GST on Export of Services
GST on Export of Services in India: The Complete Guide (2026) What Is Export of Services Under GST? Under the Integrated Goods and Services Tax (IGST) Act, 2017, the export of services is defined under Section 2(6) of the IGST Act. For a transaction to qualify as ‘export of services’, all five conditions below must be simultaneously satisfied: The supplier of service is located in India. The recipient of service is located outside India. The place of supply of the service is outside India. The payment for such service has been received by the supplier of service in convertible foreign exchange, OR in Indian Rupees wherever permitted by the Reserve Bank of India (RBI). The supplier of service and the recipient of service are not merely establishments of a distinct person. All five conditions must be met together. If even one condition fails, the transaction will NOT qualify as export of services and will be treated as a domestic taxable supply attracting GST. Important Note for Freelancers: Many Indian freelancers receive payments via PayPal, Wise, Payoneer, or direct bank wire. As long as the payment is in convertible foreign exchange and the client is located outside India, the condition of export of services is satisfied — even if you are an individual or a sole proprietor. How Is Export of Services Treated Under GST? Under GST law, export of services is treated as a Zero-Rated Supply under Section 16 of the IGST Act, 2017. This is a very beneficial treatment and it means: GST is NOT charged on the invoice raised to the foreign client (0% GST rate). You are still entitled to claim Input Tax Credit (ITC) on all your inputs and input services used for providing these exported services. You can get a full REFUND of the unutilised ITC from the GST department. This is completely different from an ‘exempted supply’ where ITC cannot be claimed. Under zero-rated supply, you get the best of both worlds — no GST on output and full ITC credit on inputs. Two Routes for Exporting Services Under GST Under GST law, an exporter of services has two options to export: Route 1: Export Under LUT (Letter of Undertaking) — Most Preferred Under this route, you export services WITHOUT paying IGST. You submit a Letter of Undertaking (LUT) to your GST jurisdictional officer at the beginning of every financial year. This is the most popular and cash-flow-friendly route. No IGST is paid on export invoices. You can claim refund of accumulated Input Tax Credit (ITC) from GST department. LUT must be filed annually via GST portal (Form GST RFD-11). Eligible persons: Any registered taxpayer who has not been prosecuted for tax evasion of Rs 2.5 crore or above. Route 2: Export on Payment of IGST — With Refund Claim Under this route, you pay IGST at the applicable rate on the export invoice. After export, you claim a refund of IGST paid. This route is less preferred because it blocks your working capital temporarily. IGST is paid on the export invoice (e.g., 18% for IT services). Refund of IGST paid is claimed from GST department. Refund must be applied within 2 years from the date of export. This route is useful when you have no ITC to carry forward. CleverCoins Expert Tip: In 99% of cases, Route 1 (LUT-based export) is more beneficial. It avoids IGST outflow, preserves working capital, and allows you to claim accumulated ITC as refund. We at CleverCoins help clients file their LUT online every April — get in touch to ensure you never miss it. What Is a Letter of Undertaking (LUT) Under GST? A Letter of Undertaking (LUT) is an undertaking given by an exporter to the GST department stating that they will comply with all export-related GST provisions and will not misuse the zero-rating benefit. How to File LUT on GST Portal Log in to the GST Portal (www.gst.gov.in). Go to Services > User Services > Furnish Letter of Undertaking (LUT). Select the Financial Year for which LUT is being filed. Fill in the required details and upload supporting documents. Sign digitally using DSC or EVC. A unique ARN (Application Reference Number) is generated. LUT remains valid for the entire financial year (April to March). For FY 2025-26, the LUT filed is valid from 1 April 2025 to 31 March 2026. GST Registration: Is It Mandatory for Service Exporters? This is a frequently asked question. The answer depends on your annual turnover: Threshold Limits for GST Registration (Service Exporters): • General States: Mandatory if aggregate turnover exceeds Rs 20 lakh per year. • Special Category States (NE states, Jammu & Kashmir, etc.): Mandatory if turnover exceeds Rs 10 lakh per year. • If your export income exceeds Rs 20 lakh, GST registration is compulsory — even if all your income is from exports. • If turnover is below Rs 20 lakh, GST registration is optional. However, without registration, you CANNOT export under LUT or claim ITC refunds. Many small freelancers earning below Rs 20 lakh from foreign clients choose to voluntarily register for GST to enjoy the benefits of ITC refund claims. How to Raise an Export Invoice Under GST An export invoice under GST (when exporting under LUT) must contain the following mandatory fields: Name, address, and GSTIN of the supplier. A consecutive serial number (not exceeding 16 characters). Date of issue. Name, address, and GSTIN or UIN (if applicable) of the recipient. Name and address of the foreign client (in foreign country). HSN/SAC code of the service (e.g., SAC 9983 for IT services, SAC 9997 for personal/professional services). Description of services provided. Taxable value and rate of GST — however, since it is zero-rated, write ‘0’ in IGST column. The mandatory declaration: ‘SUPPLY MEANT FOR EXPORT UNDER LUT WITHOUT PAYMENT OF IGST’. Invoice amount in foreign currency (USD, EUR, GBP, etc.) with
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