Tax for export-oriented businesses in India

There are no fresh income-tax holidays for exporters under the Income-tax Act 2025: the SEZ unit deduction (Section 10AA) closed to new units on 30 June 2020, and the EOU and 80HHC-series breaks are sunset. A new exporter pays normal income tax. The incentives now are indirect: GST zero-rating of exports (file a Letter of Undertaking and export without paying IGST, then reclaim input credit, or pay IGST and claim a refund), RoDTEP remission of embedded duties as a transferable scrip, and the Foreign Trade Policy schemes (Advance Authorisation for duty-free inputs, EPCG for capital goods, deemed exports).

Presumptive + GST + TDS at a glance

Presumptive taxation

Section:: Sec 44AD (small exporter) or books
Deemed profit rate:: 6% on digital receipts / 8% on other receipts
Classification:: business

GST treatment

Slab:: 18%
SAC:: export of goods/services zero-rated under LUT (RFD-11) or IGST-and-refund; domestic supply at applicable rate
Composition eligible:: No
Reverse charge (RCM):: Not applicable

TDS exposure

Last reviewed: 29 May 2026

Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact Income Tax Department. Read our editorial scope →

Exporting is a business, and the tax landscape for it has shifted: there are no fresh income-tax holidays under the Income-tax Act 2025. The old profit-linked breaks (SEZ Section 10AA, EOU Sections 10A/10B, the 80HHC-series export deductions) are legacy or sunset, the SEZ unit holiday closed to new units on 30 June 2020. The real incentives now sit in indirect tax and trade policy: GST zero-rating of exports (no GST out, full input credit back), RoDTEP remission of embedded duties, and the Foreign Trade Policy schemes (Advance Authorisation, EPCG, deemed exports). The practical decisions are how to zero-rate (LUT or IGST-and-refund) and how to map your products to RoDTEP.

What business structure do export-oriented businesses use?

The common patterns for export-oriented businesses are: Sole proprietor or partnership, for a small exporter, LLP, for a co-owned export firm, Private limited, common for scaling exporters and any SEZ/EOU unit. The right structure depends on revenue, liability exposure, and personal circumstances, covered below.

The income-tax holiday is gone

Do not plan an export business around a profit-linked income-tax holiday, there is no longer one for new entrants. The SEZ unit deduction (the old Section 10AA, now Section 144 of the 2025 Act) closed to new units on 30 June 2020, with only legacy units continuing their remaining window. The EOU and STP holidays under Sections 10A/10B sunset back in 2010-11, and the 80HHC, 80-IB and 80-IC export deductions were not re-enacted. So a new exporter pays normal income tax on its profit, the support has moved entirely to indirect tax and trade policy.

There are no fresh income-tax holidays for exporters; SEZ 10AA is closed to new units (since 30 June 2020) and EOU/80HHC-series breaks are sunset. (Income-tax Act 1961 s.10AA (Income-tax Act 2025 s.144, new-unit sunset 30 June 2020); ss.10A/10B and 80HHC-series (sunset, not re-enacted))

GST zero-rating: LUT or IGST-and-refund

Exports are zero-rated: no output GST, and full input-tax credit recoverable. There are two routes. Route A: pay IGST on the export and claim a refund (the shipping bill serves as the refund application). Route B: export under a Letter of Undertaking (LUT, form RFD-11) without paying IGST, then claim a refund of unutilised input credit. For a regular, cash-sensitive or high-volume exporter, the LUT route is usually better because you never tie up cash in upfront IGST. Under the LUT, goods must be exported within three months and service proceeds realised within one year, or IGST plus 18% interest applies.

Exports are zero-rated; export under an LUT (RFD-11) with no IGST and an input-credit refund, or pay IGST and claim it back; the LUT route avoids tying up cash. (IGST Act 2017 s.16 (zero-rated supply; LUT/RFD-11 and IGST-refund routes))

RoDTEP, deemed exports and the Foreign Trade Policy

The active incentives are in customs and the Foreign Trade Policy 2023-2028. RoDTEP (which replaced MEIS) remits embedded central, state and local duties not otherwise refunded, as a freely transferable e-scrip, so every goods exporter should map its products to the RoDTEP schedule. Deemed exports (FTP Chapter 7) cover supplies to EOU or SEZ units and against Advance Authorisation or EPCG, which qualify for refund or drawback even though the goods do not leave India. Advance Authorisation allows duty-free import of inputs against an export obligation, and EPCG allows concessional or zero customs duty on capital goods against an export obligation.

