2026 GST export compliance checklist you're getting wrong

India's GST landscape for exporters has undergone its most significant transformation since 2017. The 56th GST Council Meeting (September 2025) launched "GST 2.0" — a sweeping rate restructuring that collapsed four slabs into three, while Budget 2026 formally deleted Section 13(8)(b) of the IGST Act, finally enabling intermediary service exporters to claim zero-rated benefits. Alongside these structural shifts, a new risk-based 90% provisional refund mechanism became operational in November 2025, cutting average refund processing times from 45 days to roughly 7 days for compliant exporters. This report covers every critical compliance requirement, common mistake, and recent rule change Indian exporters need to know as of February 2026.

GST 2.0 and the 56th Council Meeting rewrote the rules

The 56th GST Council Meeting (September 3, 2025) was the most consequential since GST's launch. Two core rate slabs now apply — 5% (merit/essentials) and 18% (standard) — plus a new 40% slab for sin and luxury goods. The 12% and 28% slabs were abolished effective September 22, 2025, with ~90% of items from 28% moved to 18% and ~99% from 12% moved to 5%. These changes were formalized via Notification Nos. 09/2025 to 17/2025 – Central Tax (Rate), all dated September 17, 2025.

For exporters, this rate simplification corrected longstanding inverted duty structures in textiles, footwear, fertilizers, paper, and packaging — sectors where input tax rates exceeded output rates, trapping ITC. Exporters in these sectors should see improved ITC refund calculations under Rule 89(4).

Budget 2026 (February 1, 2026) formalized several additional 56th Council recommendations through the Finance Bill, 2026:

• Section 13(8)(b) of IGST Act formally omitted — intermediary services (IT, BPO, consulting, brokerage, GCC operations) to overseas clients now follow the default place-of-supply rule (recipient's location), making them zero-rated exports with full ITC refund eligibility. This resolves pending show-cause notices totaling ₹3,357 crore.
• Section 54(6) amended — 90% provisional refund scope extended to inverted duty structure (IDS) cases, not just zero-rated supplies.
• Section 54(14) amended — the ₹1,000 minimum refund threshold removed for IGST-paid export refunds, benefiting small and e-commerce exporters with high-volume, low-value shipments.
• Section 15(3) amended — post-sale discounts no longer require a pre-existing agreement; only credit note issuance and ITC reversal by the recipient are needed.

The 55th GST Council Meeting (December 21, 2024) had earlier reduced compensation cess on supplies to merchant exporters to 0.1%, bringing it at par with the GST rate. It also made the Input Service Distributor (ISD) mechanism mandatory from April 1, 2025 — entities receiving common input service invoices for multiple GSTINs must now register as ISD and file Form GSTR-6 monthly.

LUT filing: the single most expensive mistake exporters make

The Letter of Undertaking (LUT) allows exporters to make zero-rated supplies without paying IGST upfront — avoiding working capital blockage of 2–6 months. Filed electronically via Form GST RFD-11 under Rule 96A of the CGST Rules, the LUT is governed by Notification No. 37/2017-CT and Circular No. 8/8/2017-GST.

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Key deadlines and rules for FY 2025-26 and FY 2026-27:

Failing to renew the LUT annually is the single most common and expensive compliance mistake exporters make. The LUT expires every March 31, and exports made before a valid LUT is filed require IGST payment with 18% interest per annum from the invoice date. There is no retroactive saving — filing the LUT after exports have already been made does not cure the deficiency (though Circular 37/11/2018-GST provides some relief where exports are substantively established).

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When LUT is revoked: If goods are not exported within 3 months of the invoice date (or services payment not received within 1 year), the LUT facility is deemed withdrawn. During withdrawal, exports must be made on payment of IGST or under bond with bank guarantee. LUT is restored immediately upon paying the amount due (tax + interest).

Bond/Bank Guarantee requirements remain unchanged: exporters prosecuted for tax evasion exceeding ₹2.5 crore must furnish a bond (on non-judicial stamp paper) with a bank guarantee typically not exceeding 15% of the bond amount. Running bonds are permitted. The Commissioner may waive the bank guarantee based on the exporter's track record. In practice, the LUT route dominates — bonds are increasingly rare.

The 12 most common GST mistakes Indian exporters make

Invoice number mismatch (Error SB005) is the most frequent — and often irrecoverable — mistake. When the invoice number in GSTR-1 Table 6A doesn't match the shipping bill filed with customs, the IGST refund is automatically rejected. Since shipping bills cannot be amended after EGM filing, SB005 errors require special intervention through customs authorities. The same GST-compliant export invoice must be used in both the customs and GST systems.

Beyond SB005, the critical mistakes cluster around six areas:

LUT and timing errors: Not renewing LUT annually before March 31; filing LUT after the first export invoice of the FY (requiring IGST payment on all prior exports); not exporting goods within the 3-month window from invoice date, triggering IGST liability plus 18% interest.

GSTR-1 and GSTR-3B mismatches: Reporting exports as normal sales in GSTR-3B Table 3.1(a) instead of 3.1(b); IGST amount in Table 3.1(b) being less than the total in GSTR-1 Table 6A (which blocks data transmission to ICEGATE entirely); omitting shipping bill number, date, or 6-digit port code from Table 6A; and reporting export invoices in the wrong return period.

