Last reviewed: 28 July 2026. If you invoice clients outside India — software, SaaS, design, consulting, marketing, staffing, back-office or professional services — GST law treats you differently from a domestic supplier, and mostly in your favour. Exports of services are zero-rated: done correctly, you charge no GST to the foreign client and still recover the GST you paid on your own costs. Done incorrectly, the same contract can produce an 18% demand with interest. This guide covers the current framework, including the two changes exporters must absorb in FY 2026-27: the risk-based 90% provisional refund regime and the omission of Section 13(8)(b), which finally opens the export door for intermediaries.
What legally counts as an export of services
Zero-rating is available only if the supply meets all five conditions of Section 2(6) of the IGST Act. Miss any one and the supply is taxable like a domestic service, usually at 18%. Test every foreign contract against this table:
| # | Condition | What proves it |
|---|---|---|
| 1 | Supplier is located in India | Your GST registration and place of business |
| 2 | Recipient is located outside India | Contract, client master, foreign address and tax IDs |
| 3 | Place of supply is outside India (Section 13, IGST Act) | Default rule: recipient’s location. Watch the exceptions — services tied to immovable property or events in India, and performance-based services, stay taxable here |
| 4 | Payment received in convertible foreign exchange (or INR where RBI permits) | FIRC / bank realisation advice for every invoice |
| 5 | Supplier and recipient are not merely establishments of the same person (Explanation 1, Section 8) | Billing your own foreign branch fails this test; an independent foreign group company can pass it |
Condition 4 is where working exporters slip most often: the law zero-rates the supply, but the proof is banking paperwork. Reconcile FIRCs against export invoices every quarter, not at refund time.
Zero-rating: choose one of two routes
| Particulars | Route 1 — LUT (without payment of tax) | Route 2 — Pay IGST, then refund |
|---|---|---|
| Mechanism | Furnish a Letter of Undertaking in Form RFD-11; invoice without IGST | Charge and pay IGST on the export invoice; claim it back |
| Refund claimed | Unutilised input tax credit, per the Rule 89(4) formula | The IGST actually paid on the export invoice |
| How claimed (services) | Form RFD-01 on the GST portal | Form RFD-01 on the GST portal (unlike goods, there is no automatic shipping-bill route) |
| Cash-flow impact | No tax outflow at all — preferred by most service exporters | Tax funded from working capital until the refund arrives |
| Typical fit | Ongoing exporters with steady input credits | Occasional exports, or where accumulated ITC is small |
The LUT: small form, expensive to forget
- Who can file: any registered person, unless prosecuted for tax evasion exceeding Rs 2.5 crore (Notification No. 37/2017-Central Tax).
- When: before the first export invoice of the financial year. Each LUT covers one FY, so a fresh RFD-11 was due for FY 2026-27 before invoicing from 1 April 2026 — mid-year registrants file at the time they start exporting.
- The one-year rule (Rule 96A): if payment for services exported under LUT is not received in convertible foreign exchange (or permitted INR) within one year from the invoice date or such further period as the Commissioner allows, the IGST becomes payable with interest. Track ageing of export receivables the way you track debtors.
- Realisation and refunds (Rule 96B): refunds already taken are recoverable proportionately if export proceeds are not realised within the period allowed under FEMA (ordinarily nine months), with re-credit possible on later realisation.
Refund of unutilised ITC under LUT: the Rule 89(4) formula
Refund = (Turnover of zero-rated supply of services ÷ Adjusted Total Turnover) × Net ITC, where Net ITC means credit on inputs and input services only — capital goods credit is outside the formula. The claim must be filed within two years of the relevant date, which for services is the date of receipt of convertible foreign exchange (or the invoice date, where payment was received in advance).
Worked example. A Thane SaaS exporter’s April–June 2026 quarter: export turnover under LUT Rs 40,00,000; domestic taxable turnover Rs 10,00,000; ITC on inputs and input services Rs 2,70,000.
| Step | Computation | Amount |
|---|---|---|
| Adjusted total turnover | 40,00,000 + 10,00,000 | Rs 50,00,000 |
| Eligible refund | 2,70,000 × 40,00,000 ÷ 50,00,000 | Rs 2,16,000 |
| Provisional sanction (low-risk claim) | 90% of 2,16,000 | Rs 1,94,400 |
| Balance on final scrutiny | 2,16,000 − 1,94,400 | Rs 21,600 |
With ITC now flowing through the Invoice Management System and hard-locked GSTR-3B figures, refund claims are only as clean as your IMS discipline — see our guide to GST IMS and GSTR-3B ITC hard-locking from July 2026.
90% provisional refunds: how the 2025-26 regime works
For refund applications filed on or after 1 October 2025, CBIC Instruction No. 06/2025-GST (3 October 2025) operationalised risk-based provisional sanction for zero-rated claims: applications the system scores as low-risk are sanctioned 90% provisionally, with the balance after detailed scrutiny; high-risk claims skip the provisional step and go straight to scrutiny. Prior show-cause notices, pending adjudication or appeals on earlier refunds can keep a claim out of the fast lane. The statutory 60-day outer limit for final sanction, and interest at 6% per annum beyond it, continue to apply.
