Export of Services under GST: Eligibility and Filing Details
You have plans to grow your existing service business abroad but don’t know where to start? If we got that right, we suggest you start by understanding export of services under GST. Because not every service provided overseas counts as an export of services. There are rules and procedures around it, and we cover exactly that and more in this blog.
TL;DR - Summary
- Zero-rated supply: - Export of services is zero-rated — you charge 0% GST on your invoice, but compliance is still mandatory.
- Five conditions: - Your transaction must meet all five conditions under Section 2(6) of the IGST Act to qualify as an export.
- Two routes: - Pay IGST upfront and claim a refund later, or file a Letter of Undertaking (LUT) to export without paying IGST at all.
- Refund options: - Paid IGST? Claim it back via RFD-01. Exported under LUT? Claim a refund on your accumulated Input Tax Credit (ITC) instead.
What is export of services under GST
Export of services under GST is treated as a zero-rated supply, which means the service exporter doesn’t have to apply GST on the final invoice and keep their pricing competitive.
But your business must fulfill five conditions to be eligible for zero-rated supply under GST. Let’s explore them in the next section.
"Zero-rated" and "exempt" aren't the same. If your service were exempt, you cannot claim refunds on GST paid for your business expenses. Zero-rated exports keep full GST registration, file returns as usual, and can claim input tax costs back as a refund.
How is place of supply determined for export of service
This is the part where most service exporters get confused. The general assumption is: if I’m providing services to a client abroad, the place of supply is the client’s location. That’s true; but Section 13 of the IGST Act lays down certain ground rules to determine the place of supply under different scenarios.
Let’s explore them below:
- General Rule (Section 13(2)): For most B2B services, the place of supply is the recipient’s location. If your client is in another country, the place of supply is that country.
- Performance-Based Services: If your service requires physical presence, such as repairs, training, or on-site maintenance, the place of supply is where the service is performed. It doesn’t matter where the client is based.
- Immovable Property Services: If your work is related to a specific building or piece of land, like architecture or site surveys, the place of supply is where that property is located.
- Intermediary Services: If you are arranging a supply between two other parties, acting as an agent or broker, the place of supply is your own location, i.e., India. Here, it will be treated as a domestic service.
For example, an Indian software company provides remote coding services to a client in New York. The place of supply is the United States.
Let’s tweak this example. Instead of coding directly, the Indian software company coordinates between the New York client and a set of Indian freelancers, acting as an intermediary. The place of supply would then shift to India, and the transaction would no longer qualify as an export.
The physical location of the work matters just as much as the location of the client. If a US-based company hires you to manage a tech conference in Delhi, the place of supply is India because the service is performed in Delhi.
What documents are required for export of services under GST
Many exporters face delays or rejections during GST refund claims because they don’t have the essential documents needed to complete the process. Here’s a readymade list to avoid such an issue:
GST registration certificate
Without GST registration, you cannot claim refunds. Even if your turnover is below ₹20 lakh, you must register for GST to claim GST refunds on business expenses.
Tax invoice with export details
Every invoice you create must include the following endorsement: "Supply meant for export under LUT without payment of IGST" or show the IGST amount. You must add this besides the recipient’s name and address, SAC (Services Accounting Code) and foreign currency value.
Letter of Undertaking (LUT) or bond
The LUT is a declaration filed via Form GST RFD-11 on the GST portal. You must file it at the start of each financial year before exporting. Renew the LUT annually to avoid tax liabilities and blocked refunds.
FIRC or BRC from bank
A Foreign Inward Remittance Certificate (FIRC) is the primary proof that you received foreign payment in India. The Bank Realisation Certificate (BRC) is issued by your bank, proving that you have received foreign payment in India against a specific export. Both the documents are key for claiming GST refunds.
Bank statement showing foreign exchange receipt
This is a supplementary proof of the credit to your account. Authorities use bank statements for GSTR-2B reconciliation to verify that the funds actually arrived in India.
How to file for export of services under GST
Filing for GST is a lot easier and straightforward if you remember the following six essential steps, from initial registration to receiving your final refund.
Step 1. Obtain GST registration
Register on the GST portal as a taxpayer. While ₹20 lakhs annual turnover is the threshold for registration, you can still register if you want to claim back the GST paid on your business expenses.
For example, a freelancer in Delhi earning ₹15 lakhs registers for GST so they can claim a refund on the 18% tax paid for their new work laptop.
Step 2. File Letter of Undertaking on the GST portal
With a Letter of Undertaking (LUT) you can export services without paying IGST. After you’ve registered on the GST portal, navigate to Services > User Services > Furnish LUT to start the process. Remember to renew the LUT at the beginning of every financial year.
Step 3. Generate tax invoice for export
Your invoice must include your business name, recipient’s name and address, service description, and SAC. Do not add IGST if you have filed an LUT; do it otherwise. Also note that if your annual turnover exceeds ₹5 crore, you must also generate an e-invoice with a valid IRN for your exports to be valid.
Step 4. Receive payment in foreign exchange
Receive payment in convertible foreign exchange, like USD or EUR, through an authorized bank or payment platform. Always request a FIRC and BRC from your bank, as this is your primary legal proof of a successful export. Use platforms like Skydo to receive an FIRA on every payment automatically and save time.
Step 5. File GST returns with export details
You must report your exports in Table 6A of GSTR-1 for LUT-based exports or Table 6B if you paid IGST. These details must match your summary in GSTR-3B exactly, as any mismatch could cause a memo from the tax department.
