Picture this: Ravi runs a small software consultancy in Pune. He signs a US client, delivers the work, raises an invoice in dollars, and then freezes: does he add GST or not? Get it wrong and he either overcharges a foreign client or underpays the exchequer. This is the exact question the GST law answers cleanly, once you know the rules.
Is GST charged on export of services?
No. The export of services is treated as a zero-rated supply under GST, so no GST is charged on the invoice. Zero-rated means the tax rate on the outward supply is nil, and the exporter can still recover the input tax paid on the goods and services used to deliver it. That combination is what makes Indian services competitive abroad: the price a foreign buyer sees carries no Indian tax, and the exporter is not left absorbing input costs.
The Goods and Services Tax replaced a stack of older indirect taxes, including excise duty and VAT. The GST Act was passed on 29 March 2017 and took effect on 1 July 2017. Under it, an export of services is not exempt in the ordinary sense; it is zero-rated, which is a stronger position, because exempt supplies block input tax credit while zero-rated supplies do not.
The five conditions to qualify as an export
A supply of services counts as an export under GST only when
all five of these are true at once. Miss one and the transaction can lose its zero-rated status.
- Supplier is in India. The service provider must operate from India. Only India-based supply can claim the zero-rated benefit; offshore providers cannot.
- Recipient is outside India. Cross-border delivery is the whole point. A recipient sitting in India fails the test even if the money arrives in dollars.
- Place of supply is outside India. The service must be consumed abroad. Section 13 of the IGST Act decides this, and it is the condition most exporters get wrong (see the place-of-supply section below).
- Payment is in convertible foreign exchange, or in Indian rupees where the Reserve Bank of India (RBI) permits it. This is what ties the export to India's foreign exchange earnings, and it is why proof of realisation matters at refund time.
- Supplier and recipient are not the same legal person. They cannot be two branches of one company. This blocks firms from claiming export benefits on internal transfers between their own offices abroad.
Meet all five and the supply is an export: no GST on the invoice, and input tax is recoverable.
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Zero-rated supply and why exports are treated as inter-state
Two ideas sit underneath the whole regime.
Zero-rated supply (Section 16 of the IGST Act) means exports of both goods and services carry a nil tax rate while keeping input tax credit alive. That is the relief exporters actually feel.
Inter-state supply: under Section 7(5) of the IGST Act, exports are deemed inter-state supplies. That classification is what routes them through IGST rather than the CGST and SGST split, and it is why the refund mechanics below run on IGST.
How to claim your refund: LUT route vs IGST route
Zero-rated does not mean "do nothing." You choose one of two routes to recover input tax.
Route 1: Export under an LUT (Letter of Undertaking), no IGST paid.File an LUT on the GST portal and export without paying integrated tax up front. You then claim a refund of the
unutilised input tax credit (ITC), the tax you paid on inputs used to deliver the service. This route protects cash flow, because you never part with IGST in the first place. Most regular services exporters use it.
Route 2: Pay IGST, then claim it back.Pay IGST on the export, then file for a refund of the tax paid. You complete the refund by submitting the required documentation and filing
GSTR-1 and GSTR-3B. This route ties up cash until the refund lands, so it usually suits occasional or one-off exporters rather than high-volume ones.
Either way, the refund is filed through
Form GST RFD-01, and the government has streamlined the process to move faster than it used to.
Rule of thumb: steady, recurring service exports favour the LUT route for cash flow. Irregular exporters can live with the pay-and-reclaim route.
Place of supply rules under Section 13 of the IGST Act
Place of supply is the make-or-break condition, because it decides whether a service is genuinely consumed abroad. Section 13 sets different rules by service type.
- General rule, Section 13(2): for most services, place of supply is where the recipient is located. If the recipient is outside India, the service is an export. This covers consultancy, software development, and financial services, which is where most Indian services exports sit.
- Goods-related services, Section 13(3)(a): for work performed on physical goods (repair, maintenance), place of supply is where the goods are when the work happens. Goods in India means no export, even if the client is abroad.
- Individual-related services, Section 13(3)(b): for services tied to a person (personal care, medical, training), it is where the individual physically is during the service. Person outside India means export.
- Immovable property services, Section 13(4): for construction, real-estate consultancy, or property management, it follows the property's location. A property in India is a domestic supply regardless of where the client sits.
- Event-related services, Section 13(5): for cultural, artistic, educational, or sporting events, place of supply is where the event is held. Event abroad means export.
Section 13(8) covers specific cases taxed at the supplier's location. When your service is intangible and delivered to a foreign business, the general rule usually applies and the export stands.
Compliance and documentation you cannot skip
Zero-rated status is earned through paperwork, not assumed. The essentials:
- File an LUT on the GST portal to export without paying IGST up front.
- Keep export invoices and Form GST RFD-01 as the basis of the refund claim.
- Stay compliant with FEMA and the Foreign Trade Policy. Payment must arrive in convertible foreign exchange (or INR where RBI allows), and how you collect that payment is where a compliant cross-border setup earns its keep.
- Hit the refund filing deadlines. Late claims get rejected, and a rejected claim is real money left on the table.
- Hold a Bank Realisation Certificate (BRC) and an accountant's certification for refund claims above Rs. 2 lakh in a quarter. The BRC is your proof that the export payment was actually realised in foreign exchange; without realised payment, there is no valid refund.
The last point is where tax and payments meet. Your refund depends on proving the money came in, in foreign exchange, with documentation to match. A clean
Foreign Inward Remittance Advice (FIRA) or BRC is not a nice-to-have; it is the evidence the refund runs on.
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Get started →Deemed exports: when a domestic supply still counts
Some supplies delivered inside India are still treated as exports. In a
deemed export, the recipient is in India but is treated as an exporter for GST purposes. The main categories:
- Supplies against Advance Authorisation: supplies to a registered person under the Advance Authorisation scheme get export-equivalent treatment.
- Supplies to Export-Oriented Units (EOUs) or Technology Parks: goods or services supplied to EOUs or units in technology parks qualify.
- Supplies against EPCG Authorisation: capital goods supplied under the Export Promotion Capital Goods scheme, which lets exporters bring in capital goods at zero duty against an export obligation.
- Gold supplied by banks or PSUs under Advance Authorisation: treated as a deemed export to support gold-product exporters.
Common misconceptions about exporting services under GST
- "Foreign currency means it is automatically an export." It does not. Receiving dollars is necessary but not sufficient; all five conditions still have to hold.
- "Where I invoice from is what matters." No. Place of supply, under Section 13, is what decides export status, not where the invoice is raised.
- "Any overseas dealing qualifies." Only genuine third-party exports qualify. Supplies between branches of the same company are not exports under the distinct-persons rule.
Getting paid: the payment side of a services export
The tax rule ends where the payment begins. To keep your export zero-rated and your refund valid, the money has to arrive in convertible foreign exchange, and you need documentation that proves it. That is precisely the part many exporters underbuild.
PayGlocal is an RBI-authorised cross-border payments platform built for Indian businesses collecting from global clients. Export proceeds settle in INR to your bank account, and a
FIRA is issued automatically after settlement, so the realisation proof your GST refund depends on is generated for you rather than chased later. For a services exporter, that closes the loop between raising a zero-rated invoice and standing up a clean, refund-ready paper trail.
Conclusion
Export of services under GST is a strong position once you treat it as a checklist rather than a guess: qualify against the five conditions, pick the LUT or IGST refund route that suits your cash flow, get place of supply right under Section 13, and keep the realisation proof your refund needs. Handle those, and the zero-rated benefit works exactly as intended, no Indian tax on the invoice, input tax recovered, and a compliant trail behind it.
