Export of Services Under GST: Conditions & Refund

Export of services under GST is a zero-rated supply under Section 16 of the Integrated Goods and Services Tax (IGST) Act. You do not charge GST on your invoice to an overseas client, and you still recover the GST you paid on your own inputs. It is treated as zero-rated, not exempt, and that difference decides whether your input tax credit survives.

A supply counts as an export of services only when all five conditions of Section 2(6) of the IGST Act are met at the same time:

1. The supplier is located in India.
2. The recipient is located outside India.
3. The place of supply is outside India.
4. Payment is received in convertible foreign exchange, or in rupees where the Reserve Bank of India (RBI) permits.
5. The supplier and recipient are not merely two establishments of the same legal person.

Two things changed for service exporters in 2026. From 30 March 2026, intermediary services can qualify as exports after the Finance Act 2026 removed Section 13(8)(b). From 1 October 2026, a single Export Declaration Form replaces the SOFTEX filing, while the Foreign Exchange Management Act (FEMA) window to receive payment for services stays at nine months (twelve if invoiced in rupees).

Export of services under GST refers to supplying a service from India to a recipient abroad, where the transaction meets the five statutory conditions and is treated as a zero-rated supply under Section 16 of the IGST Act. Zero-rated means the GST rate on the outward supply is 0%, so nothing is added to the client's invoice.

Export of services also differs from export of goods in one practical way: there is no shipping bill and no customs trail. Your proof is financial, so compliance rests on your invoice, your banking evidence and your GST returns. If you also ship goods, the comparison of export of services vs export of goods shows how the two processes differ.

All five conditions in Section 2(6) of the IGST Act must hold together. Fail any one, and the supply is taxed as a normal domestic service at standard GST rates (usually 18%), with the tax coming out of your margin rather than the client's pocket.

Take a running example. Meridian Labs, a Bengaluru-registered software studio, builds a web application for Northwind Inc., a company in Austin, Texas, and invoices it USD 10,000.

• Supplier located in India - Your business is registered and operating in India, whether from an office, a coworking desk or a home setup. Meridian Labs holds a GSTIN in Karnataka, so this is satisfied.
• Recipient located outside India - The recipient is the legal entity that contracts and pays for the service, not the individual you email. Northwind Inc. is incorporated in the United States, so it qualifies.
• Place of supply outside India - This is set by Section 13 of the IGST Act. For most business-to-business software, IT and professional services, the place of supply is the recipient's location, so it falls outside India.
• Payment in convertible foreign exchange - The money must reach you in a convertible currency such as US dollars, pounds or euros, or in rupees where the RBI expressly permits it. Meridian's USD 10,000 counts whether it arrives by wire or through an authorised collection channel, and whichever of the methods of payment in international trade the contract uses.
• Distinct persons - The supplier and recipient cannot be two establishments of the same legal person. Meridian and Northwind are unrelated companies, so this holds.

The fourth condition is where compliance and cash collection meet. You cannot self-certify that the money arrived in foreign currency; your bank has to evidence it. That is why the receiving side of the transaction matters as much as the tax side, and why a receiving account that documents each inflow correctly saves work later.

On the fifth condition, Circular No. 161/17/2021-GST (20 September 2021) clarifies that an Indian subsidiary and its foreign parent are separate persons, so a subsidiary billing its overseas parent can still qualify as an export of services. Tax officers may still argue that such a set-up is an intermediary service, so keep your contracts clear.

