GST and international trade in India for FY 2026-27 — zero-rated exports, LUT, IGST imports, DGFT schemes and refund management for exporters.
India's international trade is on a multi-year upcycle, supported by free trade agreements with the UAE, Australia, EFTA, the UK and ongoing negotiations with the EU. GST sits at the heart of how Indian exporters and importers price, comply and stay competitive. This guide explains how GST applies to international trade in FY 2026-27 and the rules every cross-border business should know.
GST Basics for Cross-Border Trade
Export of goods and services is treated as a zero-rated supply under Section 16 of the IGST Act, 2017. Exporters can either supply without payment of IGST under a Letter of Undertaking (LUT) and claim refund of unutilised input tax credit, or pay IGST on the export and claim refund of the IGST paid. Imports attract IGST and applicable customs duty at the time of import, with IGST creditable subject to Section 16 conditions.
Exports of Goods
- File an LUT in Form RFD-11 at the start of each financial year to export without IGST payment.
- Ensure the shipping bill, invoice, e-way bill where applicable, and FIRC or BRC are aligned in value and description.
- Claim refund of unutilised ITC via Form RFD-01, supported by ICEGATE data integration.
- Report exports under Table 6A of GSTR-1 with proper shipping bill details.
- Reconcile ICEGATE, GSTR-1 and GSTR-3B monthly to avoid refund delays.
Exports of Services
Service exports qualify as zero-rated where the supplier is in India, the recipient is outside India, the place of supply is outside India, payment is received in convertible foreign exchange (or INR where RBI permits), and the supplier and recipient are not merely establishments of a distinct person. Documentation — service agreement, invoice in foreign currency, FIRC, SOFTEX where applicable for software exports — must be airtight.
Imports of Goods and Services
- Pay basic customs duty, IGST and applicable cesses at the time of import; IGST is creditable in the importer's GSTR-3B.
- For imported services without consideration, valuation follows the GST rules under Schedule I.
- Reverse charge applies to import of services from outside India under Section 5(3) of the IGST Act.
- Maintain bills of entry, IECs and ICEGATE data for ITC claims and audits.
- Equalisation levy applies to certain non-resident digital service providers per the prevailing rules.
Special Schemes and Concessions
Exporters should evaluate Advance Authorisation, EPCG, RoDTEP, RoSCTL, SEIS and MEIS-like schemes administered by DGFT for duty neutralisation and incentive support. SEZ units and EOUs enjoy specific GST and customs treatments. Free Trade Agreement-based preferential origin certificates can materially reduce import duty in partner-country exports. The CBIC and DGFT routinely update notifications — periodic review of trade-policy circulars is essential.
Common Pitfalls
- Failing to file LUT in time and paying IGST unnecessarily on every shipment.
- Mismatch between shipping bill, invoice and BRC values, blocking refund claims.
- Treating intra-group cross-border services casually, attracting transfer pricing and GST scrutiny.
- Missing RCM on imported services and losing the corresponding ITC.
- Not aligning HSN codes consistently across customs and GST documents.
Compliance Calendar
Build a monthly rhythm of GSTR-1, GSTR-3B, RFD-01 refund applications, ICEGATE reconciliation and BRC tracking. Quarterly, review FTA utilisation, DGFT scheme balances and transfer pricing positions for cross-border related-party flows. Annually, file GSTR-9 with full reconciliation of export and import figures against books and customs data.
Free Trade Agreements and Origin Compliance
India's expanding FTA network — UAE CEPA, Australia ECTA, EFTA TEPA, the UK FTA negotiations and ongoing EU and Canada discussions — opens preferential-tariff opportunities for Indian exporters and importers. Claiming benefits requires Certificate of Origin compliance, accurate HSN classification and adherence to rules of origin. Failure to document properly results in retroactive duty demands and penalty exposure. Treat FTA benefits as a strategic compliance project, not an opportunistic claim, and review utilisation each quarter alongside the DGFT incentive dashboard.
Compliance Calendar
Build a monthly rhythm of GSTR-1, GSTR-3B, RFD-01 refund applications, ICEGATE reconciliation and BRC tracking. Quarterly, review FTA utilisation, DGFT scheme balances and transfer pricing positions for cross-border related-party flows. Annually, file GSTR-9 with full reconciliation of export and import figures against books and customs data. A disciplined rhythm avoids end-of-year scrambles, accelerates refunds and keeps the company audit-ready throughout the financial year.
Conclusion
GST and international trade in India in 2026 reward disciplined documentation and timely refund management. The zero-rated regime is genuinely exporter-friendly when worked correctly — but unforgiving when shortcuts are taken. Build the LUT-file-refund rhythm into your operations, leverage DGFT schemes and treat compliance as a competitive advantage, not a cost. The cash freed up directly funds growth in global markets.
