In export WITH PAYMENT OF IGST and refund IGST

• As clarified by tax tribunals and experts, the IGST refund is not treated as income; it is effectively a neutral transaction for income tax purposes, since the original outflow (payment of IGST) did not reduce taxable profits.

• The IGST refund received after export is not taxable under the Income Tax Act, as it simply restores the tax-neutral position of the exporter.

• The exporter is not required to offer the IGST refund as income since the payment was originally offset against ITC and not claimed as an expense in the Profit & Loss account.

The standard journal entries for IGST paid through ITC and the subsequent refund are as follows:

• At the time of export (when IGST is paid through ITC):

Output IGST A/c        Dr
    To Input IGST A/c

The standard journal entries for IGST paid through ITC and the subsequent refund are as follows:

• At the time of export (when IGST is paid through ITC):

Bank A/c               Dr
    To IGST Receivable/Refund A/c

Alternatively, some accountants directly credit the Input IGST A/c if a separate refund receivable account is not used.

No income is booked at the time of the refund, as this is not revenue but rather a return of a tax credit asset.

The refund of IGST paid on export is generally not taxable income: it is a refund of tax previously paid, not export revenue. Where the IGST was discharged using ITC, the refund represents recovery of that credit/cash payment; it should not be credited to the Profit & Loss account as income. The export sale remains taxable business revenue under the normal income-tax rules.

In the books, record the export invoice and IGST liability in the usual way, and record utilisation of ITC against that liability. When the refund is received, debit Bank and credit the relevant IGST refund receivable/IGST control account, clearing the receivable recorded when the claim was recognised. If no receivable was recognised earlier, credit the appropriate GST/IGST balance-sheet account—not income. The precise entries depend on how the GST liability and refund claim are maintained in your ledgers.

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