Deemed exports and the refund to the recipient

A category where the tax is paid, the supply is domestic, and either party may claim the refund. Only one of them should.

The mechanics

The supply is not zero rated. Tax is charged and paid on the invoice in the ordinary way.

The refund of the tax paid may be claimed by the recipient, on an undertaking that no input tax credit has been availed on those invoices and that the supplier will not claim the refund, or by the supplier where the recipient does not avail credit and gives the required undertaking.

The documentation prescribed includes the acknowledgement of the authorisation holder or the export oriented unit, and the undertakings. Circular 14/14/2017-GST prescribes the procedure for supplies to export oriented units.

The choice of claimant must be made once and applied consistently, because the undertakings are mutually exclusive.

Where it goes wrong

Both parties act. The recipient avails credit and the supplier claims the refund, and the claim is rejected with a demand on the credit.

The undertakings are not obtained at the time of supply and cannot be obtained later because the counterparty has already availed credit.

The authorisation particulars are not recorded on the invoice, so the supply cannot be linked to the authorisation.

The recipient's acknowledgement is not obtained, which is a prescribed document.

The commercial decision

Decide at the contract stage who claims. For a supplier with accumulating credit, claiming the refund may be attractive; for a recipient who cannot use the credit, the recipient should claim.

Record the decision in the purchase order and in the invoice, and obtain the undertaking with the first supply rather than at the end of the year.

Where the recipient is an export oriented unit, follow the prescribed procedure precisely, because the department applies it strictly.

What to do on Monday

1. Decide the claimant at the contract stage and record it in the purchase order and invoice.

2. Obtain the undertakings and acknowledgements with the first supply, not at the year end.

3. Record the authorisation particulars on every invoice.

4. Reconcile credit availed against the refund route chosen, to avoid a double claim.

Questions we are asked on this

Is a deemed export a zero rated supply?

No. It is a taxable supply on which tax is paid, with a refund mechanism.

Can both the supplier and the recipient claim?

No. The undertakings are designed to ensure only one claims, and a double claim results in rejection and a demand.

Can the recipient avail credit instead of claiming the refund?

Yes, and that is often simpler. The refund route is for recipients who cannot use the credit.

What documents are prescribed?

The acknowledgement of the authorisation holder or export oriented unit and the undertakings prescribed by the rules, along with the invoices.

Does the two year period apply?

Yes, from the relevant date for that category. File early.

In this cluster

• GST refunds: every category, every form, every deadline
• Export refunds: the LUT route versus the IGST route
• VKC Footsteps: why input service tax stays stuck in an inverted duty structure
• Provisional refund of ninety percent: the mechanism and how to keep it
• Replying to RFD-08: the refund rejection notice
• Deficiency memos in RFD-03 and the limitation reset problem
• Interest on delayed refunds under Section 56
• Unjust enrichment in GST refunds: when it applies, and when it does not
• Section 77: refund where tax was paid under the wrong head
• SEZ supplies and refund: endorsement, authorised operations and the disputes

GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.