GST on Export of Services from India: LUT, Zero-Rating & Refund Guide (2026)
- Exports of services are zero-rated. You do not charge GST to your foreign client.
- File LUT (Form RFD-11) before April 1 every year. Without it, you pay 18% IGST on every export.
- You can claim refund of input GST (rent, software, laptops, etc.) every quarter through Form RFD-01.
- Five conditions decide if your supply is an export. Miss one and your "export" becomes a regular 18% taxable supply.
If you are an Indian freelancer, consultant, agency, or software exporter receiving payments from clients abroad, GST applies to you in a way that almost everyone gets partly wrong. The good news: exports of services are zero-rated, so no GST goes out the door. The catch: the conditions that decide whether your supply is actually an export, and the paperwork that protects your refund, are where most exporters lose money.
This guide walks through it in plain language: what counts as export, the LUT vs IGST choice, the refund process, and the documentation that GST, RBI, and your bank all watch together.
The 5-Condition Test: Is Your Service Actually an "Export"?
The IGST Act defines export of services through five conditions. All five must be ticked. Miss one and you are not exporting, you are making a domestic supply with 18% GST.
Your PAN, GSTIN, or registered address is in India.
The foreign company's office, registration, and billing address are abroad.
For most services, this is wherever the client sits. But beware of three traps below.
USD, EUR, GBP, etc. INR allowed only in specific RBI-permitted cases (e.g., Vostro accounts).
An Indian branch invoicing its own US head office does not qualify.
- Work tied to property in India (e.g., architecture or surveying for an Indian site). Always taxable in India.
- Training or events held physically in India. Taxable in India even if the client is abroad.
- "Intermediary" services. If you are arranging a deal between two other parties (commission, agency, finders fee), you are taxed in India.
If you do straightforward dev, design, consulting, marketing, content, or back-office work for a client abroad, you almost always qualify. If your role looks more like a "middleman," get it reviewed.
"Zero-Rated" vs "Exempt": A Distinction That Pays You Real Money
Both mean no output GST goes out. But there is one big difference:
Cannot claim input GST
The GST you paid on rent, software, and laptops is gone. You wear it as a cost.
Can claim full input GST
Every rupee of GST on your business expenses is refundable. For most freelancers this is Rs 30k to Rs 1L per year.
Two Routes to Handle a Zero-Rated Export
Route 1: Export under LUT
No IGST on invoice. Claim refund of accumulated input GST.
- File LUT (Form RFD-11) once a year
- Invoice foreign client without IGST
- Quarterly: claim refund of unutilised ITC
Best for: every exporter who files LUT on time.
Route 2: Pay IGST, Claim Refund
Charge 18% IGST, deposit it, then claim refund of the IGST.
- Add IGST to export invoice
- Deposit IGST with government
- Claim IGST refund through RFD-01
Used when: LUT was missed or no ITC to claim.
The LUT: One Filing That Saves You Lakhs
The Letter of Undertaking is the document that lets you export without paying IGST. It is filed once a year on the GST portal, must be renewed before April 1, and covers every export invoice for the financial year.
Every invoice you raise from April 1 until the day you finally file LUT must carry 18% IGST. You either pass that to your foreign client (most won't pay it), or you eat it from your own pocket and chase a refund for months.
We have seen freelancers lose 15% to 18% of two months' billings to this single missed deadline.
How to File LUT (6 Steps, 15 Minutes)
Anatomy of an Export Invoice
Missing fields on the invoice are the second-biggest reason refunds get rejected. Your invoice must have:
Claiming Your Refund (Form RFD-01)
Since you have no output GST to use it against, your input tax credit just sits in the ledger growing. You claim it back monthly or quarterly.
Refund = (Zero-rated turnover × Net ITC) ÷ Adjusted Total Turnover
If 100% of your turnover is exports, you can claim 100% of unutilised ITC. If 60% is exports and 40% is domestic, you can claim roughly 60%.
Statutory time: 60 days. Reality: clean files take 45 to 90 days. Files with deficiencies (mismatched invoices, open EDPMS, wrong purpose codes) can drag 6 to 12 months because every deficiency notice restarts the clock.
The Documentation Trail (3 Systems Watching the Same Money)
Every foreign receipt shows up in three parallel systems. They must reconcile, or your refund stalls.
Invoice + FIRC + GSTR-1 (Table 6A)
Checked at refund time
EDPMS entry + SOFTEX (for IT) + eBRC
Checked by your bank monthly
Form 26AS + AIS
Checked at ITR filing
Real Scenarios: Is It Export or Not?
