Export of services under GST is a zero-rated supply under Section 16 of the 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:
- The supplier is located in India.
- The recipient is located outside India.
- The place of supply is outside India.
- Payment is received in convertible foreign exchange, or in rupees where the RBI permits.
- The supplier and recipient are not merely two establishments of the same legal person.
Two things changed for Indian service exporters in 2026, and most guides have not caught up. 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, and the export realisation window moves to 15 months. This guide covers the conditions, the LUT-versus-IGST decision, the two deadlines that catch exporters out, and what the 2026 rules mean for the way you collect and report foreign payments. If collecting the money compliantly is the harder half, Xflow's cross-border payments for service exporters settles proceeds in convertible currency with automatic documentation.
What is export of services under GST?
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 therefore 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.
The word "zero-rated" does real work here. An exempt supply also carries no GST, but it blocks your input tax credit, so the GST you paid on rent, software subscriptions, cloud hosting and professional fees becomes a sunk cost. A zero-rated supply keeps that credit alive. You either use it against other liabilities or claim it back as a refund. For a software or ITeS business whose costs sit in India while revenue arrives from abroad, that distinction is usually worth several lakh rupees a year.
Export of services also differs from export of goods in one practical way: there is no shipping bill, no port and no physical customs trail. Your proof of export is financial, not logistical. That places the weight of compliance on your invoice, your banking evidence and your GST returns rather than on a consignment. The mechanics of each route are set out in this comparison of export of services vs export of goods.
What are the conditions for export of services under GST?
| Condition (Section 2(6), IGST Act) | What it requires |
|---|---|
| Supplier location | The supplier is located in India |
| Recipient location | The recipient is located outside India |
| Place of supply | Outside India, determined under Section 13 of the IGST Act |
| Payment | Received in convertible foreign exchange, or in rupees where the RBI permits |
| Distinct persons | Supplier and recipient are not two establishments of the same legal person |
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 18% GST, 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 $10,000. Here is how each condition applies.
- 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. A US-incorporated subsidiary billing the same client would not qualify, because the supplier would then sit outside India.
- 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. Watch the edge case: if the paying entity were Northwind's Indian arm, the recipient would be in India and the export test would fail even though the work looks identical.
- 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. Certain categories carry special rules, for example services tied to immovable property or events, so a Chennai firm doing on-site work for a foreign client should check its category rather than assume.
- Payment in convertible foreign exchange. The money must reach you in a convertible currency such as US dollars or pounds, or in rupees where the RBI expressly permits it. Meridian's $10,000 arriving by wire, or through an authorised collection channel, counts. A client settling in rupees from a domestic account would break this condition and pull the supply back into 18% GST.
- Distinct persons. The supplier and recipient cannot be two establishments of the same legal person. Meridian and Northwind are unrelated companies, so this holds. A Pune development centre invoicing its own parent company's head office abroad would fail, because a branch is not a separate person from the entity it belongs to.
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.
Is GST applicable on export of services?
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 taxable-at-zero rather than tax-free.
This is the most common point of confusion in "gst on export of services" queries. Exporters assume that because they charge no tax, they have nothing to do with GST. The opposite is true. You still register, still file returns, still report the export turnover, and still choose a compliance route. The reward for that paperwork is a live input tax credit and, in many cases, a cash refund.
Do you need GST registration for export of services below ₹20 lakh?
Yes. GST registration is compulsory for exporters even when turnover is below the usual ₹20 lakh services threshold. Exports are inter-State supplies under Section 7 of the IGST Act, and Section 24 of the CGST Act makes registration mandatory for anyone making inter-State taxable supplies. The turnover exemption that shields small domestic providers does not reach service exporters.
For a freelancer or an early-stage studio billing a single overseas client, this often comes as a surprise. Without registration you cannot file a Letter of Undertaking, cannot report exports in your returns, and cannot claim refunds. The practical reading: if you invoice abroad, register from the first invoice. Freelancers can work through the specifics in this guide to gst for freelancers.
Export of services with or without payment of tax: which route?
Zero-rating gives you two ways to export, set out in Section 16 of the IGST Act. Both recover your tax; they differ on cash flow.
| Route | How it works | Cash flow | Best for |
|---|---|---|---|
| Without payment of tax (LUT) | File a Letter of Undertaking in Form GST RFD-11, then invoice with no IGST. Claim a refund of unutilised input tax credit later. | No IGST is blocked upfront | Most service exporters, especially recurring billing |
| With payment of tax | Pay IGST on the export invoice, then claim the whole amount back as a refund in Form GST RFD-01. | IGST is funded first, then refunded | Occasional exporters, or where an LUT is not in place |
For most software, IT and ITeS exporters, the LUT route wins because it never ties up cash. The Letter of Undertaking is filed once per financial year, before you raise your first export invoice for that year, and it must be renewed each April. Your invoices then carry a short endorsement: "Supply meant for export under Letter of Undertaking without payment of Integrated Tax."
