What is Zero-Rated Supply?
Zero-rated supply is a GST concept set out in Section 16 of the IGST Act. It covers exports of goods and services and supplies to SEZ units or developers. A zero-rated supply is still a taxable supply, but the system is designed so that no GST cost stays in the price. That keeps Indian exports competitive, because the foreign client does not pay Indian tax.
Why it matters for exporters
Zero-rating works in one of two ways. You can export under a Letter of Undertaking (LUT, filed on Form GST RFD-11) without paying IGST, and claim a refund of the unused input tax credit if you need to. Or you can pay IGST on the export invoice and claim a refund of that IGST. Under LUT, your invoice should carry the wording "Supply meant for export under LUT without payment of IGST". Most service exporters choose the LUT route because it avoids blocking cash in tax.
Zero-rating only applies if the supply is genuinely an export of services, meaning all five conditions in Section 2(6) of the IGST Act are met. Proof of foreign payment, such as FIRAs and eBRCs, often supports refund claims. The EDF itself is a FEMA declaration and does not change your GST position. Our export invoice generator adds the LUT wording for you.
Example
Fable Content Studio invoices a London publisher GBP 4,000 under LUT. No IGST is charged. Fable has ₹38,000 of input GST on software and rent for the month, which it can claim as a refund of unused credit, subject to the refund rules. Its CA keeps the FIRA and eBRC on file for the claim.
Common confusion
Zero-rated is not the same as exempt. Exempt supplies carry no GST, but input tax credit on them is generally not available. Zero-rated supplies keep credit eligibility. Read zero-rated supply explained for more. This is general information, not tax advice.