Exporting to Nepal and Bhutan from Kolkata: IEC, LUT, GST on Exports and FEMA (2026)
Goods sent from Kolkata or anywhere in India to Nepal or Bhutan are exports under GST even when the buyer pays in Indian rupees, so you can ship under an LUT without paying IGST and claim a refund of the input tax credit. Services are different: services supplied to Nepal or Bhutan against payment in rupees are exempt from IGST rather than zero-rated, so the credit on them has to be reversed. Either way you need an IEC, the right customs paperwork at the land border, and, from 1 October 2026, the new FEMA export rules. This guide covers each step for traders and service firms in West Bengal.
Before the first shipment
- IEC (Import Export Code) from DGFT, linked to your PAN. It is needed for customs clearance. See our IEC registration service.
- GST registration, if you are not already registered. Exporters of goods must register whatever their turnover, because an export of goods counts as an inter-state supply.
- LUT (Letter of Undertaking) filed on the GST portal for the financial year, so you can export without paying IGST.
- A bank account with an Authorised Dealer who will handle the export proceeds and the export declaration.
GST: goods and services are treated differently
| What you supply to Nepal or Bhutan | Paid in | GST treatment | Input tax credit |
|---|---|---|---|
| Goods | Indian rupees or foreign currency | Export, zero-rated | Refund available (under LUT) or IGST paid and refunded |
| Services | Foreign currency | Export of services, zero-rated, if the other conditions are met | Refund available |
| Services | Indian rupees | Exempt from IGST, not an export | Reverse the credit on inputs used for these services |
The services rule surprises consultants, IT firms and agencies in Kolkata who bill Nepali or Bhutanese clients in rupees. Their invoices carry no IGST, but because the supply is exempt rather than zero-rated, the credit on related costs is lost. If the client can pay in a convertible foreign currency, the same work becomes a zero-rated export with full credit.
Getting the goods across the border
- Most Kolkata cargo for Nepal goes by road through the land customs stations at Panitanki (near Siliguri, to Kakarbhitta), Raxaul (to Birgunj) and Jogbani (to Biratnagar). Bhutan cargo usually crosses at Jaigaon (to Phuentsholing).
- File the bill of export at the land customs station, with the invoice, packing list and LUT reference. The export is complete when customs lets the goods out of India.
- Generate an e-way bill for the road movement from your premises to the border. Inside West Bengal the limit is now ₹50,000; see our guide for Kolkata traders.
- Keep the stamped bill of export and the proof that the goods crossed. The GST refund depends on matching your invoice in GSTR-1 to the customs record.
FEMA: the new export rules from 1 October 2026
The Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 (FEMA 23(R)/2026-RB of 13 January 2026) replaced the 2015 rules from 1 October 2026. For exporters the main points are:
- Export proceeds have to be realised within 15 months of shipment for goods, or 15 months of the invoice for services.
- Where the export is invoiced or settled in Indian rupees, as is common with Nepal and Bhutan, the period is 18 months.
- The export declaration is made in the Export Declaration Form. Service exporters file it within 30 days from the end of the month in which the invoice is raised.
Nepal and Bhutan have long had special treatment under the exchange rules because rupee trade with them is routine. Confirm with your Authorised Dealer bank, before the first shipment, exactly which declaration they need from you under the 2026 regulations for a Nepal or Bhutan buyer.
Getting the refund
- Report each export invoice in GSTR-1 with the bill of export or shipping details.
- For exports under LUT, apply for the refund of unutilised input tax credit in Form RFD-01, period by period.
- Keep the bank realisation records. A refund on an export whose money has not come back within the FEMA period can be recovered.
Frequently asked questions
Is supply of goods to Nepal an export under GST if paid in rupees?
Yes. Goods taken out of India to Nepal or Bhutan are exports whatever the currency, so they are zero-rated and can be shipped under an LUT.
Is GST charged on services to a client in Nepal paid in rupees?
No IGST is charged, because such services are exempt. But it is an exempt supply, not an export, so the input tax credit on it has to be reversed.
Do I need an IEC to export to Nepal or Bhutan?
Yes, for goods. Customs at the land border will not clear an export without one.
How long do I have to receive payment from a Nepali buyer?
Under the FEMA rules in force from 1 October 2026, 15 months from shipment, or 18 months where the export is invoiced or settled in Indian rupees.
Which border crossing do Kolkata exporters use for Nepal?
Most use Panitanki near Siliguri, Raxaul or Jogbani, depending on where the buyer is in Nepal. For Bhutan, Jaigaon is the main crossing.
Export without the refund headaches
TAXAJ handles IEC registration, LUT filing, GST refunds and FEMA compliance for exporters in West Bengal. Talk to our Park Street team at TAXAJ Kolkata.
Last updated 16 October 2026. Sources: section 2(5) and section 16 of the IGST Act, 2017; Notification No. 42/2017-Integrated Tax (Rate) on services to Nepal and Bhutan against payment in INR; Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, notification FEMA 23(R)/2026-RB dated 13 January 2026, in force from 1 October 2026. General information only; check with your bank and customs broker before shipping.
