GST Export Refund: What Has Been Recommended?
The 57th GST Council meeting, held on 8 October 2026, recommended removing the restriction that limits the turnover of zero-rated supplies of goods to 1.5 times the value of like goods supplied domestically for calculating refunds of accumulated Input Tax Credit (ITC).
The proposed amendment relates to Rule 89(4)(C) of the Central Goods and Services Tax (CGST) Rules, 2017.
The Council recognised the practical difficulties exporters face in establishing the value of comparable goods supplied domestically by the same or a similarly placed supplier.
The proposed change is intended to simplify refund calculations and reduce the compliance burden on exporters.
What Is the Existing Restriction?
Under the refund formula in Rule 89(4), the calculation of refunds for eligible zero-rated supplies of goods made without payment of integrated tax under a bond or Letter of Undertaking (LUT) includes the turnover of zero-rated supplies of goods.
Under the existing provision described in the Council's FAQ, this turnover is subject to a restriction based on the value of like goods supplied domestically by the same or a similarly placed supplier. The relevant value is limited to 1.5 times the domestic value, or the actual export value, whichever is lower.
This restriction can create practical difficulties where comparable domestic supplies are unavailable or where establishing the value of like goods is difficult.
What Change Has the GST Council Proposed?
The Council recommended amending Rule 89(4)(C) of the CGST Rules, 2017, to remove the restriction that caps the turnover of zero-rated supplies of goods at 1.5 times the value of like goods supplied domestically.
If implemented as recommended, the proposed change would remove this particular restriction from the refund calculation.
However, it would not automatically remove the other conditions governing refund eligibility under GST law.
How Could the Proposed Change Benefit Exporters?
The proposed amendment may benefit eligible exporters in the following ways:
1. Simplified Refund Calculation
Exporters would no longer need to establish the value of comparable domestic goods solely to comply with the proposed-to-be-removed 1.5 times restriction.
2. Reduced Documentation Difficulties
Businesses that face difficulty identifying comparable domestic supplies may find it easier to calculate the relevant export turnover for refund purposes, subject to the final rules and documentation requirements.
3. Better Refund Computation
Removing the restriction may prevent the eligible turnover of zero-rated supplies from being reduced solely because of the domestic value cap.
The actual refund amount would still depend on the prescribed formula, eligible Net ITC and other applicable requirements.
Illustrative Example
Suppose an exporter makes eligible zero-rated supplies of goods without payment of integrated tax under LUT.
For illustration:
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Actual value of eligible zero-rated supplies: ₹1 crore
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Value of like goods supplied domestically: ₹50 lakh
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1.5 times the domestic value: ₹75 lakh
Under the existing restriction described above, the turnover considered for the relevant part of the refund calculation may be limited to ₹75 lakh rather than the actual export value of ₹1 crore.
If the proposed amendment is implemented, this particular 1.5 times restriction would be removed.
Important: This example illustrates only the proposed change to the turnover restriction. It does not calculate the final refund amount, which depends on the complete formula under Rule 89(4), eligible ITC and other applicable conditions.
Will All Exporters Automatically Receive Higher Refunds?
No. The proposed amendment does not guarantee a higher refund in every case.
The final amount will continue to depend on the applicable refund formula, the value of eligible zero-rated supplies, the amount of eligible ITC, and compliance with the relevant provisions of the CGST Act and Rules.
Exporters should also distinguish between supplies made without payment of integrated tax under LUT or bond and supplies made on payment of integrated tax, as the refund mechanisms differ.
What Should Exporters Do Now?
Until the amendment is formally notified and implemented, exporters should continue following the existing applicable refund procedure.
They should:
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Maintain accurate export invoices and shipping documentation.
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Reconcile export turnover with GST returns and supporting records.
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Verify the eligible ITC included in refund calculations.
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Review the applicable refund formula under Rule 89(4).
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Monitor official notifications and amendments relating to Rule 89(4)(C) before relying on the proposed change.
Conclusion
The GST Council has recommended removing the 1.5 times domestic value restriction used in calculating the turnover of zero-rated supplies of goods for eligible GST refunds.
If implemented, the change could simplify refund calculations and reduce the practical difficulties exporters face in establishing the value of comparable domestic goods.
However, this remains a recommendation until the relevant legal amendment is formally implemented. Exporters should verify the applicable notification and refund procedure before applying the proposed treatment.
Source: Ministry of Finance, Government of India — FAQs on refunds and the recommendations of the 57th GST Council meeting held on 8 October 2026.