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A service supplied from India qualifies as an export under the IGST Act only when it meets all five conditions in section 2(6): the supplier is in India, the recipient is outside India, the place of supply is outside India, consideration is received in convertible foreign exchange or in Indian rupees where RBI permits it, and the supplier and recipient are not merely establishments of a distinct person. A foreign customer alone is not enough. In particular, the place-of-supply rules can change the result when a service falls within an exception such as the intermediary rule.
The five conditions that determine export status
Section 2(6) of the Integrated Goods and Services Tax Act, 2017 (IGST Act) sets a cumulative test for an export of services. Each condition must be satisfied for the supply to qualify. The test concerns the actual supplier, recipient, service, payment and relationship between the parties—not just the country shown on an invoice or the wording in a contract.
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| Condition | What to establish |
|---|---|
| Supplier in India | The supplier’s location under the IGST Act rules. |
| Recipient outside India | The location of the person receiving the service, including the establishment that receives it. |
| Place of supply outside India | The result under the applicable place-of-supply provision, including any exception. |
| Qualifying consideration | Receipt in convertible foreign exchange or Indian rupees wherever permitted by the Reserve Bank of India (RBI). |
| Not establishments of a distinct person | The supplier and recipient must not be merely establishments of the same person that are treated as distinct persons under the Act. |
If one condition fails, the supply does not meet the statutory definition of an export of services. That does not, by itself, answer every question about how GST applies to the transaction; the supply must still be considered under the applicable GST provisions.
Identify the supplier and the recipient
Start by identifying who is actually supplying the service and who receives it. A customer’s registered office or billing address may not settle where the recipient is located for this purpose. A company can have multiple establishments, and the relevant question includes which establishment receives the service. The contract, work instructions, communications, service deliverables and payment records can help describe the arrangement, but a document label alone does not replace the statutory test.
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For an Indian service provider working for a foreign group, distinguish a service supplied to a foreign customer from work performed for a foreign branch or head office that is part of the same legal person. Where that relationship may involve establishments of a distinct person, the statutory condition needs specific review rather than an assumption that every cross-border invoice is an export.
Place of supply is often the decisive question
For services supplied across borders, section 13 of the IGST Act generally places the supply where the recipient is located, unless a specific exception applies. The correct provision depends on the service and its facts. A recipient’s overseas address is therefore a starting point, not a substitute for applying section 13.
Intermediary services
Intermediary services are a significant exception: their place of supply is the supplier’s location. If an Indian supplier’s service falls within this rule, the place of supply may be in India even where the customer is abroad. That can prevent the supply from meeting the export definition.
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The label “agent,” “broker,” “consultant” or “technology provider” does not by itself resolve whether a supplier is an intermediary. Examine what the provider actually does, who the parties to the underlying supply are, and whether the provider arranges or facilitates a supply between other persons. Do not treat every contractor or service provider that communicates with multiple parties as an intermediary without analyzing the specific service.
CBIC’s sectoral FAQ illustrates the issue with brokerage supplied to non-resident clients by a stockbroker acting as an intermediary: it assigns the place of supply to India and treats the service as taxable. The example is useful for understanding the rule, but it is not a blanket conclusion for every broker, agent or digital-service business.
IT and IT-enabled services
For IT and IT-enabled services, CBIC Circular 107/26/2019-GST says classification depends on the facts and circumstances, including which supply is the principal or main supply. A contract calling work “software development,” “support,” “outsourcing” or “commission” is not conclusive. Describe the service flow: what the Indian provider delivers, what the foreign customer receives, whether another party supplies a separate service, and whether the provider arranges or facilitates that other supply.
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CBIC’s sectoral FAQ frames the practical issue as: “How do I determine whether IT services provided by me constitute export of service?” The answer is to apply the statutory conditions to the particular service and determine its place of supply from its substance, rather than relying on the customer’s country or the service name alone.
Check the form and timing of payment
The consideration condition in section 2(6) refers to receipt in convertible foreign exchange, or in Indian rupees wherever permitted by RBI. An INR payment is not automatically qualifying merely because it comes from a foreign customer, and a particular permitted payment route should not be generalized to all rupee receipts. Confirm that the currency and payment arrangement are permitted under the current RBI position and applicable GST rules for the transaction.
Keep the payment evidence with the invoice and contract records. For service-export refund claims, CBIC’s refund rules call for relevant Bank Realization Certificates (BRCs) or Foreign Inward Remittance Certificates (FIRCs), as applicable. The evidence should correspond to the specific invoice and payment route rather than simply showing that the customer is overseas.
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What zero-rating means—and what it does not
Services that qualify as exports are zero-rated under section 16 of the IGST Act. Zero-rating is the GST treatment that allows the export route to be dealt with under the applicable export and refund provisions; it does not mean that every exporter receives an automatic cash refund or that all tax paid on business inputs is returned in full.
