Do you need to pay GST on Foreign Exchange? (2026 Guide)

Updated on: 19th January 2026

GST on International Transactions: Overview

For Indian freelancers and businesses, payments from foreign clients are usually not subject to GST. That’s because most exports of services qualify as zero-rated supplies under GST.

Zero-rated doesn't mean "exempt." It means you pay 0% GST on your export invoice, but you can still claim Input Tax Credit (ITC) on the GST paid for your business expenses, like software, equipment, or rent.

Does Your Service Qualify as an Export? (5 Conditions)

For your service to qualify as a zero-rated export under Section 16 of the IGST Act, all five conditions must be met:

Some real-world examples:

Note that, this blog covers only cross-border service exports, not personal remittances or imports, which are treated differently under GST.

GST on Inward Remittances (Export Service Payments)

If you're an Indian freelancer or business receiving payments from foreign clients for services, you don’t charge GST on those invoices. These are considered zero-rated exports under GST as per Section 16 of IGST Act,  meaning no GST is applied, but you're still eligible to claim Input Tax Credit. For example, if you build websites and get paid $1,000 from a US client, you simply raise an invoice without GST.

To support this classification, you’ll need proof of foreign inward remittance, such as a FIRC (Foreign Inward Remittance Certificate) or bank advice. These documents show that the payment was received in foreign currency and help validate your export status during audits.

If you're a registered business, it’s advisable to submit a Letter of Undertaking (LUT) to export without paying GST. If you don’t furnish an LUT, you'll need to pay GST upfront on the export invoice and later claim a refund from the government.

Either way, keep proper documentation to support your zero-rated export claims and stay audit-ready.

GST on Foreign Currency Conversion (Forex Services)

When you convert foreign currency to INR, banks and forex providers charge 18% GST — but here's what most people get wrong:

GST is NOT charged on the full amount you convert.

GST is only charged on the "service value" — a small fee calculated using government-defined slabs.

Here's how it works:

So even though the GST rate is 18%, in most real-world cases, the effective tax comes out to a very small percentage of the converted amount. This helps ease the burden on exporters and freelancers converting foreign payments.

Also note: This GST only applies to retail customers. Inter-bank forex transactions (say, between banks or authorised dealers) are exempt.

How Much GST Does Skydo Charge on International Payments?

Skydo charges 18% GST on its flat service fee, not on the full amount of your international payment.

For example, if you receive $10,000, Skydo’s fee is $29. The applicable GST would be 18% of $29, which comes to around $5.22.

This makes the GST impact predictable and transparent; you’re only paying tax on the actual service, not on the full remittance amount.

GST on Compliance Services like FIRC & BRC

When you receive foreign payments for services, your bank often issues two important documents:

Banks usually charge a small fee for issuing these certificates, and 18% GST is added to that fee, since it's treated as a domestic service.

In most cases, this GST is either built into the bank’s invoice or handled via the reverse charge mechanism, meaning the foreign payer (your client) is technically liable, but you don’t need to worry about collecting GST from them.

You just pay the fee to your bank, and the GST part is already taken care of.

✅ Bonus: Skydo provides FIRA instantly and for free with every payment, saving you both time and money on compliance.

Managing GST on Foreign Transactions: Best Practices

If you're receiving payments from abroad, a few GST best practices can help you stay compliant and avoid surprises:

Common GST Mistakes Exporters Make (And How to Avoid Them)

How to file GST for international income in India?

As we've seen, as an Indian business providing services to clients outside India, your international income is classified as an export of services under GST law. Exports are considered zero-rated supplies, meaning they are taxed at 0%, but must still be reported in your GST returns.

Here’s how to file GST for international income:

1. Ensure you have an active GSTIN

You must be registered under GST to report and claim benefits on export income.

2. Raise GST-compliant invoices

Invoices for exports should mention:

3. Choose your export route: with or without payment of IGST

4. File monthly/quarterly GST returns

Report your export income in GSTR-1 (Table 6A) and GSTR-3B. If claiming refunds, file RFD-01 after submitting relevant documentation.

5. Maintain documentation

Keep records like invoices, FIRA/eBRC, LUT, and shipping bills (for goods), as required by law.

💡 Important: Just because exports are zero-rated doesn’t mean you can skip GST filings. Regular filings ensure you stay compliant and unlock refund claims on input taxes.

Summing Up

For Indian freelancers and businesses, receiving payments from foreign clients is largely GST-free, thanks to zero-rated export rules. The only GST you usually pay is on forex conversion or compliance services like FIRC, and even then, it’s a small cost.

As long as you use authorised channels, maintain proper records, and stay updated on GST rules, you can manage your global payments confidently and compliantly.

Skydo helps simplify this even further, with live forex rates, clear service fees, and instant access to FIRA.

Learn more or sign up to streamline your international payments.