How to Create a Zero‑Rated GST Invoice India for Exports

A zero rated invoice India is an export invoice issued under GST where you charge 0% GST on goods or services exported, yet legally retain the right to claim input tax credit (ITC). If prepared correctly with LUT or IGST payment it prevents tax leakage, refund rejection, and compliance risk for exporters.

Why Export Invoices Go Wrong

Most export invoicing mistakes happen because businesses mix up three different concepts:

1. Zero-rated supply

2. Exempt supply

3. Nil-rated supply

They are not the same.

Exports fall strictly under zero-rated supply, not exemption. This distinction decides whether you can:

• Claim GST refunds

• Recover input tax credit

• Avoid audit notices

Many exporters issue invoices casually, assuming “GST not applicable,” without following the legal structure required for a zero rated invoice India. That single mistake can block refunds for months.

What “Zero-Rated” Actually Means Under GST Law

Under Section 16 of the IGST Act, exports are classified as zero-rated supplies.

Zero-Rated Supply Defined

A supply is zero-rated if:

Goods are exported outside India, or

Services are supplied outside India and meet export conditions

Key legal outcome:

• GST rate = 0%

• ITC eligibility = Yes

This is why a zero rated invoice India is fundamentally different from a tax-free or exempt invoice.

Zero-Rated vs Exempt vs Nil-Rated

👉 Business implication:

Only a zero rated invoice India allows you to recover GST paid on raw materials, services, and overheads.

If you’re still unsure how an export invoice differs from a regular GST invoice, this detailed breakdown on Export Invoice vs. GST Invoice: What’s the Difference? explains the distinction clearly with real examples.

Who Should Issue a Zero-Rated GST Invoice?

You must issue a zero-rated invoice if you are:

• A goods exporter (physical shipment outside India)

• A service exporter (IT, consulting, design, marketing, SaaS, etc.)

• A manufacturer exporting via merchant exporter

• A freelancer billing overseas clients

• A startup selling digital services internationally

If foreign currency comes in and place of supply is outside India, you are in zero-rated territory.

Conditions to Qualify as Export (Very Important)

Export of Goods

Goods must:

• Physically leave India

• Be supported by shipping bill or bill of export

Export of Services (All Conditions Mandatory)

1. Supplier located in India

2. Recipient located outside India

3. Place of supply outside India

4. Payment received in foreign exchange (or permitted INR)

5. Supplier and recipient not merely establishments of same entity

If any one condition fails, your invoice cannot be treated as zero rated invoice India.

Two Legal Ways to Issue a Zero-Rated Invoice in India

You cannot randomly issue a zero-rated invoice. GST law allows only two routes.

Route 1: Export Under LUT (Most Used)

LUT = Letter of Undertaking

• No GST charged on invoice

• No tax paid upfront

• Refund claimed on accumulated ITC

• Improves cash flow

This is the preferred method for most exporters.

Validity: 1 financial year

Filed on: GST portal (online)

A zero rated invoice India issued under LUT must clearly mention LUT reference.

Route 2: Export with IGST Payment

• IGST charged on invoice

• Tax paid to government

• Refund claimed later

Used mainly when:

• LUT is not approved

• Exporter defaults on conditions

Downside: Blocks working capital.

How to Create a Zero-Rated Invoice India

Step 1: Decide LUT or IGST Route

Before creating the invoice, confirm:

• LUT filed and valid → No GST

• No LUT → Charge IGST

Never decide this after issuing the invoice.

Step 2: Use Proper Invoice Structure

A zero rated invoice India must follow GST invoice rules + export-specific disclosures.

A zero-rated export invoice still follows standard GST invoicing rules, with additional export-specific disclosures. If you need a base understanding, refer to How to Create a GST-Compliant Invoice in India before proceeding.

Mandatory Fields (Do Not Skip)

Seller Details

• Legal business name

• Address

• GSTIN

Buyer Details

• Foreign company name

• Complete overseas address

• Country name

Invoice Information

• Unique invoice number

• Invoice date

• Currency used

Product / Service Details

• Description

• HSN / SAC

• Quantity

• Unit price

• Taxable value

Mandatory Export Declarations (Critical)

Your invoice must include one of the following statements:

If under LUT:

“Supply meant for export under Letter of Undertaking without payment of IGST.”

If IGST paid:

“Supply meant for export on payment of IGST.”

Without this line, your document may not qualify as a zero rated invoice India.

Currency & Conversion Rule

• Invoice may be raised in foreign currency

• INR equivalent must be shown

• Use RBI exchange rate on invoice date

This is essential for GST reporting and refunds.

Sample Zero-Rated Invoice Layout

This structure ensures your zero rated invoice India is audit-ready.

Documents You Must Maintain (Often Ignored)

Issuing an invoice alone is not enough.

Mandatory Supporting Documents

• Shipping Bill / Bill of Export

• LUT acknowledgment

• Foreign Inward Remittance Certificate (FIRC) or BRC

• Export contract or PO

• GST returns showing export entry

Refunds are rejected mostly due to document mismatch, not invoice format.

Reporting Zero-Rated Invoices in GST Returns

GSTR-1

• Report under Table 6A – Exports

• Invoice number must match shipping bill

• Correct HSN/SAC mandatory

GSTR-3B

• Report under zero-rated outward supplies

• ITC accumulation reflected automatically

Mismatch between invoice and return breaks refund flow.

Input Tax Credit: Why Zero-Rated Matters Financially

With a valid zero rated invoice India, you can claim ITC on:

• Raw materials

• Packaging

• Professional services

• Rent and utilities

• Software tools

• Logistics and freight

For exporters, ITC refunds can equal 5–18% of turnover, making correct invoicing financially critical.

Common Mistakes That Break Zero-Rated Status

• ❌ Missing export declaration line

• ❌ No LUT filed before invoice

• ❌ Buyer address incomplete

• ❌ Incorrect place of supply

• ❌ No INR equivalent shown

• ❌ Reporting invoice in wrong GST table

Each of these can invalidate a zero rated invoice India.

Refund Timeline Reality (What Businesses Should Expect)

• Application filed → 15 days

• Officer review → 30–45 days

• Query resolution → Variable

Clean invoices + matching data = faster refunds.

Compliance Checklist (Quick Reference)

Before issuing invoice, confirm:

• LUT valid

• Export conditions met

• Correct declaration used

• HSN/SAC verified

• Currency conversion added

• Documents preserved

This checklist protects your zero rated invoice India from future disputes.

Why Zero-Rated Invoicing Impacts Business Growth

Correct export invoicing:

• Improves pricing competitiveness

• Protects cash flow

• Reduces tax friction

• Builds audit confidence

• Enables scale into global markets

Poor invoicing silently eats profit.

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