Step 6. Claim refund of ITC or IGST paid
File your refund application in Form RFD-01 on the GST portal. For LUT exports, the government can grant a provisional refund of 90% of your claim within just 7 days of acknowledgment. More about how to claim GST refunds in the next part.
How to claim GST refund on export of services
There are two ways to claim GST refund on export of services: exporting without payment of IGST and claiming ITC refund, and exporting with payment of IGST and claiming IGST refund.
Exporting without payment of IGST and claiming ITC refund
- File a Letter of Undertaking (LUT) via Form RFD-11: Submit this declaration on the GST portal at the start of each financial year. This informs the government that you will meet all export conditions, which allows you to avoid paying the 18% tax upfront.
- Issue a tax invoice without charging IGST: You don't have to add tax to your client's bill, keeping your pricing competitive. Ensure the invoice includes the mandatory "export under LUT" endorsement.
- Recover tax on business expenses (ITC): You can claim the accumulated tax spent on inputs such as your office rent and software subscriptions (SaaS tools) with this option.
- Submit Form RFD-01 for manual processing: Service exports don’t have a physical shipping bill. You must manually file this application on the GST portal to prove your export and start the refund on Input Tax Credit (ITC).
- Apply this refund formula: The government determines your maximum refund using this formula: (Turnover of zero-rated supply/Total turnover) × Net ITC. This ensures the refund is proportional to your export business.
Exporting with payment of IGST and claiming IGST refund
- Charge the full IGST on your export invoice: This export transaction is like a standard taxable sale, therefore you must apply the relevant GST rate to your invoice.
- Pay the tax upfront via GSTR-3B: Pay the tax amount to the government during your monthly return filing, so you can claim it back.
- Get refund on the GSTR-1 data: The GST portal calculates the refund amount based on what you filled in GSTR-1. It also confirms the details on your invoice through an automated matching and validation program.
- Manage the impact on your working capital: This route is faster and often preferred by exporters. But it blocks your cash as you have to pay the tax out of your own pocket and wait several weeks for the government to credit it back.
What challenges do service exporters face with GST compliance
While the GST framework offers significant benefits for service exporters, the road to compliance is often paved with procedural hurdles that can disrupt your business operations. Understanding these real-world pain points is the first step toward navigating them successfully.
Delayed refund processing
According to the law, you must receive a refund within 60 days. But often exporters wait longer than that. Mostly because of data mismatches between the GST portal and the ICEGATE system, which contains all the logistics details and customs clearances. Only after manual intervention from tax officers, who verify that the services were truly exported, will the funds be released.
Incorrect place of supply determination
The rules under Section 13 are complicated, and a simple error can turn a zero-rated export into a taxable domestic supply. This is even true for intermediary services or projects where the consumption happens in India. When in doubt, always consult a tax professional.
Documentation gaps leading to refund rejection
A mismatched invoice number or a missing FIRC/BRC, can lead to a deficiency memo (Form RFD-03) from the authorities. The complication is that the entire process often has to be restarted from scratch. Emphasize proactive document management to manage such errors.
Cash flow strain from blocked ITC or IGST
For freelancers and small exporters, any sort of delay creates a liquidity crunch. The shortage of working capital can put a pause on production plans or lead to seeking temporary, high-interest financing options.
Frequent changes in GST regulations
The GST law is constantly evolving, so staying compliant is complicated. Missing even one update can make your tax invoices invalid or lead to the immediate rejection of your future refund claims.
Pro Tip
Maintain a dedicated folder (physical and digital) for each export transaction. Keeping your invoices, LUT, and FIRCs organized from day one is the most effective way to respond to audit queries and speed up your refund.
How Skydo simplifies receiving payments for export of services
Managing GST compliance is already a lot. You don’t want your payment process adding to that burden: chasing banks for FIRCs, dealing with hidden forex markup fees, or keeping a paper trail of international payments.
Skydo fits in naturally as it’s a payment platform made for service exporters in India. Here’s what Skydo offers and makes your life a lot easier:
- Virtual accounts in multiple currencies: Receive payments in international currencies, like USD, EUR, GBP, SGD, AUD, and CAD, in virtual accounts with local bank details. Save on SWIFT transfer fees and intermediary bank charges.
- Automatic FIRC generation: You get a free FIRC/BRC, generated automatically, on every international payment. Some exporters vented their frustration on Reddit about paying banks for FIRC every time and moved to platforms that provide it for free.
- Transparent, flat fees: Skydo charges a flat fee with no hidden markups. You know exactly what you will receive before the payment even lands.
- Fast settlements: Most Skydo users receive cross-border payments within one business day. This solves the liquidity issue and provides you with the much-needed working capital to carry on your business.
- Compliance-ready: All the documentation you need for your GST refund claims, invoices, FIRCs, transaction records, is available in one dashboard, ready when you need it.
Is LUT mandatory for export of services under GST?
It is not mandatory, but it is highly recommended. Without an LUT, you must pay IGST upfront on every export invoice and then apply for a refund. This takes time and blocks your working capital. Filing an LUT lets you export without paying IGST at all, keeping your cash flow clean. For most service exporters, filing an LUT once at the start of the financial year is the smarter choice.
What is the time limit for filing a GST refund on export of services?
Can a freelancer claim a GST refund on export of services?
What happens if payment is received in INR instead of foreign currency?
