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GST on exports to Nepal is one of the most commonly misunderstood aspects of India-Nepal trade. Businesses either overpay by charging IGST when they do not need to, or underpay and face compliance notices later. Both mistakes cost real money.

This guide explains GST on exports to Nepal in plain language — no tax jargon, no circular references. Just the practical knowledge you need to ship goods to Nepal without GST complications. It is written from the perspective of IP Group, a logistics company that has been processing India-to-Nepal customs clearance at every border since 1980.

Are Exports to Nepal Zero-Rated Under GST?

Yes. GST on exports to Nepal follows the same zero-rated treatment as exports to any other country. Under Section 16 of the IGST Act, exports of goods from India are zero-rated supplies. This means no GST is payable on goods physically leaving India and entering Nepal.

However, there is a critical nuance that catches many exporters: the payment currency matters for services, but for goods, physical export is sufficient. As long as your goods physically cross the Indian border into Nepal — verified by the export shipping bill on ICEGATE — they qualify as zero-rated regardless of whether payment is received in Indian Rupees or foreign exchange.

This distinction is important because India-Nepal trade often settles in INR rather than USD or other convertible currencies.

Two Ways to Handle GST on Exports to Nepal

Indian exporters have two options:

Option 1: Export Under LUT Without Paying IGST (Recommended)

File a Letter of Undertaking (LUT) in Form GST RFD-11 on the GST portal at the beginning of each financial year. Once the LUT is active, you export goods without charging or paying any IGST. You can then claim a refund of Input Tax Credit (ITC) accumulated on your purchases.

This is the preferred approach because it preserves your working capital. No IGST is paid upfront, so no money is locked in refund processing.

Option 2: Pay IGST and Claim Refund Later

Charge IGST on your export invoice, pay it to the government, and then file for a refund. The shipping bill filed on ICEGATE serves as the refund application. Once GSTR-1 and GSTR-3B are filed correctly and data matches with ICEGATE records, the refund is processed.

This approach is simpler in documentation but locks your working capital for weeks or months while the refund is processed.

For most businesses doing regular GST on exports to Nepal shipments, Option 1 (LUT) is strongly recommended.

How LUT Filing Works for Nepal Exports

Filing an LUT is straightforward. Log in to the GST portal, navigate to Services → User Services → Furnish Letter of Undertaking, select the financial year, fill in Form GST RFD-11, and submit with DSC or EVC. The LUT is typically deemed approved within 3 working days if no action is taken by the tax official.

The LUT is valid until March 31 of the financial year. You must file a fresh LUT every April for the new financial year. If you miss filing the LUT and export without it, you must pay IGST on those exports and claim a refund through the longer process.

IP Group’s customs clearance team advises clients on LUT status before every shipment to prevent compliance gaps.

Documents Required for GST-Compliant Nepal Exports

For zero-rated GST on exports to Nepal, you need a tax invoice with “Supply meant for export on LUT without payment of IGST” clearly stated, shipping bill filed on ICEGATE, LUT acknowledgement (ARN number), e-Way Bill for the Indian domestic leg, and GSTR-1 filing with export details in Table 6A.

For the complete list of all documents needed for Nepal customs clearance beyond GST, see our detailed guide: Documents Required for Nepal Customs Clearance.

Common GST Mistakes When Exporting to Nepal

Mistake 1: Charging IGST without filing LUT. Many first-time exporters charge 18% or 12% IGST on their Nepal invoices because they did not file an LUT beforehand. This locks lakhs of rupees in refund processing for months.

Mistake 2: Confusing Nepal goods exports with services exports. For services exported to Nepal, payment MUST be received in convertible foreign exchange for zero-rating (with some INR exceptions under RBI norms). For goods, physical export is sufficient regardless of payment currency. Mixing up these rules causes incorrect GST treatment.

Mistake 3: Not matching GSTR-1 data with ICEGATE. The IGST refund for Option 2 exporters depends on exact data matching between your GST return (GSTR-1 Table 6A) and your shipping bill on ICEGATE. Mismatches in invoice numbers, dates, or values block the refund indefinitely.

Mistake 4: Forgetting to renew LUT in April. The LUT expires every March 31. Exporters who ship regularly sometimes forget to renew in April and suddenly find their first shipment of the new financial year requires IGST payment.

How IP Group Helps With GST Compliance on Nepal Exports

IP Group handles the logistics and customs side of GST on exports to Nepal. Our customs clearance services include pre-shipment advisory on GST treatment (LUT vs IGST), ICEGATE shipping bill coordination, HS code verification against both Indian and Nepal customs tariffs, export invoice review for GST compliance, and end-to-end transportation and logistics from your warehouse to Nepal delivery.

For a broader understanding of how the India-Nepal transport corridor works: India to Nepal Transport Company.

Frequently Asked Questions About GST on Exports to Nepal

Q: Is GST applicable on goods exported from India to Nepal? A: No. Exports of goods to Nepal are zero-rated under GST. You can either export under LUT without paying IGST, or pay IGST and claim a refund later. Physical export of goods across the border is sufficient for zero-rating.

Q: Can I receive payment in Indian Rupees for Nepal exports and still claim zero-rating? A: Yes, for goods. The zero-rated status of goods exports depends on physical export, not payment currency. For services, payment must be in convertible foreign exchange (with limited INR exceptions under RBI norms).

Q: What happens if I export without filing an LUT? A: You must pay IGST on the export and then apply for a refund. The refund process takes weeks to months depending on data matching between GSTR-1 and ICEGATE.

Q: How often do I need to renew my LUT? A: Annually. The LUT is valid until March 31 each year. File Form GST RFD-11 on the GST portal at the start of every financial year (April).

Q: Does IP Group handle GST documentation for Nepal exports? A: IP Group handles the logistics, customs clearance, and shipping bill coordination. We advise on GST treatment and ensure ICEGATE filings are correct. For GST return filing (GSTR-1/3B), consult your chartered accountant.

Exporting to Nepal for the first time? Get expert guidance from IP Group →