A registered exporter generally considers two broad routes. Their availability and consequences depend on the current statutory provisions, rules, eligibility requirements and safeguards for the particular taxpayer.
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|---|---|---|
| Export without payment of IGST under LUT or bond | Furnish a Letter of Undertaking (LUT) or bond before export; claim a refund of eligible unutilized input tax credit, subject to the law and rules. | The refund is governed by the prescribed calculation and restrictions; it is not necessarily equal to all input tax paid. |
| Pay IGST and claim refund | The Act provides a payment-and-refund route, subject to applicable conditions and safeguards. | Confirm that the route is currently available for the specific service exporter and transaction before relying on it. |
These are broad route choices, not a universal recommendation. A business should compare the applicable eligibility rules, available credit, documentation and cash-flow effect for its facts. A refund remains a claim subject to the governing provisions and supporting records.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Using an LUT for export without IGST payment
Under rule 96A of the CGST Rules, a registered person choosing to export services without payment of IGST must furnish a bond or LUT in Form GST RFD-11 before export. The timing matters: filing the form is a procedural step that must precede the export under this route. The LUT does not determine whether the underlying supply satisfies the statutory definition of an export.
Rule 96A also sets a payment deadline tied to receipt of consideration. For exported services, if payment is not received within one year from the date of invoice—or within a further period allowed by the Commissioner—the rule provides for payment of tax and interest within the prescribed period. The rule’s wording recognizes Indian rupees wherever permitted by RBI. Because payment permission and the applicable rule wording matter, check the current consolidated rule and the actual remittance route rather than treating any INR receipt as sufficient.
Refund claims and records to keep together
For a refund of accumulated input tax credit under the LUT route, the claim is subject to section 54, the CGST Rules and applicable restrictions. CBIC’s refund rules require invoice details and relevant BRC or FIRC information for service-export claims. Refund applications are filed electronically, and the amount is calculated under a prescribed formula; it should not be assumed to equal every rupee of input tax incurred.
Maintain one reconciled record set that connects the export classification to the return and refund figures. Useful records include:
- Contracts, statements of work and correspondence that show the actual service and parties’ roles.
- Evidence of the supplier’s and recipient’s locations and, where relevant, the establishment that received the service.
- Invoices, payment records and applicable BRC or FIRC evidence.
- The LUT or bond documentation for the no-IGST route.
- Return data reconciled to invoices, eligible input tax credit and refund calculations.
Good records do not replace the legal test, but they make it possible to show how the business applied that test and how a refund amount was arrived at.
A practical way to assess a service arrangement
- Map the parties and establishments. Record the legal supplier, the customer, the establishment receiving the service, and whether either side is a branch or other establishment of the same legal person.
- Describe the service in operational terms. State what the Indian provider actually performs and delivers. Identify any separate supply by another person and whether the provider arranges or facilitates it.
- Apply the relevant section 13 place-of-supply rule. Determine whether the general recipient-location rule applies or a specific exception, such as the intermediary rule, changes the outcome.
- Verify the consideration route. Confirm the currency and payment mechanism against the applicable RBI permission and GST rule, and plan how receipt will be evidenced.
- Select and complete the export route. If using LUT or bond without IGST, furnish Form GST RFD-11 before export. If considering payment of IGST followed by a refund claim, first verify current availability and conditions for the particular case.
- Reconcile the evidence. Match contracts, invoices, remittances, returns and refund computations so that the same transaction is consistently described throughout.
Common errors that change the analysis
- Equating a foreign customer with an export. The recipient’s location is only one of the five conditions; the place-of-supply exception and other statutory conditions still apply.
- Using the invoice address as the whole analysis. Identify the establishment that actually receives the service and assess its location under the rules.
- Relying on a contract label. For intermediary and IT/IT-enabled service analysis, the substance and principal or main supply can matter more than the title used by the parties.
- Assuming any rupee payment qualifies. INR is relevant only where RBI permits it under the applicable rules and for the particular route.
- Treating zero-rating as an automatic refund. Refund eligibility, calculation, documentation and restrictions still apply.
- Filing the LUT after the export. Rule 96A requires the bond or LUT before export for the no-payment route.
When to get transaction-specific advice
Obtain a fact-specific GST review when the customer is a related foreign establishment, a service may involve arranging another supply, payment is in INR or follows a less familiar route, or the business intends to claim a material refund. The legal result can turn on the detailed service flow, party relationships and current permissions. CBIC’s statutes, rules, sectoral FAQ and Circular 107/26/2019-GST are relevant official materials, but apply the latest amended text and current RBI permissions to the transaction rather than assuming a historical FAQ or rule excerpt settles every current fact pattern.
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