What happens when one of the five conditions fails

A foreign client on its own does not automatically qualify a supply for zero-rating. If any condition fails, the supply is taxable at the standard rate, usually 18%, and if you invoiced at 0% the tax comes out of your margin. These are the cases that catch service exporters most often:

• Rupees from an ordinary account - Rupees count only where the RBI permits them, for example settlement through a Special Rupee Vostro Account arrangement. A client paying rupees from an ordinary domestic account does not, by itself, satisfy the payment condition.
• Work tied to a place in India - Services on immovable property are supplied where the property sits, and events where they are held. An Indian agency organising a conference in Goa for a US client has its place of supply in India, so the fee is not an export.
• Work that needs physical presence - Services on goods that must be handed to you, or that need the client to attend in person, are taxed where they are performed. Software and consulting delivered online fall outside this rule.
• Billing your own branch or head office - This is the case that most often fails the fifth condition, because the two offices can count as establishments of a distinct person under Explanation 1 of Section 8. Check the structure with your chartered accountant before you invoice at 0%.
• The client's Indian arm pays - If the paying entity is the client's Indian company, the recipient sits in India and the test fails, even though the work looks identical to a true export.

GST applies in principle, but at a rate of 0%. Export of services is not outside the GST net; it sits inside it as a zero-rated supply. That framing is what lets you recover input tax credit, so treat it as taxed at zero, not as untaxed.

Many service exporters assume that because there is no GST on export of services, they have nothing to do with GST. A registered exporter still files returns, reports the export turnover and picks a compliance route, and the reward for that paperwork is a live input tax credit and, in many cases, a cash refund.

Not compulsory if your all-India aggregate turnover, including exports, stays within ₹20 lakh a year, or ₹10 lakh if you supply from a special category State. Notification No. 10/2017-Integrated Tax exempts inter-State suppliers of taxable services below that threshold. You still need a GSTIN to file a Letter of Undertaking (LUT) or claim a refund.

The older answer that every exporter must register from the first rupee comes from Section 24 of the CGST Act, which makes inter-State suppliers register, and exports count as inter-State supplies. The notification carves out services only, so it does not help goods exporters, and it falls away if another Section 24 category applies to you.

The catch is the benefits, not the liability, so decide on what you would claim:

• Register voluntarily - If you have input GST to recover or want the LUT route, you register voluntarily even below ₹20 lakh, because both the LUT and the refund claim need a GSTIN.
• Stay unregistered - If you have little input GST and stay under the threshold, export of services is zero-rated, so you owe no GST and can operate without a GSTIN until turnover or credit makes registering worthwhile.

Zero-rating gives you two ways to export services. Section 16(3) of the IGST Act lets you export without payment of IGST under an LUT, and Section 16(4), through Notification 01/2023-Integrated Tax, lets you pay IGST and claim it back. Both recover your tax; they differ on cash flow.

For most IT and ITeS exporters, the LUT route wins because it never ties up cash. You file it once a financial year, before your first export invoice, and renew it each April, as the letter of undertaking guide explains. Your invoices then carry the endorsement "Supply meant for export under bond or letter of undertaking without payment of integrated tax".

The with-payment route is a valid choice for any service, not a fallback for a lapsed LUT. You pay IGST, usually 18%, on the invoice and recover it through a refund. If your cash can absorb that gap, this route spares you the annual LUT. The LUT vs IGST refund comparison goes deeper on both.

Which route and registration path fits a freelancer or a business

Freelancers and businesses follow the same rules. What changes the answer is your turnover, the input tax credit you carry and who you bill:

• Indian freelancers under ₹20 lakh with little input GST - You can stay unregistered and invoice without GST, because there is no meaningful refund to claim. Register as turnover nears the threshold, as the guide to GST for freelancers explains.
• ITeS businesses and agencies with real Indian costs - Register, file the LUT each April and claim unutilised credit through RFD-01, since hosting, rent and software subscriptions all carry GST that you can recover as a refund.
• Intermediaries, brokers and referral agencies - Supplies made on or after 30 March 2026 can now be exports, so revisit how you invoice foreign principals from that date and review earlier invoices only with your chartered accountant.
• Indian subsidiaries billing a foreign parent - The supply can still qualify as an export under Circular No. 161/17/2021-GST, provided the other four conditions hold, though officers may still test whether the arrangement is an intermediary service.

