Export of Services Under GST
LUT, Zero-Rating, Invoices and Place of Supply
No GST is payable on a genuine export of services: it is a zero-rated supply under section 16 of the IGST Act. You either export under a Letter of Undertaking without paying IGST, or pay IGST and claim a refund. The supply must meet all five conditions in section 2(6) of the IGST Act, as published by CBIC.
Key points
Exports of services are zero-rated, not exempt, so you keep your input tax credit. This matters for any Indian company expanding to Dubai that keeps delivery in India.
All five conditions in section 2(6) must be met, including a recipient and place of supply outside India and payment in convertible foreign exchange (or rupees where RBI permits).
Most exporters file a Letter of Undertaking (Form GST RFD-11) each financial year and claim refunds of unused credit.
From 30 March 2026, the Finance Act, 2026 omitted section 13(8)(b), so intermediary services to overseas clients are no longer automatically treated as supplied in India.
Moving invoicing to a Dubai or UK company changes who exports to whom, and needs transfer pricing and permanent establishment thinking.
For an Indian services business growing in the GCC or the UK, GST on exports is usually the first operational question: how should the Indian company invoice foreign clients, or its own overseas subsidiary? This guide sets out the rules and the traps.
Is GST applicable on export of services?
GST is not charged on a qualifying export of services. Section 16 of the IGST Act treats exports as zero-rated supplies, which means the effective rate is nil but, unlike an exempt supply, you can still claim input tax credit on the costs of making it. Section 16(2) expressly allows that credit.
Three practical points sit behind that answer:
Exempt and zero-rated are different. If export of services were exempt, you would lose credit on rent, software and professional fees. Zero-rating protects it.
Registration. An export is an inter-State supply under the IGST Act. A supplier of services whose aggregate turnover (including exports) does not exceed ₹20 lakh in a financial year is exempt from registration under Notification No. 10/2017-Integrated Tax (₹10 lakh in certain special category States). Above that, you register, and you need registration to file an LUT or claim refunds.
B2B or B2C. The export test does not depend on whether the overseas customer is a business or an individual. It depends on where the recipient is located, where the place of supply is and how you are paid. Some services, such as those needing the customer's physical presence, have their own place of supply rules.
Services are classified using SAC codes under Chapter 99 of the HSN. Taxpayers with aggregate annual turnover above ₹5 Cr show at least six digits on invoices and others at least four, under Notification No. 78/2020-Central Tax.
The five conditions for a supply to count as an export of services
A supply of services is an export only if every one of the five conditions in section 2(6) of the IGST Act is met. Missing one makes it a domestic taxable supply.
Condition | What to check |
|---|---|
1. The supplier is located in India | Your registered place of business or fixed establishment supplying the service is in India. |
2. The recipient is located outside India | The contracting customer's business establishment or fixed establishment receiving the service is outside India. |
3. The place of supply is outside India | Under section 13 of the IGST Act. The default is the recipient's location, but there are exceptions. |
4. Payment is received in convertible foreign exchange, or in Indian rupees wherever permitted by RBI | Keep bank evidence of the inward remittance against each invoice. |
5. Supplier and recipient are not merely establishments of a distinct person | Services from an Indian company to its own overseas branch fail this test; services to a separately incorporated overseas subsidiary or parent do not. |
Place of supply is where most disputes start. Section 13(2) sets the default as the location of the recipient, but several categories follow different rules:
services on goods that the customer must make physically available, and services requiring the customer's physical presence, are supplied where they are performed (section 13(3));
services relating to immovable property follow the property's location (section 13(4));
event services follow the location of the event (section 13(5));
banking services to account holders and short-term hire of transport follow the supplier's location (section 13(8)).
Example: a Pune testing lab that tests a German client's components shipped to India is generally supplying in India under section 13(3), even though the client is abroad. Its fee is not an export, though there is a specific carve-out for goods temporarily imported only for repair or treatment and then re-exported.
Condition (v) and group companies. CBIC Circular No. 161/17/2021-GST clarified that an Indian company and a foreign company are separate persons. Services by an Indian subsidiary to its foreign parent or group company can therefore qualify as exports, while services by an Indian office to its own branch abroad cannot.
Exporting under LUT vs paying IGST and claiming a refund
Most service exporters use a Letter of Undertaking because it avoids paying tax upfront. The IGST route is also available for services but locks up cash until the refund arrives.
Under LUT (no IGST paid) | On payment of IGST | |
|---|---|---|
Legal basis | Section 16(3) IGST Act; Rule 96A CGST Rules | Section 16(4) IGST Act; Notification No. 01/2023-Integrated Tax |
Upfront tax | None | IGST paid, usually from input tax credit |
Refund | Unutilised input tax credit, claimed in Form GST RFD-01 | IGST paid, claimed in Form GST RFD-01 |
Main risk | Tax and interest become payable if payment is not received in time | Working capital tied up until refund |
Typical user | Most service exporters | Exporters with large accumulated credit who prefer this refund route |
How the LUT works. You file Form GST RFD-11 on the GST portal before exporting. Under Notification No. 37/2017-Central Tax, all registered persons can use an LUT except those prosecuted for tax evasion above ₹250 lakh.
The LUT is valid for the whole financial year in which it is filed, so it must be renewed each April. CBIC's LUT circular says it should be accepted within three working days, failing which it is deemed accepted.