The with-payment route exists for cases where an LUT lapsed or was never filed. You pay 18% IGST, then recover it, absorbing the timing gap in between. It is a fallback, not a default. The full mechanics of each option are compared in this breakdown of lut vs igst refund.
Collect your export payments in convertible currency, with the paperwork built in
Export of services under GST: a worked example
Numbers make the rules concrete, so follow Meridian Labs, the Bengaluru studio, through one export from invoice to refund. Assume an illustrative rate of ₹95 to the US dollar.
- The invoice. Meridian raises an export invoice on Northwind Inc. for $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, it would have been a domestic service at 18% GST, which is ₹1,71,000 that Meridian would either pass on and lose the deal, or swallow from its margin. Zero-rating is the difference between those two outcomes.
- The input tax credit. Meridian pays GST on its Indian costs during the quarter: cloud hosting, SaaS tools, its coworking rent and a designer's professional fee. Say that input GST totals ₹90,000. Because the export is zero-rated rather than exempt, that ₹90,000 stays claimable.
- The refund. On the LUT route, Meridian claims the unutilised credit back through Form GST RFD-01, using the Rule 89(4) formula. If its zero-rated turnover for the period is ₹9,50,000 against an adjusted total turnover of ₹9,50,000, the full ₹90,000 of net input tax credit is refundable.
- What actually reaches the bank. The tax is settled, but FX cost decides the take-home. A plain bank wire can shave a slice off the ₹9,50,000 through correspondent charges and a wide exchange spread, while a collection route closer to the mid-market rate keeps more of it. That gap, not the GST, is where most export value quietly leaks.
An export invoice under GST does not need a special template, but it must carry a few specific lines to hold up in a refund check. Meridian's invoice shows its GSTIN, Northwind's name and full US address, the service description, the currency and value in US dollars, a zero GST rate, and the endorsement "Supply meant for export under Letter of Undertaking without payment of Integrated Tax". Miss the endorsement, and a zero-rated invoice can be questioned at refund time.
Are intermediary services an export now?
This is the biggest change in years, and it is why the old advice on "intermediary services" is now wrong. Until early 2026, Section 13(8)(b) of the IGST Act deemed the place of supply for intermediary services to be the supplier's location, in India, regardless of where the client sat. An Indian agent or broker arranging a deal for a foreign principal had to charge 18% IGST and could never treat the fee as an export.
The Finance Act 2026 omitted Section 13(8)(b) with effect from 30 March 2026, acting on the GST Council's recommendation from its 56th meeting on 3 September 2025. The place of supply for intermediary services now defaults to the general rule in Section 13(2) of the IGST Act, which is the recipient's location. So an intermediary serving a client abroad now has its place of supply outside India, and the fee can qualify as a zero-rated export if the other four conditions are met.
If you run a referral, brokerage, agency or facilitation model billing foreign principals, revisit your GST position for invoices dated on or after 30 March 2026. Supplies that were taxable at 18% before that date may now be zero-rated. Because this is a recent statutory change, confirm your specific facts with a chartered accountant before you restate past positions.
How do you prove payment in convertible foreign exchange?
Your export claim rests on financial proof, so the documentation is the export. 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 $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 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 leave the invoice looking 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 $10,000 invoice is closed off against the $10,000 that arrived, otherwise it shows as an outstanding export the bank has to chase. The essentials are covered on this page on EDPMS.
One detail trips exporters up: report the gross invoice value, not the net amount that lands after a processor or platform takes its cut. The GST return follows the invoice, while the fee is a separate expense that may itself carry input tax credit. Keep FIRC, invoices and bank advices for at least six years to be safe during any refund check or departmental review.
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Where a payment provider matters is in how much of the invoice actually survives the journey. A bank wire can lose a meaningful slice 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 against a typical bank route, which is money kept on the same export the tax rules already protect.
The two clocks you cannot miss: GST one-year versus FEMA realisation
Export of services runs on two separate deadlines. They come from different laws, carry different penalties, and exporters routinely confuse them. Track both from the invoice date.
| Clock | Set by | Deadline | What happens if you miss it |
|---|---|---|---|
| GST realisation | Rule 96A(1)(b), CGST Rules | 1 year from the invoice date | IGST plus 18% annual interest becomes payable, and the LUT benefit is withdrawn for that invoice |
| FEMA realisation | FEM (Export and Import of Goods and Services) Regulations, 2026 | 15 months from the invoice date, from 1 October 2026 | Non-realisation is an offence under Section 13 of FEMA, with penalties up to three times the amount involved |
The GST clock is the tighter one. Under Rule 96A of the CGST Rules, if payment for an LUT export does not arrive within one year of the invoice, the IGST you never charged becomes payable, with 18% annual interest running until you regularise it. Chasing a slow-paying client past twelve months, in other words, has a direct tax cost.