In this worked example, Meridian Labs, the Bengaluru studio, takes one export from invoice to refund. All figures are illustrative, at an assumed rate of ₹95 to the US dollar.

• The invoice - Meridian raises an export invoice on Northwind Inc. for USD 10,000, roughly ₹9,50,000, with GST charged at 0% under its Letter of Undertaking. Nothing is added to the client's bill.
• What zero-rating saves - Had the supply failed any of the five conditions, 18% GST would have come to ₹1,71,000, which Meridian would either pass on and risk the deal, or absorb from its margin.
• The input tax credit - Meridian pays GST on its Indian costs during the quarter: cloud hosting, SaaS tools, coworking rent and a designer's fee. Say that input GST totals ₹90,000; because the export is zero-rated rather than exempt, all of it stays claimable.
• The refund - On the LUT route, Meridian claims the unutilised credit through Form GST RFD-01. Northwind paid within the quarter and Meridian has no domestic sales, so zero-rated turnover equals adjusted total turnover and the full ₹90,000 is refundable.
• What reaches the bank - The tax is settled, but the FX cost decides the take-home, because a plain bank wire can shave a slice off the ₹9,50,000 through correspondent charges and a wide exchange spread.

A wrong export invoice is the most common reason a refund stalls or a sale you thought was zero-rated quietly gets taxed. For services there is no shipping bill, so the invoice itself is your proof that the supply is an export, and a few specific things have to be right on it. Where exporters trip up:

• The endorsement - The invoice must state whether you export under an LUT (without IGST) or with payment of IGST. A missing or wrong endorsement lets an officer treat the sale as a domestic service and tax it.
• Charging GST to be safe - Under an LUT the invoice carries 0% GST. Adding 18% because it feels safer breaks the zero-rating and locks up money you then have to unwind.
• The currency mismatch - You invoice in the foreign currency, but your books, the Foreign Inward Remittance Certificate (FIRC) and GSTR-1 need the INR value at the right rate. A mismatch between the invoice, the FIRC and Table 6A is the classic reason a refund sits in limbo.

Put these on the invoice, at minimum:

Get these right once and save them as your invoice template. To find the right code, the guide to HSN code vs SAC code explains the difference. If your aggregate turnover is above ₹5 crore, your export invoices also need e-invoicing under Notification No. 10/2023-Central Tax.

From then on, the refund moves on the strength of three documents agreeing: the invoice, the FIRC or eFIRA, and the GSTR-1 Table 6A figures. When they match, a refund is routine; when they do not, it stalls, so keep all three consistent.

Most export advice online is written for goods, and following it as a service exporter wastes time and money. You have no shipping bill and no customs filing. Your export is proven by the money arriving in foreign exchange and the FIRC that records it, not by a port.

So ignore the shipping-bill and customs steps meant for goods. Your compliance loop is the LUT, a clean export invoice, the FIRC or eFIRA, and matching returns, which is lighter than the goods process.

Intermediary services became exportable in 2026, and older advice on them is now wrong. An intermediary is a broker or agent who arranges a supply between other parties, such as a referral or facilitation business working for a foreign principal.

The omission acted on the GST Council's recommendation from its 56th meeting on 3 September 2025. If you run a referral, brokerage, agency or facilitation model billing foreign principals, revisit your position for supplies made on or after 30 March 2026, because fees taxed at 18% before that date may now be zero-rated.

For invoices that straddle the date, the position is less settled, so confirm your facts with a chartered accountant before you restate past positions.

Your export claim rests on financial proof, so the documents carry your claim. Three items carry the weight.

