Export of Services under GST in India

Last Updated on December 16, 2025

India depends heavily on the export of services, which are a major contributor to its economy, particularly from IT firms, consultants, freelancers, BPOs, and digital service providers. Export services are subject to several advantages under the Goods and Services Tax (GST) regime, such as zero-rated tax, the possibility of refunds, and easier compliance. This blog explains all you need to know about the export of services under GST in India, including the meaning, conditions, tax advantages, process, documentation, and refund guidelines.

Meaning of Export of Services Under GST

GST refers to the export of services, as the supply of services where:

• The service provider is situated in India.
• The receiver will be outside of India.
• The location of supply is not within India.
• It is paid either in foreign exchange that is convertible or in Indian rupees that have been allowed by the RBI.
• The supplier and the recipient are not just the institutions of the same individual.

When all these have been fulfilled, a service is considered an export. On becoming an export, the service is zero-rated, i.e., no GST is paid on the outward supply.

Why is the Export of Services Significant under GST?

1. Zero-Rated Supply Advantage

Section 16 of the IGST Act considers the export of services to be zero-rated. This means:

• No GST is payable
• Businesses are entitled to an input tax credit (ITC) refund.
• The blockage in working capital is lessened.

2. Boosts International Trade

GST system is beneficial to service exporters in that they are guaranteed quicker refunds and simplified paperwork to convince the companies to venture internationally.

3. Favours IT, Consulting and Digital

The GST export incentives in India are very beneficial in the IT, BPO, marketing, design and consulting industries and have made the industry competitive.

Conditions for Export of Services under GST

Make sure that the following conditions are satisfied before asserting the benefits of exports:

• The supplier is located in India
• The recipient is not based in India.
• Location of supply is outside India.
• The payment is made using authorized foreign currency.
• The service recipient and the service provider should be independent.

GST benefits might not be applicable if any condition is not met.

Taxability of Export of Services under GST

Export of services under the GST law is never exempt from zero rating. The difference is important:

• Zero-rated supply: No taxation, and an ITC refund is allowed.
• Exempt supply: No taxes, but ITC refund is not allowed.

This makes it more profitable to export the services, as you are able to reclaim the input tax refunds.

Methods of Export Services under GST

Service exporters of business affiliates may adopt either of the two following exporter options:

1. Export With Payment of IGST

• IGST is imposed on invoices by the exporter.
• Remits the IGST to the government.
• Claims a refund of the tax paid later.

The approach is favoured where the exporters would obtain faster refunds.

2. Export (IGST not paid) (Under LUT/Bond)

• Export is done without GST charges.
• Exporter shall provide a Letter of Undertaking (LUT) on the GST portal.
• LUT is applicable in a single financial year.

LUT is favoured by the majority of exporters as it will lessen initial tax payment and enhance the working capital.

How to Apply for LUT in Order to Export Services?

• Log in to the GST portal
• Go to Services – User Services – Furnish LUT.
• Enter the necessary data.
• Provide the necessary documents.
• Submit with DSC/EVC
• Acquire approved LUT records.

In the absence of an approved LUT, the exporter will be subjected to IGST on the export invoices.

Documents Needed to Export Services

Correct documentation aids in frequent compliance with GST and quicker reimbursements.

• Issuance of an invoice to a foreign client.
• LUT/Bond copy (where exporting without paying taxes)
• FIRC/BRC (Foreign Inward Remittance Certificate)
• Agreement or purchase order
• Export service delivery proofs or reports.
• GST returns (GSTR-1 and GSTR-3B)

The possession of such documents prevents the rejection of refunds or compliance notices.

Refund Process of Export of Services under GST

Exporters are entitled to a refund of:

• IGST paid on export
• ITC not used (where exporting is LUT)

Steps for refund claim:

• Properly file GSTR-1 and GSTR-3B.
• You can use the apply to refund on the GST portal in the category of Refund of ITC on export.
• Provide supporting documents.
• Refund is handled by the GST officer.
• Upon verification, the amount has been credited to the bank account.

Submission of returns on time helps avoid delays in refunds.

Place of Supply Rules for Export of Services

It is vital to establish the location of supply. Under the GST law:

• In most cases, the location of the service recipient is the place of supply.
• In some services, such as performance-based services or property-related services, there are special rules.

Place-of-supply rules should be considered by exporters to eliminate mistakes in classification.

Common Mistakes to Avoid While Exporting Services

• Incorrect Place of Supply: The statement that India is the place of supply might invalidate the service as an export.
• Failure to receive payment in the foreign exchange: Failure to receive payment within the payment timelines under the RBI can render the supply taxable.
• Wrong or missing LUT: Exportation of goods without a proper LUT may result in liability to IGST.
• Mismatch in GST returns: Refund delays are usually attributed to a mismatch between GSTR-1 and GSTR-3B.
• Incomplete documentation: The absence of FIRC/BRC may lead to export benefits denial.

Advantages of Export Services Under GST

• Zero tax liability
• ITC refund helps cash flow
• Improves competitiveness in the international market.
• Promotes exports of digital services such as IT, BPO, SaaS, design and consultancy.
• Promotes simplicity of doing business.

Such incentives ensure that India is a good destination for service exporters.

Conclusion

Export of services offers many advantages to Indian businesses, such as refundable input tax, zero-rated supply, and easy compliance. By understanding the terms and conditions, documentation and refund procedures, and GST regulations, exporters will be able to run their operations and reap all the benefits. As a freelancer, IT firm, consultant, or service provider serving international customers, effective GST compliance is key to long-term success.