E-invoicing failures: Not generating e-invoices for export transactions when turnover exceeds ₹5 crore AATO; missing the 30-day reporting window (now mandatory for AATO ≥ ₹10 crore from April 1, 2025 — IRP rejects late invoices); using incorrect supply type codes (must use EXPWP or EXPWOP); and setting the recipient PIN code incorrectly (must be 999999 for exports).

ITC classification errors: Treating exports as "exempt" instead of "zero-rated" — a distinction that determines whether full ITC can be claimed. Zero-rated supplies allow complete ITC; exempt supplies do not. Exporters also commonly include blocked credits under Section 17(5) (motor vehicles, food, club memberships) in their refund calculations.

HSN code mistakes: Using 4-digit HSN codes when 8-digit codes are mandatory for all export invoices regardless of turnover. From May 2025, manual HSN entry has been disabled in GSTR-1 — codes must be selected from a dropdown. Wrong HSN codes trigger IRP Error 2176, block e-invoice generation, and can lead to customs classification disputes.

FOB value discrepancies: If the FOB value in the shipping bill differs from the taxable value in GSTR-1 by more than 2%, the system auto-rejects the IGST refund. When values differ, only the lower amount is sanctioned per Circular 37/11/2018-GST.

GST refund process: two routes, dramatically faster timelines

Exporters have two paths to recover GST on exports, both significantly improved by the November 2025 risk-based provisional refund system.

Route 1 — IGST refund via shipping bill (Rule 96): The shipping bill itself is the deemed refund application. No separate RFD-01 is needed for goods. ICEGATE auto-matches GSTR-1 Table 6A data with shipping bill and EGM records. When everything validates (code SB000), refund is processed automatically. From November 2025, compliant exporters receive 90% provisional refund within approximately 7 days; the balance follows within 60 days. For service exports with IGST payment, a separate Form RFD-01 with Statement 2 is still required.

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Route 2 — ITC refund under LUT/Bond (Rule 89): Exporters who ship without paying IGST claim refund of accumulated ITC via Form GST RFD-01 with Statement 3 (invoice details) and Statement 3A (computation). The refund formula under Rule 89(4) is: Refund = (Zero-rated supply turnover × Net ITC) ÷ Adjusted Total Turnover. Net ITC excludes ITC on capital goods. As of May 2025, refund filing shifted from tax-period-based to invoice-based filing — exporters enter invoice-level details directly, and invoices used in one application are locked from reuse.

Key refund timelines remain strict:

Top refund rejection reasons in order of frequency: (1) SB005 invoice number mismatch, (2) EGM not filed by carrier (SB002/SB006), (3) GSTIN mismatch between shipping bill and returns (SB003), (4) GSTR-3B Table 3.1(b) amount less than GSTR-1 Table 6A, (5) FOB value mismatch exceeding 2%, and (6) non-realization of foreign exchange within FEMA-prescribed 9 months (triggering Rule 96B repayment obligation within 30 days).

Deficiency memos (Form RFD-03) carry a strict 15-day response window — failure results in the application being treated as withdrawn, requiring a fresh filing. However, the deficiency memo period is excluded from the 2-year limitation per Notification No. 15/2021-CT.

E-invoicing, HSN codes, and GSTR filing changes in 2025-2026

E-invoicing threshold remains at ₹5 crore AATO as of February 2026 (per Notification 10/2023-CT effective August 1, 2023). The major confirmed change is the 30-day reporting time limit — from April 1, 2025, businesses with AATO ≥ ₹10 crore must upload e-invoices to IRP within 30 days of invoice date; the IRP rejects late submissions and denies IRN generation. Two-factor authentication (2FA) also became mandatory for all e-invoice and e-way bill generation from April 1, 2025. Non-compliance with e-invoicing carries penalties of 100% of tax due or ₹10,000 per invoice, whichever is higher.

HSN code requirements are now strictly enforced. For exports, 8-digit HSN codes are mandatory regardless of turnover. For domestic B2B supplies, businesses above ₹5 crore AATO need 6-digit codes, while those below need 4-digit codes. From May 2025 (Phase 3 HSN reporting), manual HSN entry in GSTR-1 has been replaced by mandatory dropdown selection, with descriptions auto-populated from the master database. Table 12 of GSTR-1/1A has been bifurcated into B2B and B2C sections, and Table 13 (document details) is now mandatory for all taxpayers.

GSTR-1 and GSTR-3B filing for exporters requires careful attention to table placement: export invoices with IGST go in Table 6A, exports under LUT go in Table 6B, and SEZ supplies go in Table 6B as well. In GSTR-3B, all zero-rated supplies must appear in Table 3.1(b) — not Table 3.1(a). The IGST amount in GSTR-3B Table 3.1(b) must equal or exceed the total from GSTR-1 Tables 6A + 6B, or invoices will not transmit to ICEGATE. The amendment deadline for GSTR-1 corrections is November 30 of the following financial year or the annual return filing date, whichever is earlier.