• FIRC or eFIRA - A Foreign Inward Remittance Certificate, now often issued digitally as an eFIRA, is your bank's confirmation that money arrived from abroad in foreign currency. It is the primary evidence behind any refund, so when Meridian files its RFD-01, the eFIRA for Northwind's USD 10,000 is the document that proves the export actually happened. Without it, the refund has nothing to stand on. See this guide to the foreign inward remittance certificate for what it must show.
• Correct purpose code - Every inward remittance carries a FETERS (Foreign Exchange Transactions Electronic Reporting System) purpose code that tells the RBI what the payment was for, such as P0802 for software implementation services. Meridian's receipt should be tagged to the code that matches the work, because a wrong or missing code can leave the funds in a suspense state and make the invoice look unrealised in RBI records. Tagging is easier when your provider handles purpose codes at the point of collection rather than after the money has landed.
• EDPMS reconciliation - Service export receipts are tracked in the RBI's Export Data Processing and Monitoring System through your authorised dealer bank. Each invoice has to be matched against its inward payment, so Meridian's USD 10,000 invoice is closed off against the USD 10,000 that arrived; otherwise, it shows as an outstanding export the bank has to chase. Invoices up to ₹10 lakh can close on your own declaration of realisation, without waiving the duty to realise. The essentials are covered on the EDPMS page.

One detail trips exporters up: report the gross invoice value, not the net amount that lands after a processor takes its cut. The GST return follows the invoice, while the fee is a separate expense that may carry input tax credit. Keep FIRCs, invoices and bank advices for the period GST law requires.

If your bank issues a Bank Realisation Certificate (BRC) instead of a FIRC or eFIRA, it serves the same purpose: it is the bank's confirmation that the export proceeds were realised in convertible foreign exchange, and a refund officer will accept any one of the three.

If collection is the harder half, this is where Xflow fits: your client pays in their own currency, and rupees reach your Indian bank account with the paperwork attached. Xflow's RBI authorisation is a final Payment Aggregator for Cross-Border payments (PA-CB) licence, as of February 2026, the fully approved stage past in-principle approval.

The GST rules protect your margin on tax, but the exchange rate decides how many rupees each export invoice turns into. Enter an invoice amount below to see what the same export puts in your account through Xflow, compared with other routes.

A bank wire can lose a meaningful slice of the invoice to correspondent charges and a wide exchange spread, while a purpose-built collection layer settles closer to the mid-market rate. Xflow customers save up to 50% on foreign exchange costs, money kept on the same export the tax rules already protect.

Export of services runs on two separate deadlines for receiving payment. They come from different laws (FEMA and the GST rules) and carry different penalties, so track both from the invoice date of every export.

FEMA is now the shorter clock. FEMA 23(R)/2026-RB, as amended on 22 September 2026, gives you nine months from the invoice date to realise and repatriate service export proceeds, or twelve months where you invoice or settle in rupees.

The GST clock runs longer. Under Rule 96A of the CGST Rules, if payment for an LUT export has not arrived, you owe the tax plus interest under Section 50(1). The amount falls due 15 days after one year from the invoice date, or after the FEMA period including RBI-permitted extensions, whichever is later.

The realisation timeline sits within India's wider FEMA framework, and your authorised dealer bank monitors each invoice against it.

Software and service exporters have filed SOFTEX forms for years to declare software exports. Under the FEM (Export and Import of Goods and Services) Regulations, 2026, a single Export Declaration Form (EDF) covers exports of goods, services and software, and it replaces the separate SOFTEX filing from 1 October 2026.

What changes in practice for a service exporter:

• The deadline - You furnish the EDF within 30 days from the end of the month in which you invoiced, through your authorised dealer bank and, where relevant, STPI or SEZ authorities.
• One form a month - Invoices to different clients within a calendar month go into a single declaration, rather than one form per invoice.
• Services other than software - You may also submit the declaration on or before the date you receive payment, instead of waiting for the month to close.

It is a lighter rhythm, but it is a real monthly deadline, so build it into your month-end close. The guide to the export declaration form walks through the filing itself.

Your GST returns are where the department sees the export. Exports under an LUT and exports with payment of IGST are both reported in GSTR-1, both flow into GSTR-3B, and both end in a refund application in Form GST RFD-01. What differs is the amount you claim.

