Expanding your services to global markets creates new opportunities, but it also brings GST responsibilities you must understand. Once you know how service exports work under GST, you can stay compliant, avoid unnecessary costs, and receive overseas payments on time.
A clear GST process also makes your international business easier to run. You can claim input tax credit (ITC) refunds on eligible expenses, keep your pricing steady for global clients, and manage cross-border invoicing with fewer complications.
This guide explains the key conditions, benefits, and compliance steps you must follow as a service exporter in India, so you know exactly what to prepare and how to stay aligned with GST requirements.
Key Takeaways
- Export of services under GST qualifies as zero-rated, allowing you to claim refunds on eligible input tax credit.
- A service is treated as an export only when all five core conditions under Section 2(6) of the IGST Act are met.
- Choosing between exporting under LUT or paying IGST depends on your cash flow needs and refund preference.
- Accurate documentation—especially BRC/FIRC, LUT, invoices, and matching GST returns is essential for timely GST refunds.
- Understanding the place of supply rules helps you classify exports correctly and prevents compliance issues during refund claims.
Defining Export of Services Under GST: The Core Conditions
Under India’s GST system, exports are treated as zero-rated supplies to support global service exports and improve competitiveness. To classify a service as an export, you must meet the conditions defined in Section 2(6) of the IGST Act, 2017. Here are the five core conditions explained in simple terms, along with an example for clarity:
- The supplier must be located in India, whether you work from an office, coworking space, or from your home.
Example: A SaaS company in Bengaluru sells its software subscription to clients in the US. Since the business is registered and operating from India, the supplier location requirement is fulfilled. Even remote teams working entirely online still qualify as long as they are based in India.
- The service recipient must be located outside India at the time the service is delivered.
Example: A freelance designer in Delhi creates brand assets for a UK-registered company. The client’s billing address and business presence are in the UK, so the recipient is clearly outside India. Even if communication happens over email or video calls, the location of the recipient remains abroad.
- The place of supply must be outside India, as GST classifies the transaction based on where the service is considered supplied.
Example: A consulting firm in Pune provides a market-entry strategy to a company in Singapore. The advice is used by the Singapore business for its operations abroad, so the place of supply is considered outside India. This holds true even when the consultant works remotely from India.
- The payment must be received in convertible foreign exchange or in INR when permitted by the RBI, confirming that the transaction is international in nature.
Example: A UX designer delivers work to a US client and receives payment in USD through a bank or a compliant payment gateway. Since the funds arrive in foreign currency through a regulated channel, the condition is met.
- The supplier and recipient must be separate legal entities; services provided to your own foreign branch do not qualify as exports.
Example: An Indian headquarters provides internal support services to its own branch office in the US. Both locations are part of the same corporate entity, so the transaction does not qualify as an export. GST treats them as establishments of one distinct person.
Understanding Place of Supply Rules for Export of Services
Before you treat any export project as export of service, you need to identify the place of supply. This step decides whether GST applies and ensures that your international invoices follow the right tax treatment. For cross-border services, the place of supply is decided based on the rules in Section 13 of the IGST Act.
The general rule is simple: The place of supply is the location of your overseas client.
For example, if you are in India and your client is in Canada, the service is considered supplied in Canada.
However, some services do not follow this general rule. These are the most common exceptions:
- Services Linked to Property: If your service relates to a building or land, the place of supply is where that property is located.
- Services Based on Physical Performance: If you must be physically present to deliver the service—such as installation, repair, or on-site work—the place of supply is where the work actually happens.
- Event-Related Services: If your service is connected to an event (like training sessions, exhibitions, or conferences), the place of supply is the place where the event takes place.
Using these rules, you can judge each project correctly. This helps you avoid mistakes in GST reporting and ensures your international transactions are classified the right way.
Zero-Rated Supply and Input Tax Credit (ITC) Refund Mechanism
Under GST, exports are treated as zero-rated supplies, a key measure to keep Indian services competitive in global markets. When a service qualifies as an export of services under GST, it carries a tax rate of 0%, even though it remains taxable in principle. This matters because it allows you to claim refunds on the GST you pay on your inputs, such as software tools, hosting, or professional services.
