What Are the Conditions for Export of Services Under GST?

If you sell services to clients outside India, getting the export of services under GST classification matters more than you may think. Under the GST framework, qualifying service exports are treated as zero-rated supplies under the IGST Act. This allows you to export services without charging GST while still claiming input tax credits.

Meeting the prescribed conditions for export of services under GST helps you protect margins and stay price-competitive globally. It also ensures smoother refunds and cleaner compliance, which is critical for SaaS firms, agencies, and service exporters dealing with overseas clients.

Misreading these rules can lead to tax demands, blocked refunds, and loss of export benefits. GST law therefore sets out five specific statutory conditions that define service exports in India. Continue reading to understand each condition clearly and how to apply them in practice.

What Are the Five Conditions for Export of Services Under GST?

GST law follows a strict definition of export of services under GST. As per Section 2(6) of the IGST Act, a service qualifies as an export only when all five conditions are met together. If any one of these conditions fails, the supply is treated as an inter-State transaction under GST, bringing tax liability, interest, and added compliance risk.

Is the Supplier of Service Located in India?

• The service provider must be registered and located in India’s taxable territory.
• The GST registration establishes the supplier’s legal presence.
• Services delivered from overseas branches or foreign offices do not qualify as Indian exports.

Is the Recipient of Service Located Outside India?

The recipient must be legally located outside India based on their place of incorporation or residence. If the recipient is physically present in India when the service is performed, this condition can become disputed and needs careful review.

Is the Place of Supply Outside India?

• The place of supply must fall outside India to meet export conditions.
• Place of supply is decided based on the rules in Section 13 of the IGST Act. 
• The actual destination and use of the service matter more than the billing address.

Is Payment Received in Convertible Foreign Exchange?

• You must receive payment in convertible foreign currency within the timeline prescribed by RBI.
• RBI allows payment in INR for notified territories such as Nepal and Bhutan subject to specific approvals and conditions.

Are the Supplier and Recipient Distinct Persons?

• GST disallows exports between establishments of the same legal entity.
• A foreign branch and Indian head office count as the same person.
• A foreign subsidiary qualifies as a separate person.
• This distinction follows recent clarifications from the Central Board of Indirect Taxes and Customs.

Is GST Registration Mandatory for Export of Services?

Under GST, exports of goods and services are classified as inter-State supplies. As a rule, Section 24 of the CGST Act, 2017 requires persons making inter-State supplies to register for GST. However, service exporters get a specific relaxation. If a service exporter’s total annual turnover remains below the ₹20 lakh exemption limit, GST registration is not mandatory.

Explore Razorpay’s Global Payment Solutions

GST Registration Requirements: Domestic vs Export services

How is the Place of Supply Determined Under Section 13?

Section 13 of the IGST Act comes into play when either you or your client is located outside India. This section decides whether your service genuinely qualifies as an export or gets treated as a taxable domestic supply. While the law starts with a simple default rule, it also carves out specific exceptions that often trip up exporters.

In practice, many services fail the export test not because of where the client sits, but because Section 13 overrides the general rule based on how and where the service is performed. Understanding these distinctions early helps you avoid refund rejections and GST disputes.

When Does the Default Rule (Section 13(2)) Apply?

For most intangible and remote services—such as IT services, software development, consulting, marketing, or design—the place of supply is the location of the recipient. This rule covers the majority of SaaS exporters, freelancers, and agencies.

If you cannot identify the recipient’s location from contracts or records, the law falls back to the supplier’s location, which can immediately disqualify the service from export status.

How Do Performance-Based Services Change the Place of Supply?

Certain services depend on where the work is physically carried out, not where the client is based:

• Section 13(3) applies to services that require physical presence, either of goods or of individuals.
• If goods are located in India during the repair service, the place of supply remains India.
• This holds true even if the client is based overseas.

Services Related to Goods

• Place of supply is where the goods are physically located at the time of service.

Services Provided to Individuals

• Place of supply is where the service is actually performed.

What Are the Rules for Intermediary and Banking Services?

Under Section 13(8) of the IGST Act, if you act as an intermediary—such as a broker or agent arranging a supply—or provide specified banking or financial services to account holders, the place of supply shifts to your location in India, not the foreign client’s location.

Because of this shift, many such services do not qualify as exports even when you raise invoices on overseas customers and receive foreign currency.

