Export of Services Under GST: Conditions & Refund

Export of services is defined under Section 2(6) of the IGST Act and is treated as a zero-rated supply. That means you charge no GST on the invoice, yet you can still claim ITC in GST, the input tax credit you paid on the way to delivering the service.

Nothing is exempt and nothing is written off. The tax rate is simply nil, and the credit stays with you.

A service qualifies as an export only when all five conditions are met together:

• The supplier of the service is located in India.
• The recipient of the service is located outside India.
• The place of supply of the service is outside India.
• Payment is received in convertible foreign exchange, or in Indian rupees where the RBI permits.
• The supplier and recipient are not merely two establishments of the same person.

Miss any one and the supply falls out of zero-rating, so GST applies as if it were a domestic sale. The two conditions that trip up most exporters are the last two: proving the money arrived as foreign exchange, which is the FIRC for GST refund evidence, and the place-of-supply test.

This guide walks through each, with a worked rupee refund example and the documents you actually need. It is general information, not tax advice, so confirm your filing position with a chartered accountant.

The five tests from Section 2(6) are cumulative. Here is what each one means in practice for a services exporter.

Conditions one, two and five are usually settled the moment you sign the client. Conditions three and four decide whether your zero-rating survives an audit.

For a concrete example: a Bengaluru software studio that builds a web app for a US company, invoices in US dollars, and receives the money into an Indian bank account with a FIRC on file is making a textbook export of services.

The supplier sits in India, the recipient and the place of supply are both abroad, and the payment arrives as convertible foreign exchange.

Swap the studio for a freelance designer serving a UK client, or an accounting firm filing returns for a Singapore parent, and the same five tests apply.

No GST is charged on a qualifying export invoice, because export of services is zero-rated under Section 16 of the IGST Act. Zero-rated is not the same as exempt.

An exempt supply blocks your input tax credit, while a zero-rated supply lets you recover it. That distinction is the whole reason exporters push to qualify.

You have two routes to keep the benefit:

• Without payment of tax (LUT): file a Letter of Undertaking (Form RFD-11), invoice at 0%, and later claim a refund of the accumulated input tax credit.
• With payment of tax: charge IGST on the invoice, pay it, then claim the IGST back as a refund.

Both end in a refund. They differ only in your cash flow and paperwork, which the next section unpacks. If you want the deeper mechanics, our note on LUT vs IGST refund sets them side by side.

The choice comes down to whether you want to lock up cash upfront. Under the LUT route you never part with IGST, so nothing is blocked, but your refund is limited to input credit and computed by formula.

Under the with-payment route you fund the IGST first and claim all of it back, which can strand working capital for weeks.

A worked rupee example

Say you invoice a US client $10,000, converted at an illustrative ₹95 to the dollar, so ₹9,50,000. Your input tax credit for the quarter is ₹40,000.

• LUT route: you invoice ₹9,50,000 at 0%. No IGST leaves your account. You file RFD-01 and claim the ₹40,000 accumulated credit as a refund. Zero cash blocked.
• With-payment route: you charge IGST at 18%, which is ₹1,71,000 on top of the invoice. You pay it now, then claim the full ₹1,71,000 back through RFD-01. That ₹1,71,000 is out of your account until the refund clears, typically several weeks.

For most services exporters with modest input costs, the LUT route is simpler and kinder on cash. When you claim, keep your evidence tidy; a foreign inward remittance certificate is what the officer relies on.

If your aggregate turnover is under ₹20 lakh (₹10 lakh in some special-category states), GST registration is optional. But there is a catch that trips up freelancers: you cannot file an LUT or zero-rate an invoice without a GSTIN.

No registration means no RFD-11, which means no clean way to claim a refund.

Use this quick decision tree:

• Turnover under ₹20 lakh and no input credit worth reclaiming? You can stay unregistered and simply not charge GST.
• Turnover under ₹20 lakh but you want to file an LUT or recover input tax? Register voluntarily, then file the LUT.
• Turnover over ₹20 lakh? Registration is mandatory; file the LUT and export at 0%.

Most freelancers who want the zero-rating benefit register voluntarily. Our primer on GST for freelancers covers the threshold maths and what input tax credit you can recover once registered.

This is where zero-rating is won or lost, and where most generic guides go quiet. Condition four does not ask which app the money arrived through.

