Yes, an Indian IT freelancer or company can export services to a foreign client without charging GST on the invoice, but only when every condition in section 2(6) of the IGST Act is satisfied. The supplier must be in India, the customer must be outside India, the place of supply must be outside India, payment must arrive in convertible foreign exchange or in Indian rupees where Reserve Bank of India (RBI) rules permit, and the parties cannot merely be establishments of the same person. A qualifying export is zero-rated, which gives the supplier a choice: pay IGST and seek a refund, or file a Letter of Undertaking (LUT), invoice without IGST and seek a refund of eligible input tax credit.
Registration, place-of-supply analysis, intermediary classification, payment evidence and invoice wording determine whether that treatment survives a refund review. The rules apply to a sole proprietor, individual freelancer, partnership or company according to the legal person that actually signs the contract and keeps the records.
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What makes an IT service an export from India?
GST export treatment is a statutory test, not a label that can be added because a client has a foreign address. A supply of software development, implementation, maintenance, technical support, cloud-related work or other information-technology-enabled service can qualify only when all of these conditions are met:
- Supplier in India: The freelancer, partnership or company making the supply is located in India.
- Recipient outside India: The contractual customer is located outside India.
- Place of supply outside India: The applicable cross-border place-of-supply rule points outside India.
- Payment received: Consideration is received in convertible foreign exchange, or in INR where the RBI permits that route.
- Not establishments of the same person: The Indian supplier and the overseas recipient are not merely establishments of one legal person.
Failing any one condition can remove zero-rating. A foreign-incorporated group company is therefore not automatically an unrelated foreign recipient; examine the legal entities, contract and actual establishment receiving the service.
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Supplies to a unit or developer in a Special Economic Zone (SEZ) are also zero-rated when the statutory requirements for that supply are met. Zero-rated does not mean exempt. It preserves the right to use input-tax credit and claim a refund through one of the permitted routes.
Do you need GST registration?
CBIC’s GST FAQ states that registration is needed to claim refunds on exports because exports are zero-rated. The general aggregate-turnover threshold is above ₹20 lakh on a PAN basis, subject to section 24 exceptions and applicable state rules. The threshold is a starting check rather than a safe exemption: taxable inter-State supplies, refund claims or another compulsory-registration category can create a liability even when turnover is below the general figure.
When liability arises, a registration application is generally due within 30 days. A registered freelancer receives a GSTIN that must be used consistently on export invoices, returns and refund applications. A company must use the GSTIN of the legal entity that contracted for and supplied the work; using a director’s or another group’s GSTIN breaks the documentary chain.
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| Issue | Individual freelancer | Company |
|---|---|---|
| Supplier identity | The proprietor or individual named in the contract and GST registration | The incorporated legal entity named in the contract, GST registration and books |
| Export test | All section 2(6) conditions must be satisfied | The same section 2(6) conditions apply |
| Records | Contract, invoices, client-establishment evidence, bank realization and input-tax documents | The same records, maintained in the company’s accounting and statutory systems |
| Refund route | LUT without IGST or payment of IGST followed by refund | LUT without IGST or payment of IGST followed by refund |
The legal form does not make a supply an export. The contracted service, recipient establishment, place of supply, payment route and evidence do.
Place of supply: the point most contracts overlook
For a cross-border service, the statutory default is generally the location of the recipient. Section 13 of the IGST Act contains exceptions, so an IT provider should document which customer establishment actually receives and uses the service and why the chosen rule applies.
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Evidence to retain
- The signed master-services agreement, statement of work and change orders.
- The overseas customer’s legal name, registered address, tax or company number where available, and the establishment identified in the contract.
- Tickets, acceptance records, deployment notes or other material showing delivery to that establishment.
- A written place-of-supply analysis for any section 13 exception that could point to India.
A foreign billing address alone is weak evidence if the work is ordered, controlled or received by an Indian establishment. Resolve that fact before issuing invoices rather than relying on a refund officer to infer it later.
When is an IT provider an intermediary?
Circular 107/26/2019 makes intermediary status fact-dependent. The key question is whether the provider supplies its own principal service or arranges or facilitates another person’s supply.
Own-service model
A developer that writes and delivers its own software, an implementation team configuring a customer’s system, or a support provider performing contracted technical work is not automatically an intermediary. Such an ITeS supplier can claim export treatment when the section 2(6) conditions are met.
Arrangement or facilitation model
A business that brings a customer and another supplier together, negotiates or coordinates the other supplier’s supply, and earns a fee for that facilitation may be an intermediary. The contract, deliverables, control over the underlying service and fee structure matter. Do not describe a brokerage or agent activity as “software development” merely to obtain zero-rating.
If the classification is disputed, obtain professional advice before selecting the invoice and refund route. An intermediary finding can change the place-of-supply result and the GST payable.
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Zero-rated options: LUT or pay IGST?
For a qualifying export, choose one of two paths. Both require registration where applicable, accurate returns and evidence of the export.
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|---|---|---|---|
| LUT or bond | No IGST charged on the export invoice | Refund of eligible unutilized input tax credit | File the LUT for the financial year and preserve its acknowledgement |
| Pay IGST | Charge and pay IGST on the export invoice | Refund of the IGST paid, subject to the refund process | Reconcile invoice values, payment and return data before claiming |
Zero-rating gives a credit and refund entitlement; it is not an exemption that permanently blocks credit. Select one route for each supply based on cash flow, available input credit and the business’s ability to complete reconciliations.
