GST on Export of Services in India: A Complete Guide

If you provide services to clients abroad, GST applies differently than it does on domestic sales. Under GST, such transactions are treated as ‘export of services’, and classified as a zero-rated supply. That means you don’t charge GST on your invoice and can still claim Input Tax Credit (ITC), which protects your margins and boosts competitiveness.

However, exporting services isn’t as simple as raising an invoice in dollars. Most exporters struggle with GST compliance and international payment management.

This guide breaks down the regulations, explains what qualifies as export of services under GST in India, and helps you avoid common compliance and payment hurdles.

Understanding Export of Services Under GST

Not every overseas transaction qualifies as an export under GST Section 2(6) of the IGST Act, 2017 clearly defines when a service can be treated as an export and classified as a zero-rated supply.

To qualify, all of the following five conditions must be met:

• The supplier is located in India – Your business must operate from India.
• The recipient is located outside India – The client must be based abroad.
• Place of supply is outside India – Service should be consumed or deemed to be consumed outside India.
• Payment is received in foreign convertible currency – USD, EUR, GBP, etc.
• Supplier and recipient are separate legal entities – Transactions between a business and its overseas branches are not treated as exports under GST.

Conditions for a Service to Be Treated as Export Under GST

Zero-Rated Supply and Benefits for Exporters

Under GST, export of services is treated as a zero-rated supply. This means GST is not charged on the invoice, and exporters can still claim refunds on taxes paid for business inputs.

Exporters have two ways to comply with GST:

1. Export Without Paying IGST

• File a Letter of Undertaking (LUT)
• Issue invoices without GST
• Ideal for regular exporters who want to avoid blocking capital

2. Export After Paying IGST Upfront

• Pay IGST at the time of invoicing
• Claim a refund of the IGST paid later.

The real benefit of zero-rated supply lies in claiming refunds on Input Tax Credit. You can recover GST paid on services and goods used for export, such as:

• Software tools and cloud platforms
• Third-party services
• Office utilities and equipment
• Professional fees and compliance costs

When managed correctly, zero-rated supply also helps you:

• Protect working capital
• Improve margins
• Offer competitive pricing internationally
• Maintain cleaner compliance records for audits

Related Read : What is SGST, CGST, IGST & UTGST? Types of GST Explained

Determining the Place of Supply for Services Export

To qualify as an export under GST, the place of supply must be outside India. Section 13 of the IGST Act explains how this is determined when either the supplier or the recipient is located abroad. These rules directly impact your eligibility for zero-rated GST benefits.

Here’s how each rules work in practice:

• The default rule states that the place of supply is the location of the service recipient.
• For services linked to immovable property, such as architectural or site assessment services, the location of the property decides the place of supply.
• If a service is performance-based, like repairs, physical testing, or in-person training, the place of supply becomes the location where the service is actually performed.
• For event-related services like conferences, exhibitions, cultural or educational events, the event’s physical location is treated as the place of supply.

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FEMA Compliance for Service Exporters

While GST handles tax treatment, every export of services must also follow the rules under FEMA (Foreign Exchange Management Act), 1999. FEMA compliance is not optional; it is part of every international transaction.

Key FEMA Rules You Must Know:

• FEMA, 1999 governs all cross-border transactions and use of foreign exchange in India.
• Export proceeds must be realised and repatriated within 15 months from the date of export.
• Payment should be received in freely convertible foreign currency such as USD, EUR, GBP, etc.
• In specific cases allowed by RBI, export earnings may also be received in Indian rupees.
• All payments must be routed through Authorised Dealer (AD) banks, which verify documents and report the transaction.
• Exporters can open an Exchange Earners Foreign Currency (EEFC) account to retain foreign currency and reduce conversion costs.

GST on International Payments and Currency Conversion

The export of services may be zero-rated under GST, but the charges linked to receiving foreign payments are not. Banks and payment platforms levy GST on remittance processing, currency conversion, and other services. 