Keep the INR value in both returns identical to the invoice and to the FIRC or eFIRA, since the refund claim lists every invoice against its certificate and any gap between those figures stalls it.

Where an export goes in Table 6A and GSTR-3B

Report every export invoice in Table 6A of GSTR-1, whether you exported under an LUT or with payment of IGST, and mark which one it was. Supplies to SEZ units and developers go in Table 6B, not 6A, and Table 6C covers deemed exports.

The same zero-rated turnover must then appear correctly in GSTR-3B. Any mismatch between the two returns is a common reason a refund stalls or triggers a query, so reconcile them before you file. The guide to GSTR-1 for export of services covers the step-by-step.

Steps to claim a GST refund on export of services, in order

Work through these in sequence for each refund period:

1. Raise the export invoice - Use the export endorsement and record the INR value at the right rate. On the LUT route, your LUT must already be on file for that financial year.
2. Receive payment and collect proof - Get the FIRC, eFIRA or BRC for each receipt, because the refund needs a statement that matches every invoice number to its certificate.
3. File GSTR-1 and GSTR-3B - Report the export in Table 6A and the zero-rated turnover in GSTR-3B. The portal will not accept a refund application until the latest GSTR-3B is filed.
4. File Form GST RFD-01 - Apply within two years of the relevant date. On the LUT route you claim unutilised input tax credit by formula; on the IGST route you claim the IGST you paid, with no formula.
5. Track the claim - The officer checks the claim within 15 days and acknowledges it in RFD-02. A provisional 90% refund is due within seven days of that acknowledgement, subject to a system risk check.

The final order is due within 60 days of a complete application, though practice often runs longer, so file early and keep the evidence ready.

How the Rule 89(4) refund formula works on real numbers

When you export without payment of tax under an LUT, the refund of unutilised input tax credit follows Rule 89(4) of the CGST Rules: refund = (turnover of zero-rated supply of services / adjusted total turnover) × net ITC.

Services turnover here counts payments received in the period for zero-rated services, so an invoice that is still unpaid does not count yet. Net ITC is the credit you availed on inputs and input services during the same period.

Take an illustrative quarter with zero-rated export turnover of ₹8,00,000, adjusted total turnover of ₹10,00,000 and net ITC of ₹90,000. Your maximum refund is (8,00,000 / 10,00,000) × 90,000 = ₹72,000. The guide on how to claim ITC in GST walks through the credit side in full.

A GST refund on service exports almost never fails on the tax position; it fails on a missing document or a missed deadline. Because a service export has no shipping bill, the paper trail below is the only thing that proves the export happened and releases your money. Keep these together as one bundle for every export period:

The deadline that loses refunds. RFD-01 must be filed within two years of the relevant date. For a service export, that is the date payment is received in convertible foreign exchange, or in rupees where the RBI permits, as your FIRC or eFIRA shows. If payment came before the invoice, it is the invoice date.

Miss the two-year window and the refund lapses even when every other document is perfect. Before each export cycle closes, also check the items the bundle does not cover:

• Register for GST once an LUT or a refund is worth more than the compliance; below ₹20 lakh aggregate turnover (₹10 lakh in special category States), registration is not compulsory.
• Confirm the FETERS purpose code for each receipt, such as P0802 for software services, so the payment reconciles cleanly against its invoice.
• Reconcile every receipt in EDPMS through your authorised dealer bank, so no invoice shows as an outstanding export.
• File the Export Declaration Form within 30 days of each invoicing month, consolidating that month's invoices into one declaration.
• Track the FEMA nine-month clock and the GST clock of one year plus 15 days separately, because both run from the same invoice date.

Get the collection layer right and most of these items document themselves, which is the job Xflow's cross-border payments for service exporters are built for. Xflow receiving accounts take your export payments in convertible currency and settle rupees to your Indian account on the next business day (T+1). Each payment comes with an eFIRA within 24 hours of withdrawal, with the purpose code recorded on it.