RBI Extends Export Realisation Timeline to 15 Months: Key Impact on GST Compliance

The Reserve Bank of India (RBI) has recently extended the time limit for the realization of export proceeds under FEMA, from the earlier 9 months to 15 months. This relaxation aligns with evolving global trade dynamics and provides exporters with much-needed flexibility amid longer payment cycles.

However, this update also has direct implications for GST compliance, particularly for exports made under LUT and refunds claimed on zero-rated supplies.

What Has Changed?

Under FEMA, exporters must receive payment for export goods/services within a stipulated period. With the RBI extending this window to 15 months, GST provisions that are linked to foreign exchange realization automatically shift in tandem.

This impacts:

• Exporters supplying under a Letter of Undertaking (LUT)
• Exporters claiming GST refunds on zero-rated supplies

Impact 1: Exports Under LUT (Without IGST Payment):

For exporters who export goods or services without paying IGST under an LUT, the following implications apply:

Extended Time for Payment Realisation:

Exporters now have 15 months (instead of 9 months) to realize export proceeds.

No GST Liability During Extended Period:

As long as the payment is received within 15 months, the exporter continues to enjoy zero-rated benefits with no GST liability.

GST Becomes Payable If Payment Is Not Realised:

If proceeds are not received within 15 months:

• The exporter must pay GST on the export transaction, and
• Interest becomes payable from the date of export

This effectively gives exporters an additional 6 months of compliance relief.

Impact 2: GST Refunds on Zero-Rated Supplies:

Exporters who claim GST refunds—whether on input taxes (ITC refund) or on payment of IGST—are subject to FEMA-linked realization timelines.

Refund Must Be Returned If Proceeds Are Not Realised:

If export proceeds are not received within the permitted FEMA timeline, refund sanctioned earlier must be paid back to the government.

Extended 15-Month Window Reduces Refund Reversal Risk:

With FEMA timelines now extended:

• The refund recovery risk is pushed forward by six additional months
• Exporters get more time to secure payments and avoid refund reversal

This is beneficial for sectors with longer settlement cycles, such as IT services, engineering exports, and project-based industries.

Why This Matters for Exporters:

• Provides greater liquidity and working capital flexibility
• Reduces compliance pressure related to GST refund reversals
• Offers breathing space amid delayed foreign remittances
• Ensures RBI and GST compliance cycles are aligned

Conclusion:

RBI’s extension of the export realization period to 15 months is a welcome regulatory relaxation, especially in a globally uncertain trade environment. Exporters should leverage this additional time to streamline receivables and ensure full compliance with FEMA and GST rules.

At KDP Accountants, the team of professionals is available to support you with GST on exports, LUT filing, refund planning, or FEMA compliance. Connect with us at enquire@kdpaccoutants.com.