RoDTEP remits embedded duties as a transferable scrip; deemed exports and the FTP schemes (Advance Authorisation, EPCG) give duty-free inputs and capital goods against export obligations. (Foreign Trade Policy 2023-2028 (RoDTEP, deemed exports Ch 7, Advance Authorisation, EPCG); SEZ Act 2005 s.26 (duty exemptions))

Allowable expenses

Category	Examples	Tax treatment
Cost of goods / inputs	Raw materials, components (duty-free under AA where applicable)	Cost of sale; GST input credit refundable on zero-rated exports
Logistics	Freight, shipping, insurance, customs clearance	Deductible business expense
Capital goods	Plant and machinery (concessional duty under EPCG)	Capitalised and depreciated; GST input credit available
Compliance	LUT/RFD filing, RoDTEP claims, accountant	Deductible business expense
Foreign vendors	Overseas agents, services	Deductible; Section 195 / 15CA-15CB may apply

Vehicle and travel costs

Transport and logistics vehicles used in the business are deductible under regular books or included in the deemed profit under Section 44AD.

Capital allowances and equipment

Capital goods imported under EPCG attract concessional or zero customs duty (against an export obligation) and depreciate normally. There is no profit-linked income-tax holiday for a new exporter, so depreciation and actual costs are the route, not an exemption.

Worked example

Verdant Exports — Tiruppur, TN

textile exporter from the domestic tariff area (2026-27)

Exports garments to buyers in Europe, paid in foreign exchange, and buys most inputs domestically. Set up after the SEZ sunset.

There is no income-tax holiday available to it, so it pays normal income tax on its profit. For GST it files an LUT and exports without charging IGST, claiming a refund of the input credit on its inputs, which preserves cash flow versus paying IGST upfront. It maps its garments to the RoDTEP schedule and claims the duty-remission e-scrip, and if it imports inputs it can use Advance Authorisation to bring them in duty-free against its export obligation. The support is all indirect-tax and trade-policy, not an income-tax break.

Common audit triggers for export-oriented businesses

Assuming a new SEZ or EOU income-tax holiday is available (it is not)
Missing the LUT renewal or the 3-month (goods) / 1-year (services) realisation deadline
Not mapping products to the RoDTEP schedule (leaving remission unclaimed)
Treating a domestic supply as a zero-rated export without the conditions met
Not realising export proceeds in convertible foreign exchange to support zero-rating
Mixing up deemed-export refunds with physical-export zero-rating

Frequently asked questions

Is there still a tax holiday for exporters?+

Not an income-tax one for new entrants. The SEZ unit deduction (Section 10AA) closed to new units on 30 June 2020, the EOU and STP holidays sunset in 2010-11, and the 80HHC-series export deductions were not re-enacted. A new exporter pays normal income tax on profit. The incentives have moved to GST zero-rating, RoDTEP duty remission and the Foreign Trade Policy.

Should I export under an LUT or pay IGST?+

For a regular, high-volume or cash-sensitive exporter, file a Letter of Undertaking (RFD-11) and export without paying IGST, then reclaim unutilised input credit, this avoids tying up cash. Paying IGST and claiming a refund suits occasional exporters or those with large idle input credit. Both routes are zero-rated; the difference is cash flow. Under an LUT, meet the 3-month (goods) or 1-year (services) realisation deadline.

What is RoDTEP?+

Remission of Duties and Taxes on Exported Products. It refunds embedded central, state and local duties that are not otherwise credited, as a freely transferable e-scrip that can be used to pay basic customs duty. It replaced the older MEIS scheme. Every goods exporter should map its products to the RoDTEP rate schedule and claim the remission, it is real money left unclaimed otherwise.

What are deemed exports?+

Under Chapter 7 of the Foreign Trade Policy, deemed exports are supplies that qualify for export benefits even though the goods do not physically leave India, for example supplies to an EOU or SEZ unit, or against an Advance Authorisation or EPCG. The supplier or recipient can claim a refund or duty drawback. They sit alongside the GST zero-rating that applies to physical exports.

Last reviewed: 29 May 2026