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Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →Outbyte Driver Updater FREEScan for outdated or missing drivers - takes under a minuteDriver Scan →A foreign customer or a foreign-currency invoice does not, by itself, make a software or IT-services supply an export under Indian GST. The transaction must meet all five statutory export conditions, including the place-of-supply and payment tests. If it qualifies, it is zero-rated, but the applicable filing and refund route still matters.
First identify what you are supplying
GST treatment depends on the substance of the supply, not just whether an invoice says “software.” CBIC’s IT/ITES FAQ classifies activities such as software development, design, programming, customization, adaptation, upgrades, enhancement and implementation as services. It describes pre-developed or pre-designed software supplied on storage media, or made available using an encryption key, as goods under heading 8523. These are government FAQ classifications; check the applicable tariff entry and the facts of the particular transaction, especially for licensing, mixed or bundled supplies.
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CBIC’s FAQ gives an 18% rate for IT services. That figure is the FAQ’s stated answer, not a universal rate for every product or transaction described as software. Confirm the current rate notification, classification and effective date before invoicing.
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Random freezes, missing sound and display glitches usually trace back to one bad driver. Find and replace yours safely.Free scan · under a minuteCheck all five conditions for an export of services
Section 2(6) of the IGST Act defines an “export of services” through five cumulative conditions. If even one is not met, the supply does not qualify under this definition.
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- The supplier is in India.
- The recipient is outside India. Identify the actual recipient under the contract and the establishment that receives the service; a foreign brand or payment intermediary alone does not settle this question.
- The place of supply is outside India. Apply the relevant place-of-supply rule to the actual service, including any special category that may displace the general rule.
- Payment is received in convertible foreign exchange, or in Indian rupees where permitted by the Reserve Bank of India.
- The supplier and recipient are not merely establishments of a distinct person. A supply between establishments of the same legal person in different territories can fail this condition. Do not assume that separate invoices, group branding or an overseas address makes an affiliate arrangement equivalent to a sale to an unrelated customer.
Assess the contract, recipient establishment, service performed, payment route and relationship between the parties together. A foreign customer and a foreign-currency receipt do not cure a failure of another condition.
How place of supply can change the result
For cross-border services, the general rule in section 13 of the IGST Act places supply at the recipient’s location. CBIC’s IT/ITES FAQ describes that general approach for IT/ITES services and notes an exception where an unregistered recipient’s address is unavailable on the supplier’s records. The applicable statutory category and facts still need to be checked; “software service” is not a shortcut to a place-of-supply conclusion.
Watch for intermediary services
Intermediary services can be subject to a supplier-location rule rather than the general recipient-location rule. The IGST Act’s definition excludes a person who supplies the goods or services on its own account. Therefore, providing development or implementation work on one’s own account is not automatically an intermediary service merely because another party is involved.
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CBIC’s FAQ illustrates an overseas firm facilitating an Indian company’s software supply abroad as an intermediary. That example concerns the service supplied by the foreign facilitator to the Indian software company; it should not be read as classifying all software development or outsourcing as intermediary activity. Examine what the supplier actually undertakes and whether it supplies the service itself or arranges or facilitates a supply between others.
How common arrangements differ
| Arrangement | Key GST question | What to examine |
|---|---|---|
| Bespoke development, customization or implementation for an unrelated foreign customer | Does the service meet every export condition? | Actual recipient and receiving establishment, place-of-supply category, payment route and contract scope. |
| Pre-developed software supplied on media or through an encryption key | Is the supply goods rather than an IT service? | How the software is supplied and the applicable tariff classification; the service-rate answer may not apply. |
| Commission or facilitation arrangement | Is the supplier an intermediary, or does it supply on its own account? | The parties to the underlying supply and the supplier’s actual role; intermediary rules may affect place of supply. |
| Service between establishments of the same legal person in different territories | Does the distinct-person condition prevent export treatment? | The legal identity of the parties and which establishments are involved. |
| Supply to an SEZ unit or developer | Does the supply qualify for zero-rating as an SEZ supply? | The recipient’s SEZ status and the conditions and procedures applicable to that supply. |
Zero-rating and the refund route
Section 16 of the IGST Act treats qualifying exports and supplies to SEZ units or developers as zero-rated supplies. Zero-rating is not the same as ignoring GST requirements: the statutory restrictions, prescribed procedures and supporting records govern whether input tax credit (ITC) can be used or refunded.
Exports under LUT or bond
For exports made under a Letter of Undertaking (LUT) or bond without payment of integrated tax, the refund rules provide a route to claim eligible unutilized ITC. The rules prescribe the computation and application requirements; refund applications use the RFD-01 framework. Check the current section 16 restrictions, rules, forms and filing requirements before claiming a refund.
Registration and refund claims
CBIC’s FAQ says a person whose outward supplies are all export services needs GST registration to claim refunds. This is a point about claiming a refund, not a substitute for checking the current registration rules against the exporter’s full circumstances.
When payment arrives in Indian rupees
The statutory payment condition allows Indian rupees where the RBI permits the relevant route. Circular 202/14/2023-GST clarifies that proceeds received in INR from designated Special Rupee Vostro Account balances can satisfy that condition, subject to the applicable RBI permissions and Foreign Trade Policy conditions. This does not make every INR remittance an eligible export receipt; verify the account, route and conditions for the transaction.
What to verify before treating a supply as an export
Keep the assessment grounded in the transaction record. Review the contract and scope of work, the identity and location of the establishment receiving the service, the legal relationship between supplier and recipient, the place-of-supply category, and the payment and remittance trail. For a refund claim, also check the applicable LUT or bond, registration position, returns and prescribed refund support under the current rules. Where intermediary status, group establishments, software classification or a nonstandard payment route is uncertain, obtain advice from a qualified Indian GST practitioner before filing or claiming a refund.
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