You can access zero-rated benefits in two ways. The first option is supplying services without paying IGST by submitting a Letter of Undertaking (LUT) or a bond. In this case, you can claim a refund on the unutilised ITC accumulated from your business expenses. The second option is paying IGST on the export invoice and then claiming a refund of the IGST paid later. Most businesses choose based on their cash flow needs and how easily they can manage compliance.
The refund mechanism ensures you do not end up bearing tax costs on services delivered to clients outside India. It removes the cascading tax impact and keeps Indian exports competitively priced in the global market.
Comparison: Zero-Rated Supply Options
| Criteria | Export Under LUT/Bond (No IGST Paid) | Export With IGST Payment |
| Tax Payment at the Time of Export | No IGST payment | IGST paid upfront |
| What refund do you get? | Refund of unutilised ITC | Refund of the IGST you paid |
| Impact on cash flow | No upfront tax → better cash flow | Money goes out first → refund comes later |
| Compliance requirement | File an LUT once every financial year | No LUT needed |
| Common users | Businesses wanting better cash flow | Businesses comfortable paying tax upfront and waiting for refund |
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Essential Documentation for GST Refunds on Exported Services
Accurate paperwork is crucial when you apply for a GST refund for export of services. Even small errors—like mismatched invoice values or missing remittance proofs—can slow down your claim or lead to rejection. Keeping your documents complete and organised helps you avoid unnecessary follow-ups and ensures smoother processing on the GST portal.
You’ll need a set of core documents to support your refund claim. These include:
- You must file Form RFD-01, which is the main application for claiming a GST refund.
- Your export invoices should clearly show the details of the services supplied and tax applicability.
- If you export without paying IGST, you must submit a valid LUT for the relevant financial year.
- You must attach a Bank Realisation Certificate (BRC) or Foreign Inward Remittance Certificate (FIRC) as proof that you received the payment in foreign currency.
Your export details must match across GSTR-1 and GSTR-3B, as even small differences can delay or block your refund. When your documents are accurate and submitted on time, the refund process for export of services under GST becomes much smoother.
GST Refund Documents Checklist for Export of Services
- Form RFD-01
- Export invoices
- Letter of Undertaking or bond
- BRC/FIRC
Pro Tip: Create a simple checklist that includes the invoice copy, LUT, FIRC/BRC and the other return entries. Reviewing this list for every export ensures you don’t miss any document when filing your refund.
Overcoming Challenges in Service Exports and GST Compliance
Delays in GST Refund Processing
Many exporters face delays in receiving GST refunds, which can put pressure on working capital. Refunds take longer when invoices, return filings, or BRC/FIRC details do not match. You can reduce delays by keeping documents consistent, filing returns on time, and tracking refund status regularly.
Difficulty in Identifying the Correct Place of Supply
Figuring out the correct place of supply can be tricky, especially for intermediary or location-based services. A wrong classification may lead to disputes or rejection of export status. Reviewing Section 13 rules carefully and seeking expert input for unclear cases helps you avoid errors.
Frequent Changes in GST Regulations
GST rules evolve often, and missing an update can lead to non-compliance. This affects everything from documentation to refund eligibility. You can stay compliant by monitoring GST notifications, renewing your LUT on time, and updating internal processes whenever a rule changes.
Strain on Cash Flow Due to Refund Backlogs
Delayed refunds or incorrectly filed claims can block your funds for months. This is particularly challenging for small businesses with tight cash cycles. Planning your cash flow with expected refund timelines and maintaining clean ITC records helps you avoid surprises.
Risk of Refund Rejection Due to Documentation Gaps
Exporters sometimes lose refunds because of mismatched invoice values, missing remittance proof, or errors in GSTR-1 and GSTR-3B. Keeping all export documents in one place and using tools that match data automatically helps you avoid these errors.