The payment deadline. Under Rule 96A (as amended in July 2024), if you do not receive payment within one year of the invoice, or within the period allowed under FEMA including any RBI extension, whichever is later, you must pay the IGST with interest within 15 days after that period. RBI extended the general realisation period for export proceeds, including services, to 15 months in November 2025. If you do not pay, the LUT facility is withdrawn until you do.
Refunds. Refund of unutilised credit is claimed in Form GST RFD-01 within two years of the relevant date, using the formula in Rule 89(4) of the CGST Rules. For services, the relevant date is generally the date payment is received, or the invoice date where payment came in advance.
Since 1 October 2023, the right to export on payment of IGST applies only to notified classes. Notification No. 01/2023-Integrated Tax allows it for exports of services and most goods, excluding specified goods such as tobacco products.
Invoice format and the declarations required
An export invoice follows Rule 46 of the CGST Rules, with three export-specific changes.
Endorsement. The invoice must carry either "SUPPLY MEANT FOR EXPORT UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF INTEGRATED TAX" or "SUPPLY MEANT FOR EXPORT ON PAYMENT OF INTEGRATED TAX", as applicable. CBIC's current text of Rule 46 combines this with SEZ supplies in one longer wording.
Recipient details. In place of the usual recipient GSTIN details, show the recipient's name and address, the address of delivery and the name of the country of destination.
Standard fields. Invoice number and date, your GSTIN, SAC code, description, taxable value, the IGST rate and amount (nil under LUT), and place of supply.
Practical points:
Issue the invoice within 30 days of completing the service, as for domestic services.
If your aggregate turnover is above ₹5 Cr, export invoices must be reported through the e-invoice system under Notification No. 10/2023-Central Tax.
Report exports in Table 6A of GSTR-1 and keep the bank advice or e-BRC for every receipt.
The contract, invoice and bank receipt should name the same overseas entity. Mismatches are the most common reason refunds are questioned.
Intermediary services: the common trap for agencies and consultants
Until 30 March 2026, intermediaries could not export services under GST. Section 13(8)(b) deemed their place of supply to be the supplier's location in India, so commission and facilitation fees from overseas principals were taxed as domestic supplies.
An "intermediary" under section 2(13) is a broker, agent or other person who arranges or facilitates supplies between two or more persons, but not someone who supplies on its own account. A sourcing agent finding Indian manufacturers for a UK retailer, or a consultant introducing GCC buyers to Indian sellers for a success fee, was the classic case.
CBIC's Circular No. 159/15/2021-GST set out the tests: three parties, two distinct supplies, and the intermediary arranging rather than supplying the main service.
What changed. Section 157 of the Finance Act, 2026, dated 30 March 2026, omitted section 13(8)(b), as CBIC's current text of the IGST Act records. Intermediary services now fall under the default rule in section 13(2): place of supply is the recipient's location. An Indian intermediary serving an overseas client can therefore treat its services as exports if all five conditions are met.
Three cautions:
Past periods. Supplies before the change remain under the old rule, and pending disputes are not automatically resolved.
Imports. The reverse also applies. An Indian business paying a foreign intermediary now has a place of supply in India and should consider reverse charge IGST.
The other conditions still apply. Payment in foreign exchange and a genuine overseas recipient remain essential.
What changes when your Dubai or UK company invoices the client
When an overseas group company invoices the client, the Indian company's export becomes a service to its own group company, and the questions move from GST to transfer pricing and permanent establishment.
In a typical India Delivery, Dubai Front Office model, the UAE subsidiary contracts with GCC clients and the Indian company provides delivery services to the UAE subsidiary. GST-wise, the Indian company's invoice to its UAE subsidiary can be an export: the subsidiary is a separate person under Circular No. 161/17/2021-GST, located outside India, and pays in foreign currency.
But four things change:
Pricing. The price India charges the UAE company must be arm's length under India's transfer pricing rules, now in the Income-tax Act, 2025 from 1 April 2026. GST zero-rating does not protect an under-priced fee.
Who the supplier really is. If Indian staff deal directly with clients, sign scopes and manage delivery while Dubai only invoices, tax authorities may look through the contracts. We cover this risk in what happens when a Dubai company invoices clients while the team is in India.
Indian clients. If the Dubai or UK company invoices an Indian client, that client is importing services and generally pays IGST under reverse charge.
Treaty and PE. Indian employees working for the overseas company, or founders managing it from India, can create a permanent establishment or residence question. The India UAE DTAA and the India-UK treaty decide how business profits are then taxed.
On the UAE side, the subsidiary has its own corporate tax and VAT position; on the UK side, its own corporation tax and VAT. None of these is settled by the Indian GST invoice.
The Greenwolf view
GST on exports is mechanical once the operating model is right. Getting the model right is the work. Commercial design first; tax follows functions, risks and substance.
The questions we ask before anyone changes an invoice:
Who is the customer's contracting party, and why? Does the client need a local entity, or would an Indian export invoice work?
What does each entity actually do? Sales, account management, delivery, IP and risk each point to where profit belongs.
Is the overseas entity a branch or a subsidiary? The answer decides condition (v).
Is any part of the business an intermediary? Post-March 2026 that may now be an export, but only if the paperwork and payment trail say so.
How does cash flow? LUT, payment within the realisation period and refunds should be planned with the intercompany pricing, not after it.
Planning a move?
Planning a move? Read the corridor guide: expanding an Indian services business to Dubai. Follow Greenwolf Advisors on LinkedIn for the rest of the #GoGlobalWithGreenwolf series.
This article is general information, not advice for a specific case.
Author – Team Greenwolf
10 October, 2026 | 13 Min Read
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