ITC reconciliation has become more demanding with the Invoice Management System (IMS), operational since October 2024. Recipients must actively accept, reject, or keep pending supplier invoices. From October 2025, unaccepted invoices under IMS are automatically accepted and flow to GSTR-2B. A three-way reconciliation — IMS vs. GSTR-2B vs. GSTR-3B — is now the compliance standard.

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Critically, zero-rated supplies (exports) are not treated as exempt for ITC reversal under Rules 42 and 43 — no reversal is required for the portion attributable to exports.

RoDTEP scheme faces an uncertain future beyond March 2026

The RoDTEP scheme is valid until March 31, 2026 per DGFT Notification No. 35/2025 (September 30, 2025). Current rates range from 0.3% to 4.3% of FOB value across 10,780+ HS lines for DTA exports. The scheme reimburses embedded non-GST taxes (electricity duty, VAT on fuel, mandi tax, stamp duty, toll charges) that are not covered by the GST ITC mechanism.

Exporters can claim both RoDTEP and IGST refund simultaneously — there is no conflict, as the two schemes cover different tax components. RoDTEP credits are issued as transferable e-scrips via ICEGATE, usable only for paying Basic Customs Duty on imports. They are not subject to GST themselves and cannot be used for GST payment.

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The most significant development is the 45% cut in FY 2026-27 budget allocation — down to ₹10,000 crore from ₹18,233 crore in FY 2025-26. A Rate Review Committee was constituted in October 2025 (chaired by Neeraj Kumar Gupta) to rationalize rates based on FY 2024-25 data. No formal multi-year extension has been announced beyond March 2026, though the budget allocation implies some continuation.

New compliance requirement — Annual RoDTEP Return (ARR): Exporters with total RoDTEP claims exceeding ₹1 crore in a financial year must file an ARR demonstrating that claimed taxes were actually incurred. The FY 2023-24 ARR deadline has been extended to March 31, 2026 with a ₹15,000 composition fee (Public Notice No. 46/2025-2026). Non-filing leads to denial of benefits and scroll-out restrictions.

For RoSCTL (covering textile apparel and made-ups under HS Chapters 61, 62, 63), the same uncertainty applies — allocation was halved to ₹5,000 crore for FY 2026-27.

Penalties, enforcement, and what tightened in 2025-2026

GST enforcement has materially tightened across several dimensions. Late fees remain at ₹50/day (₹25 CGST + ₹25 SGST) for regular GSTR-1/GSTR-3B returns, capped at ₹5,000 per return. Annual return (GSTR-9) late fees are ₹200/day, capped at 0.50% of annual turnover. Interest on late tax payment runs at 18% per annum; excess ITC claims attract 24% per annum.

Three enforcement changes particularly affect exporters. First, from December 1, 2025, the GST portal permanently blocks filing of returns older than 3 years — ITC related to blocked returns is permanently lost. Second, from January 2026, hard portal validations block GSTR-3B filing where claimed ITC exceeds the closing balance in the Electronic Credit Reversal and Re-claimed Statement. Third, bank account details must be current on the portal — failure triggers automatic registration suspension, blocking return filing and e-way bill generation.

The GST Appellate Tribunal (GSTAT) launched on September 24, 2025 and began hearing appeals from December 2025. The deadline to file GSTAT appeals for orders communicated before April 1, 2026 has been extended to June 30, 2026 (S.O. 4220(E) dated September 17, 2025). This provides exporters a long-awaited appellate remedy below the High Court level.

Fraud and tax evasion penalties remain severe: 100% to 300% of tax evaded (minimum ₹10,000), with imprisonment ranging from 1 year (₹1–2 crore evasion) to 5 years (above ₹5 crore). The general penalty under Section 125 is capped at ₹25,000.

Zero-rated supply documentation checklist

For exports to qualify as zero-rated under Section 16 of the IGST Act, exporters must maintain precise documentation depending on their chosen route:

Under LUT (without IGST payment): Valid LUT (Form RFD-11) for the financial year; export invoices with GSTIN, invoice number, and 8-digit HSN/SAC codes; GSTR-1 Table 6B filed correctly; GSTR-3B filed for the period; shipping bill/BL/AWB; BRC/FIRC for foreign exchange receipt (services); and Form RFD-01 with Statement 3/3A for ITC refund claims.

With IGST payment: Tax invoice with IGST charged; GSTR-1 Table 6A with complete shipping bill number, date, and 6-digit port code; GSTR-3B with IGST in Table 3.1(b) ≥ Table 6A amount; shipping bill filed with customs; EGM filed by carrier; and GSTR-3B for the relevant period. No separate RFD-01 is needed for goods — the shipping bill is the deemed refund application.

Export of services must meet all five conditions under Section 2(6) IGST Act: supplier located in India, recipient located outside India, place of supply outside India, payment received in convertible foreign exchange (or INR via Special Vostro Account where RBI permits), and supplier and recipient are not establishments of a distinct person.

Time limits remain strict: goods must be exported within 3 months of invoice date; service payments must be received within 1 year. Foreign exchange must be realized within 9 months per FEMA. Non-realization triggers Rule 96B — IGST refund must be repaid with interest within 30 days.