Export of Services Under GST: Conditions, LUT and Foreign Exchange Realisation

Whether a service qualifies as an export decides whether GST applies at all. Many Indian service businesses work for foreign clients, but not every such service is an export under GST. This guide explains the conditions.

The Five Conditions

Under the IGST Act, a supply of services is an export only if:

1. The supplier is located in India.
2. The recipient is located outside India.
3. The place of supply is outside India.
4. The payment is received in convertible foreign exchange, or in Indian rupees where permitted by the RBI.
5. The supplier and recipient aren't merely establishments of the same person — for example, an Indian branch and its foreign head office.

Place of Supply

For most services, the place of supply is the location of the recipient, so a service to a client abroad has its place of supply outside India. But some services have specific rules — for example, services on goods physically present in India, services related to immovable property, and certain events — where the place of supply can be in India even for a foreign client.

Intermediary Services

An intermediary — someone who arranges or facilitates supplies between other parties, rather than supplying on their own account — generally has the place of supply at the intermediary's location. That means intermediary services to foreign clients can be taxable in India. Whether a business is an intermediary depends closely on its contracts and role.

Foreign Exchange Realisation

Payment must actually be received in convertible foreign exchange, or in rupees where the RBI permits. Keep foreign inward remittance certificates or bank advices for every export invoice — they're needed for refunds and to prove export status.

Subsidiaries of Foreign Companies

An Indian subsidiary providing services to its foreign parent is a separate legal entity, not merely an establishment of the parent, so its services can qualify as exports if the other conditions are met.

LUT

To export services without charging IGST, file an LUT for each financial year before exporting.

Getting Help

Think Filing reviews service contracts for export status, files LUTs, and handles refund claims for service exporters.