How to file an LUT and issue the invoice
- Confirm registration and the export test. Verify the supplier’s GSTIN, recipient establishment, section 13 place-of-supply rule, payment method and non-intermediary position.
- File the LUT for the financial year. On the GST Portal, go to
Services > User Services > Furnish Letter of Undertaking (LUT)and submit Form GST RFD-11. Save the acknowledgement with the year’s export file. - Choose the correct endorsement. For the LUT route, put this wording on the invoice: “SUPPLY MEANT FOR EXPORT UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF IGST”. If paying IGST instead, use: “SUPPLY MEANT FOR EXPORT ON PAYMENT OF IGST”.
- Include complete invoice particulars. Show the supplier’s legal name, address and GSTIN; a sequential invoice number and date; the foreign customer’s legal name and address; description and value of each service; currency and payment terms; place of supply; and the selected export endorsement.
- Report the transaction. Enter export invoices in the applicable GST returns, using the export and payment fields required by the current GST Portal forms.
- Apply for the refund. Use the relevant refund application for the IGST-paid route or the eligible input-tax-credit route, and reconcile the claim with invoices and returns before submission.
Portal labels and validation rules can change. Check the live GST Portal instructions when filing rather than relying on an old screenshot or a prior year’s workflow.
Payment in foreign currency or INR
The export condition permits payment in convertible foreign exchange. INR can also satisfy the condition when the payment route is permitted under RBI rules. Circular 88/07/2019 records that LUT acceptance for supplies outside India or to an SEZ may be allowed where payment is in INR or convertible foreign exchange, provided the arrangement is consistent with RBI requirements.
Do not treat every INR receipt as acceptable, or every INR receipt as disqualifying. Identify the RBI permission that covers the transaction, keep the bank advice and realization evidence, and match the receipt to the invoice and contract. Services to Nepal or Bhutan have a specific limitation in the same circular: they are treated as exports only when payment is received in convertible foreign exchange.
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Bank and accounting file
- Invoice number and date linked to the incoming payment.
- Bank statement, foreign-inward-remittance advice or equivalent realization document.
- Exchange-rate basis used in the accounts and GST return.
- Credit notes, refunds or adjustments tied to the original invoice.
- Written explanation and RBI support for an allowed INR settlement.
What if one export condition fails?
When the recipient is actually an Indian establishment, a place-of-supply exception points to India, the payment does not meet the currency rule, or the supplier is an intermediary, the supply may lose zero-rated treatment. The correct result could involve domestic or inter-State GST, a different registration obligation, or an adjustment to a refund already claimed.
CBIC’s sectoral FAQ lists the GST rate on IT services as 18%. That published rate applies where the supply is taxable and not entitled to export zero-rating; it is not a blanket instruction to charge 18% on every foreign-client invoice. Determine the classification and place of supply first.
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Contract does not identify the recipient establishment
Problem: The agreement names a global group but not the establishment receiving the service.
Fix: Add the legal entity and establishment address to the statement of work, and retain evidence of who issued instructions and accepted delivery.
Invoice endorsement is missing or wrong
Problem: An LUT invoice says “export” but omits the prescribed wording, or an IGST invoice uses the LUT endorsement.
Fix: Use the exact endorsement for the route selected and correct the document through the permitted GST procedure before filing the refund.
Returns and refund values do not reconcile
Problem: Invoice numbers, taxable values or tax amounts differ between books, GSTR-1 and the refund application.
Fix: Reconcile invoice-level data, amendments, credit notes, currency conversion and bank realization before submission.
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Input credit has no supporting tax invoice
Problem: The LUT refund includes credits that are not supported by valid supplier invoices or return data.
Fix: Keep purchase invoices, supplier GST details, payment evidence and the credit ledger trail; remove ineligible amounts from the claim.
Intermediary analysis is only a job-title description
Problem: “IT consultant” is used as proof that the supply is not facilitation.
Fix: Map the actual deliverables, ownership of the output, authority to bind another supplier and fee arrangement to the contract.
Practical scenarios
Indian developer building a foreign customer’s application
The developer’s Indian entity contracts directly with the overseas customer, delivers its own coding work, identifies the customer’s foreign establishment, receives permitted foreign exchange and files an LUT. The supply can be zero-rated if the remaining section 2(6) conditions are documented.
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Indian agent arranging a foreign customer’s purchase from another vendor
The agent does not provide the underlying software or implementation. It earns a facilitation fee for arranging another person’s supply. That fact pattern requires an intermediary analysis and cannot be treated as an export merely because the payer is abroad.
Foreign group asks an Indian subsidiary to support an Indian office
The invoice may be addressed to a foreign headquarters, but if the Indian office is the establishment receiving the service or the parties are establishments of the same person, the export conditions may fail. Contract, work instructions and actual use must be examined together.
A pre-invoice decision checklist
- Is the contracting supplier’s legal person in India and correctly registered?
- Is the recipient a genuinely separate foreign legal person or establishment?
- Which section 13 rule fixes the place of supply, and is an exception relevant?
- Does the contract describe the supplier’s own service rather than arranging another person’s supply?
- Will payment arrive in convertible foreign exchange or through an INR route permitted by the RBI?
- Has the LUT for the financial year been acknowledged, or has the business chosen to pay IGST?
- Does the invoice carry the exact endorsement for that route?
- Can the business produce the contract, recipient evidence, bank realization and input-tax trail at refund time?
For a straightforward software-development engagement, this checklist usually produces a clear route. Related-establishment transactions, unusual place-of-supply facts, Nepal or Bhutan payments, and disputed intermediary cases warrant advice from a qualified Indian GST professional before invoicing.
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