The FEMA clock is longer and it moved in 2026. Under the RBI's FEM (Export and Import of Goods and Services) Regulations, 2026, effective 1 October 2026, export proceeds for services must be realised and repatriated within 15 months of the invoice date, replacing the shorter legacy window. A wider period helps working capital, but non-realisation is treated seriously: failure to repatriate is an offence under Section 13 of FEMA and can attract penalties well beyond the sum involved. The realisation timeline sits within India's wider FEMA framework, and your authorised dealer bank can confirm the window that applies to a given invoice during the transition.
What replaces SOFTEX? The unified EDF from 1 October 2026
Software and service exporters have filed SOFTEX forms for years to declare software exports. That ends in 2026. Under the FEM (Export and Import of Goods and Services) Regulations, 2026, a single unified Export Declaration Form covers exports of goods, services and software, and it replaces the separate SOFTEX filing from 1 October 2026.
For a service exporter, the practical shape is this: you furnish the Export Declaration Form within 30 days from the end of the month in which you invoiced, routed through your authorised dealer bank and, where relevant, STPI or SEZ authorities. Multiple invoices to different clients within a calendar month consolidate into a single monthly declaration rather than form-by-form filing. It is a lighter compliance rhythm, but it is a real deadline with a monthly cadence, so build it into your close. The mechanics of the new filing are set out in this guide to the export declaration form.
How do you show export of services in GSTR-1 and claim the refund?
Your returns are where the export becomes visible to the department, so consistency across them is what makes a refund move.
Report export invoices in Table 6A of GSTR-1, marking whether the supply was made with or without payment of tax. The same zero-rated turnover must then be reflected correctly in GSTR-3B. Any mismatch between the two returns is the single most common reason a refund stalls or triggers a query, so reconcile them before you file. The step-by-step is covered in this guide to gstr-1 for export of services.
To claim a refund of accumulated input tax credit on the LUT route, file Form GST RFD-01. The refundable amount follows the formula in Rule 89(4) of the CGST Rules:
Refund = (Turnover of zero-rated supply / Adjusted total turnover) x Net ITC
You attach your LUT, export invoices, FIRC or eFIRA, and the matching return figures. The refund is only as clean as the evidence behind it, which is why the collection and documentation steps earlier in this guide matter at filing time. The wider process of how to claim itc in gst walks through the credit side in full.
Export of services under GST: a quick compliance checklist
Use this as a working reference for each export cycle:
- Register for GST from your first export invoice, regardless of turnover, because the ₹20 lakh threshold does not apply to inter-State supplies.
- File your Letter of Undertaking in Form GST RFD-11 at the start of the financial year, and renew it every April, so you never charge IGST you would only have to reclaim.
- Invoice in convertible foreign currency, carrying the LUT endorsement, your GSTIN and the client's full foreign address, since a missing endorsement can stall a refund.
- Confirm the correct FETERS purpose code for each receipt, such as P0802 for software services, so the payment reconciles cleanly against the invoice.
- Obtain a FIRC or eFIRA for every inward remittance and reconcile it in EDPMS through your AD bank, as this is the proof any refund or audit rests on.
- From 1 October 2026, file the unified Export Declaration Form within 30 days of each invoicing month in place of SOFTEX, consolidating a month's invoices into one declaration.
- Track the GST one-year clock and the FEMA 15-month clock separately, because they run from the same invoice date but carry different penalties.
- Report exports in Table 6A of GSTR-1, keep the same figure in GSTR-3B, and claim ITC refunds via RFD-01, since a mismatch between the two returns is the most common refund blocker.
Get the collection layer right and most of this list documents itself. Xflow provides receiving accounts that take export payments in convertible currency, generate the eFIRA automatically, apply the correct purpose code, and settle to your Indian account on a T+1 basis, backed by final RBI PA-CB authorisation for exports and imports.
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Frequently asked questions
It is zero-rated, not exempt. The GST rate on the outward supply is 0%, but the supply stays within GST, which lets you recover input tax credit. An exempt supply would block that credit.
Yes. Exports are inter-State supplies, and Section 24 of the CGST Act makes registration compulsory for inter-State taxable supplies, so the ₹20 lakh threshold does not apply to exporters.
No GST is charged on the client's invoice if you meet the five conditions of Section 2(6). You either export under an LUT without paying IGST, or pay IGST and claim it back as a refund.
Two apply. Rule 96A gives one year from the invoice date for GST, after which IGST plus 18% interest is due. The FEMA realisation window is 15 months from the invoice date from 1 October 2026.
From 30 March 2026, yes, if the conditions are met. The Finance Act 2026 removed Section 13(8)(b), so the place of supply now follows the recipient's location under Section 13(2) rather than defaulting to India.
Not from 1 October 2026. A single unified Export Declaration Form replaces SOFTEX and covers goods, services and software, filed within 30 days from the end of each invoicing month.
It is the primary proof that payment arrived in convertible foreign exchange, and it is required to support GST refunds and FEMA reporting. Your bank or payment provider issues it for each inward remittance.
Yes, on the LUT route. File Form GST RFD-01, using the Rule 89(4) formula, with your LUT, export invoices, FIRC and matching return figures attached.