Managing GST compliance manually becomes harder as your export volume increases. Small mistakes in invoices, return filings or documentation can delay refunds and affect your cash flow. Using software tools for auto-reconciliation, e-invoice generation and return filing helps you maintain accuracy and reduce the chances of penalties.
How Razorpay MoneySaver Export Account Simplifies Global Payments for Exporters
As you explore the practical steps involved in exporting under GST, one of the biggest challenges you’ll face is receiving payments from international clients in a way that’s easy, efficient and compliant. That’s where the Razorpay MoneySaver Export Account comes in — it’s a payment solution built to simplify the way Indian exporters get paid from abroad. Below are its key features and how each helps streamline your global operations.
Virtual Accounts That Support Global Bank Transfers
Razorpay provides international-ready virtual accounts that allow your clients to pay using their local banking networks, including SWIFT, ACH, SEPA, BACS and Fedwire. This lets them send payments just like they would pay any vendor in their own country, which reduces friction and often speeds up the transfer process.
For you, this removes the need to open or manage a foreign bank account, which can be costly and paperwork-heavy. You receive payments through a fully compliant route while giving your overseas clients a familiar and convenient way to pay you.
No Forex Markup and Transparent Pricing
Razorpay uses the real-time exchange rate without adding any forex markup, so your earnings aren’t reduced by hidden conversion margins. The pricing for receiving international payments is also transparent and relatively low, giving you a clear idea of what will reach your account. This predictability helps businesses manage cash flow more confidently and avoid last-minute surprises.
INR Settlement With Automated FIRC/FIRA
When you receive a foreign payment through the MoneySaver Export Account, Razorpay converts the amount and credits it directly to your INR bank account. This means you don’t have to manage foreign currency balances or handle conversion separately. Razorpay also generates FIRC or FIRA automatically, so you don’t need to follow up with banks or request these documents on your own.
Having both the settlement and the compliance paperwork handled in one place makes your export reporting much easier and cuts down the time spent on manual follow-ups.
Multiple Global Payment Methods in One Dashboard
Along with international bank transfers, Razorpay also lets you accept payments through global cards, Apple Pay and Google Wallet. These payments are all recorded in the same Razorpay dashboard, so you don’t have to check multiple platforms or reconcile different reports. Having everything in one place helps you review transactions quickly, track settlements easily and keep your export records organised.
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Conclusion
Understanding GST rules for service exports becomes much easier once you understand the core conditions and how they apply to your work with global clients. When you follow the legal definitions and treat eligible transactions as zero-rated supplies, you reduce compliance risks and keep your tax reporting accurate. Clear documentation and consistent processes also help you receive input tax credit refunds on time, which supports healthier cash flow.
As your international business grows, using dependable financial tools can further streamline your cross-border payments and reduce day-to-day friction. With the right systems and compliance steps in place, exporting services becomes smoother and sets you up for long-term success in global markets.
FAQs
1. Is GST applicable for the export of services?
No. Exported services are treated as zero-rated supplies, so GST isn’t charged, and you can still claim input tax credit.
2. What is the limit for export services under GST?
There’s no monetary limit. Any service that meets the export conditions is treated as a zero-rated supply.
3. What defines export of services under GST Section 2(6) of IGST Act?
A service qualifies as an export when the supplier is in India, the recipient is outside India, the place of supply is outside India, payment is received in permitted foreign currency, and both parties are not establishments of the same entity.
4. Is a Letter of Undertaking (LUT) mandatory for export of services?
Yes. An LUT is required if you want to export services without paying IGST and then claim a refund of input tax credit.
5. How do you determine the place of supply for export of services?
The place of supply is usually the location of the overseas recipient, except for services linked to property, events or on-site work, which follow the place where the service is performed.
6. What are the tax benefits of exporting services under GST?
You don’t pay GST on export, and you can claim a refund of input tax credit used to provide the service.
7. What types of documents are needed to claim a GST refund for exported services?
You typically need export invoices, proof of foreign exchange received (BRC/FIRC), and a valid LUT if used.