What Are the Two Ways to Claim Tax Benefits on Exports?

Exports under GST are treated as zero-rated supplies, which means the tax burden should not stick with the exporter. To achieve this, GST offers two compliance routes. Both lead to tax relief, but they affect cash flow very differently. Choosing the right option can make a visible difference to your working capital and refund timelines.

LUT Route vs IGST Paid Route — Quick Comparison

How Does the Letter of Undertaking (LUT) Route Work?

• You must file Form GST RFD-11 on the GST portal before making an export.
• You can export goods or services without paying IGST upfront.
• You may claim a refund of the input tax credit accumulated on your expenses.
• This route avoids cash blockage and is therefore preferred by most exporters.
• It requires a valid GST registration and proper export compliance.

When Should You Pay IGST and Claim a Refund?

• You pay IGST at the time of making the export.
• Then apply for a refund under Section 54 of the CGST Act.
• The refund is processed only after verification by the tax authorities.
• You must submit proof of foreign payment, such as a Bank Realisation Certificate (BRC) or a Foreign Inward Remittance Certificate (FIRC).
• This route is generally used when filing an LUT is not possible or gets delayed.

How to Manage Foreign Exchange Realisation for GST Compliance?

To qualify as an export of services, you must receive payment in convertible foreign exchange within the time limits prescribed by the RBI. This makes payment tracking critical. The way you receive money affects not just costs and speed, but also how easily you can prove compliance during GST refunds, audits, or LUT verification.

Below is how common payment methods compare from a GST and RBI compliance lens.

Traditional SWIFT and Wire Transfers

• High intermediary and correspondent bank fees reduce net realisation.
• FIRCs often require manual follow-up with banks.
• Slow settlement can delay GST refund claims and working capital recovery.

Digital Payment Gateways and Wallets

• Easy to collect payments through online checkout, especially for SaaS and consulting.
• High transaction and FX conversion fees impact margins.
• Multiple small receipts make reconciliation and GST audits harder.

Razorpay MoneySaver Export Account

• Receive payments via local bank transfers from 180+ countries.
• Zero forex markup and no hidden charges.
• Automated FIRC generation simplifies GST compliance.
• Faster settlement improves refund timelines.
• Saves up to 75% on transfer costs compared to traditional banks.
• Built for exporters needing clean audit trails and RBI-aligned reporting.

Comparison of International Payment Methods

Conclusion

To qualify as an export of services under GST, you must satisfy all five conditions under Section 2(6) together. Missing even one can turn an export into a taxable inter-State supply. In practice, most disputes arise around the place of supply and foreign exchange realisation, making these the two areas where exporters need the most care.

GST rules also evolve through circulars and clarifications, especially on intermediary services and the distinct person rule. Staying updated helps you avoid surprises during audits or refund claims. Using specialised export accounts can further reduce effort by streamlining foreign currency receipts, reconciliation, and compliance—letting you focus more on growing global revenue and less on paperwork.

FAQs

Q1. Is GST registration mandatory for the export of services?

Not immediately. While exports are considered “inter-state supplies” (which usually require mandatory registration), service exporters are exempt from registration if their annual aggregate turnover is below ₹20 Lakhs (₹10 Lakhs in special category states).

Q2. What is the time limit to receive payment for the export of services?

As per FEMA guidelines, the foreign currency payment must be realised within 15 months from the date of the invoice.

Q3. Can I accept payments in Indian Rupees (INR) for service exports to Nepal and Bhutan?

Yes, you can accept payments in Indian Rupees (INR) for service exports to Nepal and Bhutan, as these transactions are generally exempted from the requirement to settle in convertible foreign exchange.

Q4. What is the difference between an LUT and an IGST refund?

An LUT lets you export services without paying IGST upfront. The IGST refund route requires you to pay tax first and then claim a refund later.

Q5. Is a Foreign Inward Remittance Certificate (FIRC) required for GST refunds?

Yes. A FIRC or FIRA is mandatory proof that foreign currency was received in India for the export invoice.

Q6. How is the ‘Place of Supply’ determined for freelance or digital services?

Usually, it is the recipient’s location. But if you act as an intermediary or perform services in India, the place of supply may shift to India.

Q7. Does a supply between a head office and a foreign branch qualify as an export?

No. A head office and foreign branch are the same legal entity. Supplies to a separately incorporated foreign subsidiary can qualify as exports.