GST on Services Exports from India: Step-by-Step

This guide explains how Goods and Services Tax (GST) applies when you export services from India. You’ll learn the key rules, how to claim zero-rated benefits, and the exact steps to follow to ensure your exports are treated correctly under GST law.

What You’ll Need

• Your GST registration number (GSTIN)
• Details of the service provided (description, value, recipient)
• Evidence of export (e.g., foreign inward remittance certificate, bank statement, contract)
• Access to the GST portal (gst.gov.in) for filing refunds
• Understanding of your service category (whether it qualifies as an export under GST)

Step-by-Step

1. Determine if your service qualifies as an export. Under GST, a service is considered an export if it meets all four conditions: (a) the supplier is located in India, (b) the recipient is located outside India, (c) the payment is received in convertible foreign exchange (or in Indian rupees where permitted by RBI), and (d) the supplier and recipient are not merely establishments of the same person (i.e., they are distinct persons, but the place of supply is outside India).
2. Identify the place of supply. For most services, the place of supply is the location of the recipient. If the recipient is outside India, the place of supply is outside India, which qualifies as an export. However, be careful with services like transportation or those related to goods—specific rules apply.
3. Choose the export mechanism: with payment of tax or without. You have two options:
   • Export with payment of IGST: You charge IGST on the invoice and later claim a refund of the IGST paid.
   • Export without payment of IGST (under bond or LUT): You file a Letter of Undertaking (LUT) and supply the service without charging IGST, then claim refund of any unutilized input tax credit (ITC).
4. If exporting with IGST: Issue a tax invoice with the IGST rate applicable to your service. The recipient’s address should be outside India. File your GSTR-1 and GSTR-3B as usual, declaring the export supplies.
5. If exporting without IGST (LUT): First, file a LUT on the GST portal (Form GST RFD-11). This is a one-time declaration for the financial year. Then, issue an invoice without charging IGST, mentioning that it is an export under LUT.
6. Receive payment in foreign currency. Ensure you receive the export consideration in convertible foreign exchange or in Indian rupees where permitted (e.g., for SEZ units). Keep proof of receipt (e.g., FIRC, bank statement).
7. File your GST returns. Report your export supplies in GSTR-1 (Table 6A for exports) and GSTR-3B (in the appropriate tables for zero-rated supplies).
8. Claim refund.
   • If you paid IGST: File a refund claim in Form GST RFD-01 on the portal, selecting ‘Refund of IGST paid on export of services’.
   • If you exported under LUT: File a refund claim in Form GST RFD-01 for ‘Refund of unutilized Input Tax Credit (ITC) on account of export of services’.
9. Track your refund. After filing, monitor the status on the GST portal. The refund is typically processed within 60 days, but delays can occur.

Common Mistakes

• Not filing LUT before exporting: If you export without IGST but haven’t filed LUT, it’s treated as a taxable supply and you may face interest and penalties.
• Incorrect place of supply: For some services (e.g., online information and database access), the place of supply is the location of the recipient, but for others (e.g., services related to goods), it may be where the goods are located. Getting this wrong can lead to treating an export as a domestic supply.
• Not receiving payment in foreign currency: If you receive payment in Indian rupees from a foreign recipient, it may not qualify as an export unless specifically permitted by RBI.
• Missing documentation: Without proper evidence of export (contract, invoice, payment receipt), your refund claim may be rejected.
• Using the wrong refund form: Filing for a refund of IGST when you exported under LUT (or vice versa) will cause delays or rejection.

Tips

• Always file your LUT well before your first export of the financial year—it’s valid for the entire year.
• Keep a digital and physical file of all export documents: contract, invoice, FIRC, bank statements, and proof of delivery of service.
• Reconcile your GSTR-1 and GSTR-3B data regularly to avoid mismatches that delay refunds.
• If you are unsure about the place of supply for a specific service, consult the GST Act or seek professional advice—getting it wrong is costly.
• For continuous services (e.g., software subscriptions), you may need to issue invoices periodically and treat each period as a separate export.

Troubleshooting

Refund claim rejected: If your refund is rejected, you will receive a notice. Check the reason—often it’s missing documents or a mismatch in data. You can file a fresh application after rectifying the issue.

Payment received after refund claim: Ensure you have received the payment before claiming a refund. If not, the claim will be rejected. Wait until the money is in your account.

LUT not accepted: If your LUT is rejected (e.g., due to previous defaults), you can reapply after addressing the issue. Alternatively, you can export with IGST and claim refund later.

Delay in refund: If your refund is delayed beyond 60 days, you can contact the GST helpdesk or file a grievance on the portal. Interest is payable on delayed refunds, but you must claim it.

Mismatch between GSTR-1 and GSTR-3B: If your export figures don’t match, the system will flag it. Correct the returns (if allowed) or explain the discrepancy to the officer.

Frequently Asked Questions

Q: Is GST applicable on export of services?
A: No, export of services is zero-rated. You can either pay IGST and claim a refund, or export under LUT without paying IGST and claim a refund of input tax credit.

Q: What is a Letter of Undertaking (LUT)?
A: A LUT is a declaration filed on the GST portal that you will comply with the conditions for zero-rated supply. It allows you to export services without paying IGST.

Q: Can I claim a refund of input tax credit if I export under LUT?
A: Yes, you can claim a refund of unutilized ITC attributable to the export of services, subject to the rules.

Q: What if I receive payment in Indian rupees from a foreign customer?
A: In most cases, export requires payment in convertible foreign exchange. However, RBI permits certain transactions in INR. Check if your case qualifies; otherwise, it may not be treated as an export.

Q: Do I need to file a separate refund application for each export?
A: No, you can file a single refund application for a period (e.g., monthly or quarterly) covering all exports during that period.

Q: What is the time limit for filing a refund claim?
A: You must file your refund claim within two years from the relevant date (usually the end of the financial year in which the export occurred).

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