Zero rated supply
IGST s.16, IGST Act
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Amendment history
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Zero rating. Exports and supplies for authorised operations to an SEZ developer or unit are zero rated, so no tax sticks: either supply under a bond or LUT and claim refund of the unutilised input tax credit, or pay IGST and claim refund of the tax. Since 1 October 2023 the paid-IGST route is confined to notified suppliers and goods, and export proceeds must be realised within the FEMA period or the refund is recoverable with interest.
What this means in practice
The parts that actually decide cases — the things a practitioner checks first.
Two routes: LUT or bond with refund of unutilised credit, or payment of IGST with refund of the tax. Since 01-10-2023 the paid-IGST route is available only to notified suppliers and goods, so the LUT route is the default.
SEZ supplies are zero-rated only for AUTHORISED OPERATIONS – an endorsement from the specified officer is needed for the refund.
Rule 96B recovers the refund with interest if export proceeds are not realised within the FEMA period, unless the RBI writes it off.
A LUT is filed annually in RFD-11 before the first export of the year; exporting without a valid LUT means tax has to be paid.
Questions people actually ask
Real questions we get on this provision, answered straight.
Our LUT for the year was not filed before our first export invoice.+
Strictly the export should have carried IGST. File the LUT immediately; departments have generally allowed a late LUT to cover earlier exports of the same year where the exports are genuine, but the exposure exists until the refund is sanctioned – so do not repeat it, and keep the shipping bills and BRCs ready.
The exact words of the law
2,458 characters, uneditedReproduced from the CBIC text. We explain it above — but you should always be able to read it yourself.
Read the full provision+
(3) A registered person making zero rated supply shall be eligible to claim refund of unutilised input tax credit on supply of goods or services or both, without payment of integrated tax, under bond or Letter of Undertaking, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder, subject to such conditions, safeguards and procedure as may be prescribed: Provided that the registered person making zero rated supply of goods shall, in case of non- realisation of sale proceeds, be liable to deposit the refund so received under this sub-section along with the applicable interest under section 50 of the Central Goods and Services Tax Act within thirty days after the expiry of the time limit prescribed under the Foreign Exchange Management Act, 1999 (42 of 1999.) for receipt of foreign exchange remittances, in such manner as may be prescribed.
(4) The Government may, on the recommendation of the Council, and subject to such conditions, safeguards and procedures, by notification, specify- ( i ) a class of persons who may make zero rated supply on payment of integrated tax and claim refund of the tax so paid 3 [ in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder]; (ii) a class of goods or services 3 [ or both, on zero rated supply of which, the supplier may pay integrated tax and claim the refund of tax so paid, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder].] 3 [
(5) Notwithstanding anything contained in sub-sections
(3) and (4), no refund of unutilised input tax credit on account of zero rated supply of goods or of integrated tax paid on account of zero rated supply of goods shall be allowed where such zero rated supply of goods are subjected to export duty.]
What changed, and when
The amendment trail, newest first — because the version that applies to your case depends on the period.
2024-08-16 · Insertedbyse
Inserted by section 153 of The Finance Act (No. 2) Act, 2024 No. 15 of 2024 dated 16.08.2024.
2021-03-28 · Insertedvide
27/2023-C
Inserted vide s. 123(a) of the Finance Act, 2021 dated 28th March, 2021- Brought into force w.e.f. 01st October, 2023 vide Notification No. 27/2023-C.T. , dated 31st July, 2023.
2021-03-28 · Substitutedvi
27/2023-C
Substituted vide s. 123(b) of the Finance Act, 2021 dated 28th March, 2021- Brought into force w.e.f. 01st October, 2023 vide Notification No. 27/2023-C.T. , dated 31st July, 2023 ; for: "( 3 ) A registered person making zero rated supply shall be eligible to claim refund under either of the followi
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Where this comes from
Text reproduced from the Central Board of Indirect Taxes and Customs, as available on 2026-09-05. The explanation and practice notes above are GSTZone’s own, written for this hub. If you spot anything out of date, tell us and we’ll fix it — this hub is checked daily against CBIC.
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