Bengaluru freelancer, US client, USD payment
You build software for a Delaware C-Corp. USD lands in your Indian bank. All 5 conditions met. File LUT, invoice without IGST.
Indian agency, US parent invoice, India-based work
You bill the US parent, but the work is consumed by their Indian subsidiary. The department can re-characterise this as a domestic supply with 18% GST. Document the foreign recipient clearly.
Freelancer paid via PayPal, INR credited
PayPal converts USD to INR inside their system. As long as the FIRC shows foreign currency origin, this still qualifies. But if you receive INR from an Indian PayPal sub-account, it is domestic.
Affiliate commissions from a US SaaS
You promote a US product, get USD commission. Marketing service to a foreign recipient. Export. But if you are matchmaking between an Indian buyer and US seller, intermediary rule kicks in and it becomes domestic.
US client, advisory work + India training
Part of the engagement involves in-person training in India. Split the invoice: remote advisory = export, India performance = taxable in India.
Should I Even Register for GST?
Registration is mandatory once your aggregate turnover (exports counted) crosses Rs 20 lakh (Rs 10 lakh in special category states).
- Claim refund of input GST on rent, software, laptops (Rs 30k to Rs 1L/year for most freelancers)
- Without registration, you cannot file LUT, so you have no safety net when you cross the threshold
- Many foreign corporate clients ask for GSTIN during vendor onboarding
5 Costly Mistakes We Catch Every Month
LUT is annual, last year's does not carry over. Set an April 1 calendar reminder.
Bank uses generic P1099 instead of P0802 (software) or P0805 (consulting). Refund rejected. Verify at the time of credit.
Exports without payment of tax belong in Table 6A with LUT details. Wrong table triggers a notice.
Each export creates an RBI entry. Unclosed entries get you reported to RBI and can freeze future receipts.
Any mismatch (invoice number, amount, missing FIRC) = deficiency notice + fresh 60-day clock.
Frequently Asked Questions
Do I need to charge GST on services exported to foreign clients?
No. Export of services is zero-rated. If you have filed a valid LUT for the financial year, you invoice the foreign client without any IGST. If LUT is not filed, you must charge 18% IGST and claim refund.
Is GST registration mandatory for a freelancer earning only from foreign clients?
Mandatory once aggregate turnover (exports included) crosses Rs 20 lakh in a financial year, or Rs 10 lakh in special category states. Below that, registration is optional but recommended if you want to claim refund of input GST.
What is the difference between LUT and paying IGST on exports?
Under LUT, you export without paying any IGST upfront and claim refund of unutilised input tax credit. If you pay IGST, you charge tax on the invoice, deposit it, and claim refund of the IGST itself. LUT is preferred because it avoids the working-capital cost.
How long does GST refund on export of services take?
Statutory limit: 60 days. In practice: clean and well-documented files are processed in 45 to 90 days. Deficient applications can take 6 to 12 months due to repeated rectifications.
Can I file LUT after April 1?
Yes, but it is effective only from the date of filing, not retrospectively. Invoices raised between April 1 and the LUT filing date attract 18% IGST, recoverable only through the refund route.
Is payment via PayPal considered receipt in foreign currency for GST?
Yes, provided the FIRC issued by your bank confirms inward remittance and shows the foreign currency origin. PayPal's internal INR conversion does not break zero-rated status, as long as the underlying transaction is a foreign currency receipt.
What SAC code should I use on my export invoice?
Depends on the service. Common codes: 998314 (IT design and development), 998313 (IT consulting), 998311 (management consulting), 998361 (advertising), 998399 (other professional services). Wrong SAC causes the bank's purpose code to mismatch and refunds get held up.
Do I need to file SOFTEX as a freelancer?
SOFTEX is required for software and IT-enabled services exports. Banks usually require SOFTEX before closing EDPMS, and unclosed EDPMS blocks refund processing.
For the full RBI compliance trail (FIRC, SOFTEX, EDPMS, purpose codes), see SOFTEX, FIRC and EDPMS explained. For the 44ADA presumptive option many service exporters use, see 44ADA for freelancers.
Receiving Foreign Payments? Let Us Handle the GST Trail.
From LUT filing to IGST refunds to EDPMS closure, our team coordinates with your bank, files every return, and ensures no rupee of refund is left unclaimed. 800+ exporters trust Olambit with their compliance.