India–Nepal Trade Compliance: GST, Customs and Land Port Guide for Bihar Exporters

Cross-Border Trade With Nepal: GST, Customs, and Land Port Compliance From Raxaul and Jogbani

By Vishal Agarwal, CA

A Bihar practitioner’s field guide to India–Nepal trade — GST treatment, customs framework, land-port operations at Raxaul and Jogbani, and the compliance failures we see most often.

Bihar shares over 700 kilometres of border with Nepal. Every day, hundreds of trucks cross at Raxaul (Sirsiya ICP), Jogbani, Bhithamore, and Panitanki. For any Bihar business trading with Nepal — and there are far more than the official statistics capture — the compliance architecture is very specific. Getting it right matters both commercially and for GST refund realisation.

The framework in one paragraph

India–Nepal trade sits under the Treaty of Trade (1991, periodically renewed) and the SAFTA regime. Most goods move duty-free with rules-of-origin compliance, though a sensitive list applies. Since April 2019, the GST department treats Nepal as a normal export destination — meaning exports to Nepal are zero-rated supplies eligible for refund of unutilised input tax credit, subject to LUT filing.

Exports to Nepal — the GST workflow

The clean export workflow from Bihar to Nepal:

1. File LUT (Letter of Undertaking) annually on the GST portal — GST RFD-11. Without LUT you will have to pay IGST upfront and claim refund later.
2. Raise export invoice clearly marked “Export under LUT — for Nepal.” Include the buyer’s PAN Nepal / VAT number, HSN, and export value in INR and NPR (fixed 1.6:1 for INR-NPR).
3. Generate shipping bill or bill of export at the land customs station. E-way bill is mandatory for movements above ₹50,000.
4. File GSTR-1 with export table — Table 6A.
5. File refund application in RFD-01 for accumulated ITC under the export route.

Payment mechanics — this is where it gets specific

Payments for exports to Nepal are typically made in INR (as INR is convertible in Nepal for trade purposes) under the Indo-Nepal Payment Arrangement. Certain goods — mainly high-value items like machinery over specific thresholds — require payment in freely convertible currency (USD, EUR). This distinction matters because the GST refund treatment differs and FEMA compliance changes.

Imports from Nepal into Bihar

Import via land customs at Raxaul or Jogbani follows the standard Bill of Entry route. Under the India–Nepal Treaty of Trade, most goods qualify for preferential duty (often nil BCD) if accompanied by a Certificate of Origin issued by the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) or a similar approved authority. Missing or defective certificates convert your consignment to full-duty basis on landing — an expensive mistake we still see monthly.

Land port operations — practical realities

At Sirsiya (Raxaul) Integrated Check Post, documentation flows through the ICEGATE system alongside the Nepal Customs system. Digitisation has genuinely improved throughput, but three friction points remain:

• HSN misclassification — Nepal Customs and Indian Customs sometimes classify the same good under different HSN codes; this creates duty disputes.
• E-way bill non-compliance — Bihar’s inter-state moves need Part-B of the e-way bill; movements terminating at the customs station still require it.
• Vehicle documentation — Nepal permits require separate paperwork; using the wrong vehicle type creates on-site delays.

Common compliance failures

The four I flag most often:

1. Filing exports without LUT and later scrambling for IGST refund.
2. Claiming duty-free import without a valid Certificate of Origin.
3. Under-declaring INR value to save Nepal Customs duty, then facing GSTR-1 vs. shipping bill mismatch in India.
4. Skipping RFD-01 filing quarterly, letting ITC accumulate for years without refund.

2026 developments worth tracking

The Integrated Check Post upgrades at Jogbani (operational since 2024) and the Bhithamore ICP (expected operational in 2026) will further digitise documentation. The FIRMS 2.0 portal now integrates FEMA-side declarations for cross-border consideration. And the recent GST Council clarifications on export refund timelines for inter-state and cross-border movements have compressed the refund cycle materially — from 8–10 weeks to 4–6 weeks in most Bihar zone cases in 2026.

A closing action list for Bihar exporters to Nepal

• File your annual LUT before the first export of the tax year.
• Keep Certificate of Origin templates and FNCCI or DGCIS numbers ready.
• Reconcile GSTR-1 export table with shipping bills monthly.
• File RFD-01 for accumulated ITC every quarter, not annually.
• Train your logistics team on Part-B e-way bill discipline at land ports.

For Bihar businesses, Nepal is not a distant export market — it is a border-crossing, next-district trade lane. Treat the compliance with the same discipline you would apply to inter-state supply within India, and the refund cycle rewards you.