Introduction
Global clients, USD payments, and fast-growing exports. It is a good time to be an Indian entrepreneur. But one question always creates confusion:
"Do I need to pay GST on international payments?"
You don't pay GST on your export income, but you do pay GST on forex conversions and platform services that support these transactions.
This guide breaks down the what, where, and how of GST on international transactions — so you stay compliant and avoid overpaying.
Key takeaways
- Export income is zero-rated under GST if you’ve submitted an LUT, so you don’t charge GST on exports.
- You still pay GST on currency conversion, platform fees, bank charges, and eFIRA issuance.
- Maintain proper records, invoices, LUT, and FIRCs or eFIRAs to claim GST refunds and stay compliant.
- Use digital tools to manage and store your GST and export documents safely.
- Platforms like Xflow can help by automating GST compliance and saving you time.
What exactly is GST on international transactions?
Whenever you convert foreign currency to INR (or vice versa), banks and forex providers charge 18% GST, but only on the service fee charged by your bank or forex dealer. This fee is considered a “value of supply” and is taxed at 18% GST.
Different types of GST on international transactions
Prepare better for compliance with these GST scenarios.
| Column1 | Column2 |
|---|---|
| Record11 | Record12 |
Common GST pitfalls (and how to avoid them)
GST mistakes are common when dealing with cross-border payments. Even experienced businesses make costly mistakes. Here are the most common issues and how to stay compliant.
The double GST trap on forex services
Many businesses unknowingly pay GST twice during currency conversions. This typically occurs when both the payment platform and the receiving bank charge separate foreign exchange conversion fees and levy GST individually. To avoid this, ensure only one entity handles the conversion and charges GST.
Incorrect GST slab application
Platforms sometimes apply the incorrect GST slab when calculating foreign exchange conversion tax. For example, if you convert ₹50,000 and the bank applies the ₹1–10 lakh slab instead of the correct slab for amounts up to ₹1 lakh, you end up paying more than you should.
Poor documentation leads to a refund rejection
A common mistake is not collecting FIRCs or eFIRAs on time. In one case, a small-scale startup earning ₹15 lakh over six months was unable to claim an IGST refund because it lacked proper documentation. This led to a cash flow loss of ₹2.7 lakh. Timely documentation is non-negotiable.
Delayed eFIRA downloads
Most platforms only keep eFIRA or FIRC documents available for 60 to 90 days. If you don’t download them in time, getting them later can be tough. It’s best to save these files as soon as each transaction is completed.
Incomplete invoice formatting
Just stating "0% GST" on your invoice isn't enough. Invoices must include the phrase "Export of services – Zero rated supply under GST" and mention your valid LUT number. Incomplete invoices can lead to refund denials or compliance issues.
RCM miscalculations on foreign platform services
Businesses often miscalculate GST under the Reverse Charge Mechanism (RCM). For instance, if you pay $100 to a foreign software provider, you need to calculate 18% GST on the INR value using the exchange rate on the date of payment, not the invoice date. This small error can snowball over multiple transactions.
Best practices for smoother operations
Good systems reduce errors and simplify audits. Follow these best practices to stay compliant and focus more on growing your business.
Use authorized dealer (AD) banks
Always route export payments through authorized AD Category-I banks. These banks issue valid FIRCs and maintain records that comply with RBI requirements. Avoid using personal accounts or informal platforms that lack documentation support.
Go beyond just the basics in your invoice
Add details like project name, deliverables, timelines, and payment milestones. This helps during audits and supports your export claim.
Keep your records safe and organized
Use a cloud-based system with automatic backups. Scan any physical paperwork and follow a clear naming format like “FIRC_ClientName_20250718_Amount.pdf” so everything’s easy to find.
Conduct quarterly compliance reviews
Every three months, review:
- Export receipts vs GSTR filings
- Pending or missed RCM payments
- Any missing FIRCs or eFIRAs
Fixing issues early prevents bigger problems later.
Stay updated on GST rules
GST regulations change frequently. Subscribe to official GST circulars and consult a CA or tax expert who specializes in cross-border transactions.
Use accounting tools that handle GST
Adopt software that can:
- Track export income and forex charges separately
- Calculate RCM automatically
- Flag mismatches before filing
Keep backup copies
Store all important documents—FIRCs, invoices, LUTs—in multiple locations. Keep both digital and printed versions of high-value transaction records. Easy access during audits can prevent delays of weeks or even months.
Your compliance checklist
Use this checklist to stay compliant across export transactions, from invoicing to filing.
Pre-registration
Make sure your GST registration is under the regular scheme, not the composition scheme. Only regular registration allows zero-rated export benefits and LUT/IGST filings.
Choosing between LUT and IGST routes
The LUT route avoids paying IGST upfront, while the IGST route allows input credit but requires a refund process. If your cash flow is tight or you frequently export, the LUT route is typically the better option. Use IGST only if you have fewer transactions and prefer a cleaner audit trail.
Invoice compliance
Make sure your export invoices include:
- The client's complete address with country
- Foreign currency payment terms
- HSN/SAC codes for services
- Place of supply (outside India)
- A clear note on zero-rated supply
- Your LUT or bond number
Documentation system
Organize your documents by month with dedicated folders for:
- FIRCs and eFIRAs
- Forex conversion receipts
- Platform invoices
- RCM payment records
- Set reminders to download FIRCs/eFIRAs within 48 hours of receipt.
GSTR filing
Ensure all export details in GSTR-1 match your invoices and payment documentation. Use the correct place of supply codes for foreign transactions and verify the consistency of HSN/SAC codes to ensure accuracy. Mismatches can trigger audits or delays in refunds.
RCM tracking
Maintain a monthly register of all foreign platform payments that fall under RCM. Record:
- Payment date
- Service provider name
- Amount in foreign currency
- Exchange rate used
- INR equivalent
- GST paid under RCM
Why modern platforms like Xflow simplify GST compliance
Managing GST on international payments can be a hassle. With traditional banks, GST charges aren’t always clear. Manual paperwork leads to errors. Modern platforms like Xflow make the process smoother and easier to manage.
Xflow automates GST calculations, generates eFIRA instantly, and ensures full transparency in service charges. You no longer have to worry about incorrect tax slabs, missing compliance documents, or delayed refunds.
Do not waste your time chasing banks and deciphering tax rules. Xflow reduces your compliance burden so you can focus on growing your global business while staying fully aligned with GST, FEMA, and RBI regulations.
Frequently asked questions
Not directly on the export income. Export of services is zero-rated under GST if you file an LUT (Letter of Undertaking). However, GST is charged on associated services, such as foreign exchange conversion, platform fees, or compliance documents.
You can file an LUT (Letter of Undertaking) with the GST department. This allows you to export services without charging GST. Without an LUT, you'll need to charge IGST and later claim a refund. This is more paperwork-heavy.
eFIRA is the digital version of FIRC—used to prove foreign payments for exports. It’s faster, paperless, and accepted by banks, DGFT, and GST authorities.