It asks for documentary proof that you received convertible foreign exchange. The proof document, not the payment rail, is what an officer relies on.

That proof is the Foreign Inward Remittance Certificate (FIRC) or its electronic advice, the eFIRA. It names the remittance, the currency, the amount and the purpose code.

It is the evidence your CA attaches to a GST refund and that feeds the RBI’s EDPMS (Export Data Processing and Monitoring System). Understanding foreign inward remittance end to end helps here.

Yes. Money received through PayPal, Payoneer, Wise, a bank wire or a receiving account all counts as convertible foreign exchange, provided you hold the FIRC or eFIRA for that receipt.

Routing through a processor does not break eligibility. Missing the certificate does.

This is exactly why receiving matters: with an auto eFIRA issued per receipt, the forex proof is generated for you rather than chased after the fact.

A real and common bind: a client pays $1,000, the processor deducts fees, $912.18 lands in your bank, and the FIRC names the processor (say a Singapore entity), not your client.

What goes on the GST invoice?

Report the gross ₹95,000 as your export turnover and book the processor fee as a business expense. The FIRC naming a processor does not weaken your export proof, as long as it ties back to the invoice.

When you hold your own receiving account, the certificate maps cleanly to each invoice, which is what our receiving accounts are built to do.

Under Rule 96A of the CGST Rules, if you export services under an LUT, you must receive the payment within one year of the invoice date.

Miss it and you owe the IGST you never charged, plus interest at 18% a year from the invoice date until you pay, and your LUT can be suspended until you clear it.

Getting paid quickly is therefore a compliance safeguard, not just a cash-flow nicety. Next-business-day (T+1) receipt gives you the widest possible margin against that deadline.

Note that FEMA sets its own realisation timeline too, so speed helps on both counts.

For most services to a foreign client, the place of supply is the recipient’s location under Section 13(2) of the IGST Act, which is what makes them an export.

The classification that used to catch people out is the intermediary, and the rules here changed with the Finance Act 2026.

If you merely arrange or facilitate a supply between a foreign client and an Indian vendor, without supplying the main service on your own account, GST law may treat you as an intermediary.

This used to be a hard block: under Section 13(8)(b) of the IGST Act, an intermediary’s place of supply was deemed to be the supplier’s location in India, so the supply was dragged onshore and taxed at 18%, even though the client sat abroad.

That has now changed. Section 13(8)(b) was omitted by the Finance Act 2026, with effect from 30 March 2026.

Intermediary services now fall back on the default rule in Section 13(2), so the place of supply is the recipient’s location. Where the recipient is abroad and the other export conditions are met, an intermediary’s supply can now qualify as a zero-rated export.

The cut-over is by date of supply, not billing: services rendered on or after 30 March 2026 are governed by the amended law, regardless of when you invoiced or were paid.

Two cautions remain. First, the definition of intermediary under Section 2(13) still applies, so confirm you actually qualify as an intermediary rather than assuming zero-rating.

Second, doing work on your own account (writing the code, running the campaign, delivering the service directly) was never intermediary work and always stayed an export.

Confirm your classification with a CA. Getting the right RBI purpose code for inward remittance on receipt supports whichever position you take.

Services exporters keep getting stuck on a goods-shaped form. Table 6A of GSTR-1 was built with shipping bills in mind, and there is no shipping bill for a service. Here is how the fields actually apply.

Report the SAC, set the LUT or with-payment flag correctly, and leave the shipping-bill fields empty. Our detailed GSTR-1 for export of services note screens each field, and for the document itself see what belongs on an export invoice.

Run through this before you treat a receipt as a zero-rated export:

• All five Section 2(6) conditions are satisfied together.
• You hold a GSTIN and a valid LUT (Form RFD-11) for the financial year.
• Your export invoice shows 0% under LUT and the correct SAC.
• You have a FIRC or eFIRA for each receipt, tying to the invoice.
• Payment received within one year of the invoice date.
• The work is on your own account, not intermediary facilitation.
• GSTR-1 Table 6A filed with shipping-bill fields left blank.
• Software exporters: SOFTEX filing done where applicable.

Zero-rating should feel like relief, not risk. When the receipt, the certificate and the purpose code all line up on their own, the downstream FIRC, EDPMS and GST-refund workflow simply works.

If you are mapping the wider scheme landscape, our roundup of export incentives and the note on EPCG benefits sit alongside this one.