# Export of Services Under GST: When Is a Foreign Client a GST Export?

**Category:** GST | **Published:** 2026-06-26 | **Last reviewed:** 2026-06-26 | **Author:** Mrs. Swapna Patel

An export of services under GST is defined by Section 2(6) of the IGST Act through five conditions: the supplier is in India, the recipient is outside India, the place of supply is outside India, payment is received in convertible foreign exchange (or in rupees where the RBI permits), and the two parties are not merely branches of the same entity. Meet all five and the supply is zero-rated under Section 16 of the IGST Act, which is not the same as a 0% or exempt supply. A zero-rated exporter keeps full input tax credit and recovers tax in one of two ways: supply under a Letter of Undertaking (LUT) without charging IGST, or pay IGST on the invoice and claim a refund. Miss even one condition (most often the foreign-exchange one) and the supply is taxed as a normal domestic service.

> **Myth:** Billing a foreign client means you simply charge 0% GST and forget about it.
>
> **Fact:** An export of services is zero-rated under [Section 16 of the IGST Act](https://www.indiacode.nic.in/handle/123456789/2367), not exempt; you must either file an LUT or pay IGST and claim a refund, and all five conditions of [Section 2(6)](https://www.indiacode.nic.in/handle/123456789/2367) must be met first.

## What counts as an export of services under GST?

> **Short answer:** A service is an export only if all five tests in [Section 2(6) of the IGST Act](https://www.indiacode.nic.in/handle/123456789/2367) are met: Indian supplier, recipient abroad, place of supply abroad, payment in convertible foreign exchange, and the parties are not the same entity.

- The supplier of the service is located in India.
- The recipient is located outside India.
- The place of supply is outside India (for most services, the recipient's location).
- Payment is received in convertible foreign exchange, or in Indian rupees where the [RBI permits it](https://www.rbi.org.in/) (for example, through a Vostro account).
- The supplier and recipient are not merely two establishments of one distinct person, so an Indian branch billing its own overseas head office does not qualify.

## Is an export of services taxed at 0%, or is it zero-rated?

> **Short answer:** It is zero-rated under [Section 16 of the IGST Act](https://www.indiacode.nic.in/handle/123456789/2367), which is different from a 0% or exempt supply: a zero-rated exporter keeps full input tax credit, while an exempt supplier loses it.

A nil-rated or exempt supply blocks the input tax credit on your purchases, so the GST you paid on software, rent, or equipment becomes a sunk cost. Zero-rating removes the tax on the output and still lets you recover the tax on the inputs, which is why the distinction decides real money. For the full split, see [exempt vs nil-rated vs zero-rated supply](/answers/exempt-vs-nil-rated-vs-zero-rated-supply-gst).

**[See where export sits among exempt, nil-rated and zero-rated supplies](https://hrareceipt.in/answers/exempt-vs-nil-rated-vs-zero-rated-supply-gst)**

## LUT or pay-and-refund: how do you invoice an export?

> **Short answer:** Two routes under [Section 16 IGST](https://www.indiacode.nic.in/handle/123456789/2367): file a Letter of Undertaking and invoice with no IGST, or charge IGST on the invoice and claim it back as a refund. Most service exporters choose the LUT route to avoid blocking cash.

| Route | What you charge | How you recover |
| --- | --- | --- |
| LUT (Letter of Undertaking) | Invoice with no IGST, carrying the LUT reference | Nothing to recover on output; you still claim a refund of unutilised input credit |
| Pay IGST and refund | Charge IGST on the export invoice | Claim a refund of the IGST paid, but the cash is locked until the refund clears |

*The two zero-rated export routes under [Section 16, IGST Act](https://www.indiacode.nic.in/handle/123456789/2367) and [Rule 96A, CGST Rules](https://cbic-gst.gov.in/pdf/CGST-Rules-Sept-2023.pdf). An LUT must be filed before the first export invoice of the financial year. See [what an LUT is and who needs one](/answers/what-is-lut-letter-of-undertaking-gst-export).*

**[Generate a clean export invoice with the LUT reference field](https://hrareceipt.in/pakka-bill)**

## What if the foreign client pays you in rupees?

> **Short answer:** Payment must arrive in convertible foreign exchange, or in rupees only through an [RBI-permitted](https://www.rbi.org.in/) channel such as a Vostro account; a plain rupee transfer from an Indian bank account breaks the Section 2(6) test and the supply is taxed as domestic.

- The foreign-exchange condition is the one freelancers most often fail, because a client routing rupees from inside India does not count.
- Why it matters: lose this condition and the service stops being an export, so you owe normal GST on it, not zero-rated treatment.
- Keep the bank remittance advice (FIRC or equivalent) as proof the proceeds came in as foreign exchange.
- A supply that looks like an export but fails a condition is not the same as [deemed exports](/answers/deemed-exports-gst-section-147), which is a separate category for goods supplied within India.

## Primary sources

- [Section 2(6), Integrated Goods and Services Tax Act 2017 (export of services) — India Code](https://www.indiacode.nic.in/handle/123456789/2367) — The five-condition statutory definition of export of services.
- [Section 16, IGST Act 2017 (zero-rated supply) — India Code](https://www.indiacode.nic.in/handle/123456789/2367) — Exports and SEZ supplies are zero-rated, with full input tax credit and two refund routes.
- [Rule 96A, Central Goods and Services Tax Rules 2017 (LUT / bond) — CBIC](https://cbic-gst.gov.in/pdf/CGST-Rules-Sept-2023.pdf) — Export without payment of IGST under a Letter of Undertaking.
- [RBI Master Direction on Export of Goods and Services — Reserve Bank of India](https://www.rbi.org.in/) — Receipt of export proceeds in convertible foreign exchange and permitted INR settlement.

## Related

- [Exempt vs nil-rated vs zero-rated supply: the ITC difference](https://hrareceipt.in/answers/exempt-vs-nil-rated-vs-zero-rated-supply-gst)
- [What is an LUT (Letter of Undertaking) for GST exports?](https://hrareceipt.in/answers/what-is-lut-letter-of-undertaking-gst-export)
- [GST tax invoice fields under Section 31 and Rule 46](https://hrareceipt.in/answers/gst-tax-invoice-fields-section-31-rule-46)

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*Source: [Export of Services Under GST: When Is a Foreign Client a GST Export?](https://hrareceipt.in/answers/export-of-services-gst-section-2-6-igst) — HRAReceipt.in*
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