• Service Charges on Foreign Remittances: Banks and authorised dealers apply processing fees when receiving international payments. These charges attract 18% GST and are usually deducted before settlement.
• GST on Currency Conversion: When foreign currency is converted to INR, GST at 18% applies on the service value, not the full amount. Exporters must account for this while evaluating the effective cost of conversion.
• How the Taxable Value is Calculated: GST is charged only on the service portion of the currency conversion. Banks generally use either of these methods:
  • A slab-based formula set under GST rules.
  • The difference between your conversion rate and the RBI reference rate for that day.
• GST on Documentation Fees: Banks charge fees for issuing Foreign Inward Remittance Certificate (FIRC) or Bank Realisation Certificate (BRC), and these charges also attract GST. So it’s important to record them while calculating your total cost per transaction.

How to Claim GST Refunds for Exported Services?

Once your service qualifies as export, you can claim a GST refund on the taxes paid for inputs or on the IGST paid at the time of export. The process is fully online, but it requires accurate documentation and strict adherence to timelines to avoid delays or rejection.

Steps to Claim GST Refund for Exported Services

1. File Form RFD-01 on the GST Portal: The refund process begins with an online application using Form RFD-01. This form is available under the “Refunds” section on the GST portal.
2. Attach Supporting Documents: You must upload export invoices, FIRC/BRC as proof of foreign currency receipt, and a statement of Input Tax Credit utilised. These documents confirm that the transaction qualifies as a zero-rated supply.
3. Refund for Exports without IGST Payment: If you export services without paying IGST by using a LUT, you can claim a refund on the ITC that has accumulated on your purchases and expenses. 
4. Refund for Exports with IGST Payment: If IGST was paid at the time of export, the refund is claimed for the entire IGST amount paid on the invoice.
5. Follow the Deadline: Refund applications must be submitted within two years from the relevant date of export. Missing this timeline may lead to loss of refund eligibility.

Common Challenges and Misconceptions for Service Exporters

Many service exporters assume that sending an invoice overseas is enough to qualify for GST benefits, but compliance requires much more.

Here are the issues most exporters face:

• Not All Foreign Payments Qualify as Exports: A service qualifies as an export only when all GST conditions are met together, including clearly establishing the place of supply outside India and receiving payment in a convertible foreign currency.
• Place of Supply Confusion: In digital services or consulting, exporters struggle to prove that the service was used outside India. If this is unclear, GST may treat it as a domestic service.
• Weak Documentation for Foreign Receipts: Banks sometimes delay issuing FIRCs/BRCs. Without them, you cannot prove that payment was received in foreign currency, which may block your GST refund.
• Ignoring FEMA Requirements: If payments do not arrive within the permitted period or come in non-convertible currency, the transaction may be flagged for FEMA non-compliance.
• GST on Extra Service Charges Is Often Overlooked: GST applies to fees charged for currency conversion, remittance, and documentation  but many exporters don’t record them properly, which affects expense calculations and ITC tracking.

Misconceptions vs. Actual Rules

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Conclusion

Exporting services can be a strong opportunity, but it works well only when compliance is handled correctly. Understanding GST and FEMA rules, using zero-rated benefits, choosing the right refund route and keeping proper documents help you protect your income.

With a clear process, you can avoid delays and build a reliable, profitable export business.

FAQs

1. Is GST applicable on export of services from India?

No. Export of services is treated as a zero-rated supply, so GST is not charged.

2. What are the key conditions for a service to qualify as an export under GST?

A service is treated as an export when:

• The supplier is located in India
• The recipient is located outside India
• The place of supply is outside India
• Payment is received in convertible foreign exchange (or INR where permitted)
• The supplier and recipient are separate legal entities.

3. Is GST applicable on payment received in foreign currency for export of services?

No GST is applied on the export value. However, bank charges and currency conversion fees may attract 18% GST, as per normal service tax rules.

4. What does ‘zero-rated supply’ mean for service exporters?

It means no GST is charged on the exported service, and the exporter is eligible to claim ITC refunds on inputs and input services.

5. What is the timeline for realising export proceeds under FEMA?

Export proceeds must be realised and repatriated to India within 15 months from the date of export.

6. How can service exporters claim GST refunds?

Service exporters can claim GST refunds by filing Form RFD-01 on the GST portal. 

7. Are there any exemptions for GST registration for service exporters?

Yes. Businesses that exclusively export services and have a turnover below the prescribed threshold (₹20 lakh, or ₹10 lakh for Special Category States) are not required to register for GST.