GST on export of services: the five conditions, LUT, and refunds

A supply of services is an export only if all of these hold:

1. The supplier is located in India.
2. The recipient is located outside India. This means the client’s business establishment receiving the service, not where the person signing the contract lives.
3. The place of supply is outside India under section 13 of the IGST Act.
4. Payment is received in convertible foreign exchange, or in Indian rupees where the RBI permits it, for example through a special rupee vostro account.
5. The supplier and recipient are not merely establishments of the same person. An Indian branch billing its foreign head office fails this test. An Indian subsidiary billing its foreign parent passes it, because they are separate companies.

For most services, place of supply is the location of the recipient (section 13(2)), so a foreign client means the place of supply is outside India. The exceptions are where the service is tied to something physically in India:

The 2026 change for intermediaries. Until 29 March 2026, section 13(8)(b) fixed the place of supply of intermediary services at the supplier’s location, so Indian agents, sourcing firms and brokers working for foreign principals paid 18% GST with no export benefit. The Finance Act, 2026 omitted that clause with effect from 30 March 2026, when it received assent. Intermediary services now follow the general rule and can qualify as exports. Earlier periods remain governed by the old rule.

Almost every service exporter uses an LUT. It is filed online in Form RFD-11, is valid for the financial year it is filed in, and must be in place before the export invoice. Anyone registered can file one unless prosecuted for tax evasion above ₹2.5 crore. We file it for ₹499; see LUT in GST.

Under an LUT, the foreign payment must arrive within one year of the invoice date (or a longer period allowed by the Commissioner). If it does not, IGST becomes payable with interest within 15 days.

• Mark the invoice “Supply meant for export of services under LUT without payment of IGST” (or “on payment of IGST”), with the client’s name, address and country.
• Foreign-currency invoices must also show the rupee value at the applicable exchange rate.
• Report exports in Table 6A of GSTR-1 and in the zero-rated line of GSTR-3B.
• Keep the bank’s FIRC or e-BRC for every receipt. It is your proof that condition 4 was met and is asked for in every refund.

Exporters under LUT build up unused input tax credit on software, rent, professional fees and equipment. That credit is refunded through Form RFD-01, filed for any period (usually a month or quarter) within two years of the relevant date. Refunds are processed with a provisional release of 90% for most applicants, and the balance after verification. The detailed steps and documents are in our GST refund guide.

A worked example: a design studio bills a US client ₹10 lakh a quarter under LUT and pays ₹90,000 of GST on its own inputs. It charges no GST, claims ₹90,000 of ITC, has no domestic output tax to set it against, and files RFD-01 for the ₹90,000.

Not until their aggregate turnover crosses ₹20 lakh in a financial year (₹10 lakh in special category states). Exports count toward that turnover. Once over the limit, registration is compulsory even if every rupee comes from abroad, and registering voluntarily earlier is often worth it for the ITC refund. See our GST registration service.