Unutilized Input Tax Credit: proportional refund mechanism for zero-rated export of services under LUT using ITC-based formula.
Exports of services classified as zero-rated supplies may be made under IGST payment or without tax under a Letter of Undertaking; where LUT is used, Rule 89(4) permits refund of unutilized input tax credit calculated as: Refund = Turnover of zero-rated supply of services x Net ITC / Adjusted Total Turnover. "Turnover of zero-rated supply" aggregates payments received for invoices and adjusts for advances, "Net ITC" covers ITC on inputs and input services in the relevant period, and "Adjusted Total Turnover" excludes exempt supplies (other than zero-rated) and supplies already subject to refund claims. Filing requires GST RFD-01A with Statement 3, supporting export documentation and adherence to prescribed timelines and portal procedures. (AI Summary)