Selling outside India, or to a unit in a Special Economic Zone, is zero-rated. That is not the same as exempt: the supply is taxable at nil, which is what lets you keep your input credit.
The two ways
| Route | What happens | Suits |
|---|---|---|
| Under LUT | No IGST charged. You have filed a Letter of Undertaking. | Most exporters. No money tied up. |
| With payment of IGST | IGST charged, then claimed back as a refund. | Exporters without an LUT in place. |
Marking a document
- Set the customer’s country, or mark them as an SEZ unit.
- On the document, set whether it is an export and whether it is under LUT.
- Choose the currency if you are billing in dollars, dirhams or pounds.
These start undecided, not switched on. Export, SEZ and LUT are three-state flags — yes, no, or not yet decided. That matters: LUT once defaulted to true, which quietly told every overseas customer you had filed one. Leaving it undecided makes somebody choose.
How it prints
- The title reads EXPORT INVOICE rather than Tax invoice.
- Outside India the HSN column disappears by itself, because it means nothing there.
- The document carries the currency you billed in.
The LUT is the switch
Two ticks on the document decide everything: Export or SEZ, and Under a Letter of Undertaking.
| Situation | What happens |
|---|---|
| Export or SEZ, with an LUT | The supply is zero rated. No IGST is charged. |
| Export or SEZ, without an LUT | IGST is charged, and claimed back as a refund later. |
That is not a display choice, it is the tax. Under s.16(3) of the IGST Act a supplier without an LUT has to charge IGST, so the tick genuinely changes what the customer owes.
Check which way the LUT switch is set before you send the first export of a financial year. An LUT is valid for one financial year; the invoice you raise on 2 April under last year’s assumption is the one that causes the argument.
What the document prints
- The heading reads Export invoice or SEZ supply rather than Tax invoice.
- The HSN column stays, because an export still needs it.
- A foreign currency and its exchange rate can sit on the document, with the rupee value carried alongside for your books.
SEZ is not quite export
A sale to a unit in a Special Economic Zone is treated as a zero-rated supply even though the goods never leave India. It is the same tax treatment and a different heading, which is why the two sit side by side as separate ticks rather than one.
Where to go next
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