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.