Intermediaries: the Section 13(8)(b) omission, w.e.f. 30 March 2026
Until this year, an Indian “intermediary” — a broker or agent who arranges a supply between a foreign principal and its customers without supplying on own account — was denied export status: Section 13(8)(b) fixed the place of supply at the supplier’s location, so the commission suffered 18% GST even when billed to a foreign principal in dollars. The Finance Act, 2026 omitted Section 13(8)(b) with effect from 30 March 2026. Intermediary services now follow the default rule in Section 13(2): place of supply is the recipient’s location.
| Particulars | Supplies up to 29 Mar 2026 | Supplies from 30 Mar 2026 |
|---|---|---|
| Place of supply of intermediary service to foreign principal | India (supplier’s location) | Recipient’s location outside India |
| GST on commission billed to foreign principal | Taxable, generally 18% | Zero-rated export, if all Section 2(6) conditions met |
| LUT and FIRC discipline | Not relevant | Mandatory — same as any other service exporter |
What it means in money: a recruitment or sourcing agency earning Rs 60,00,000 a year in commission from a US principal was absorbing roughly Rs 10,80,000 of GST annually where the foreign client refused to bear it. For supplies from 30 March 2026, that levy drops away under LUT — provided payment lands in convertible foreign exchange and the agency files its LUT and reports the exports correctly. Two cautions: the omission has no saving clause, so positions for past periods and pending demands need case-by-case handling; and contracts should be reviewed so that invoicing, recipient identity and FX flows actually match the export conditions being claimed.
Exporter’s GST compliance rhythm
| When | Action |
|---|---|
| Before first export invoice of the FY | File LUT in RFD-11; keep the ARN on record |
| Every invoice | Raise a GST-compliant export invoice (no tax under LUT); mention “Supply meant for export under LUT without payment of IGST” |
| Monthly / quarterly | Report exports in GSTR-1 Table 6A and in GSTR-3B row 3.1(b); act on IMS before 3B locks |
| Quarterly | Reconcile FIRCs to export invoices; chase receivables approaching the Rule 96A one-year mark |
| Periodically | File RFD-01 refund claims — align periods, keep the 2-year window in sight |
| Annually | Renew LUT before 1 April; review foreign contracts, especially intermediary arrangements post 30-3-2026 |
Common mistakes we see in exporter files
- Charging 18% GST to foreign clients “to be safe” — it inflates your price and the tax is often irrecoverable from the client later.
- Exporting in April–May with the previous year’s LUT — each LUT dies on 31 March.
- Treating services to their own foreign branch as exports — Explanation 1 to Section 8 defeats the claim.
- No FIRC trail: payments routed through aggregators or wallets without export-linked realisation advice, weakening condition 4 at refund stage.
- Claiming capital goods credit inside a Rule 89(4) refund — the formula excludes it, and the excess invites a deficiency memo or worse.
- Missing the two-year refund window for early periods while waiting to “accumulate a bigger claim”.
- Assuming all foreign-billed work is export — performance-based services, India-located property or event services, and pre-30-March-2026 intermediary supplies follow different place-of-supply rules.
Frequently asked questions
Is GST registration mandatory to export services from India?
Not always. Export of services is an inter-State supply, but Notification No. 10/2017-Integrated Tax exempts pure service providers from compulsory registration until aggregate turnover crosses Rs 20 lakh (Rs 10 lakh in special category states). However, you must be registered to file an LUT or claim any refund, so most serious exporters register voluntarily even below the threshold.
What happens if I export services without filing an LUT?
Technically the export becomes liable to IGST because neither route was followed. In practice, departments have generally allowed exporters to regularise by filing the LUT belatedly, treating the lapse as procedural where all Section 2(6) conditions are met, but this is at the officer’s discretion and can invite scrutiny and interest exposure. File the LUT before the first export invoice of each financial year rather than relying on regularisation.
Can export payments be received in Indian rupees?
Yes, where RBI permits. Payments received in INR through Special Rupee Vostro Accounts (SRVA) count as fulfilling the export condition, as clarified by Circular No. 202/14/2023-GST, and specific arrangements exist for Nepal and Bhutan. Keep the bank’s FIRC or equivalent advice on file as proof for every receipt.
Are services to my own foreign branch treated as exports?
No. Under Explanation 1 to Section 8 of the IGST Act, an Indian head office and its foreign branch are establishments of the same person, so supplies between them fail the Section 2(6) definition and are not zero-rated. Services to an independent foreign group company can qualify, subject to the other conditions.
How long does a GST refund for exporters take in 2026?
For refund claims filed on or after 1 October 2025, low-risk claims receive 90% of the amount on a provisional basis shortly after acknowledgement under the risk-based mechanism in CBIC Instruction No. 06/2025-GST, with the balance after scrutiny. The statutory outer limit for final sanction remains 60 days from a complete application, beyond which interest at 6% per annum applies. Claims flagged as high-risk go through detailed scrutiny instead, so timelines vary case to case.
Do commission agents and intermediaries now qualify as exporters?
For supplies made on or after 30 March 2026, yes — the Finance Act, 2026 omitted Section 13(8)(b) of the IGST Act, so the place of supply of intermediary services follows the default rule of the recipient’s location. A commission agent billing a foreign principal and receiving convertible foreign exchange can now treat the service as a zero-rated export if all Section 2(6) conditions are met. Supplies made before 30 March 2026 remain governed by the earlier provision.
Somesh Chandak & Associates, Thane, assists service exporters, SaaS companies, freelancers and agencies with LUT filing, export invoicing, FIRC reconciliation, RFD-01 refund claims and post-2026 intermediary positions.
Exporter LUT & Refund Support GST Services Talk to usThis article is for general information for FY 2026-27 and is not professional advice. Positions on place of supply, intermediary status and refunds are fact-specific; legal provisions cited stand as on 28 July 2026 and may change. Please consult your advisor before acting.