some cases, a Bond with bank guarantee.    
● By filing an LUT, you declare to the government that you’ll abide by GST rules and will    
complete the exports.    
● Once the LUT is in place, you can export goods/services without paying IGST at all.

Example:    
The same machinery is worth ₹10 lakh.    
If you file LUT, you directly export it without paying ₹1.8 lakh IGST upfront.    
Your cash stays free for business.

The Key Takeaway 

Both export options are legally valid. However, most exporters favor the LUT route because it avoids blocking funds (no upfront GST payment) and simplifies compliance with significantly less refund paperwork because it :    
● Saves money from getting stuck.  
● Reduces refund paperwork. 
● Keeps liquidity free for business expansion.

How MyGSTRefund Helps Exporters 

Mygstrefund provides a completely automated, end-to-end GST refund solution with 100% accuracy and no paperwork.

Includes advanced features like error-free filing, real-time tracking, and a "no refund, no fee" promise, meaning that you only have to pay when a refund is approved.    
● Quick LUT Filing – Hassle-free setup for zero-rated exports.    
● Refund Claim Filing – Error-free applications for faster disbursal.    
● Deemed Export Guidance – Ensure you leverage GST exemptions.    
● Merchant Export Advisory – Avail the 0.1% concessional rate easily.    
With GST experts by your side, you can focus on growing your export business instead of worrying about compliance.

Conclusion 

Avoiding GST Isn’t Just Legal—It's Smart    
Exporters in India can benefit from zero-rated exports through LUT filing or by using the 0.1% concessional GST rate for merchant exports setup that boosts cash flow and slashes costs.    
But dealing with GST rules, refunds, and documentation can get messy. That's where MyGSTRefund shines as a game-changer. They're India's first fully automated, success-based GST refund platform for exporters and MSMEs-no-refund, no fees, and they streamline the process end-to-end