A sale of services to a foreign customer is not automatically an export under India’s GST rules. It qualifies as an “export of services” only when all five conditions in section 2(6) of the Integrated Goods and Services Tax Act, 2017 (IGST Act) are met together. The customer’s location and the currency received are only two parts of the test.
Apply the five-condition test
Section 2(6) of the IGST Act sets out a cumulative test. Assess the actual supply against each condition; if even one is not met, the supply does not qualify as an export of services under that definition.
As an Amazon Associate I earn from qualifying purchases.
- The supplier is located in India. Identify the person making the supply and the location relevant to that supplier for the transaction.
- The recipient is located outside India. Determine which place of business or fixed establishment receives the service. If the recipient has no place of business, the relevant test is the recipient’s usual residence. CBIC’s Sectoral FAQs discuss how to identify the recipient’s location, including a case involving an unregistered recipient whose address is unavailable in the supplier’s records.
- The place of supply is outside India. Apply the place-of-supply rule for the service, rather than assuming it follows the customer’s billing address or the destination of a payment.
- Consideration is received in a permitted form. The law allows receipt in convertible foreign exchange or in Indian rupees wherever the Reserve Bank of India (RBI) permits. An INR receipt qualifies only if the particular route is permitted under applicable RBI requirements.
- The supplier and recipient are not merely establishments of a distinct person. Check the legal and operational relationship between the establishments involved. A branch and its head office may be treated differently from separately incorporated companies in the same group.
The five conditions are set out in section 2(6) of the IGST Act. Foreign ownership, a foreign customer, an overseas contract address, or foreign-currency payment cannot substitute for any failed condition.
Quick wins for a faster PC:
Clear out junk files and repair common Windows errorsFree Scan →Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Work through the supply and recipient before choosing a rule
Describe what the business actually supplies
Start with the contracted service and the work actually performed. Identify the customer, the deliverables, and whether the Indian supplier provides the service on its own account or arranges a supply made by someone else. The invoice description or a label such as “consulting,” “support,” or “commission” does not by itself decide how the supply is characterized.
#1 Best Overall
This distinction matters especially where an Indian business works between a customer and a third-party provider. The question is not simply whether the business communicated with, supported, or helped the customer; it is what supply the business undertook and whether it facilitated another person’s supply.
Identify the establishment receiving the service
Where a customer has more than one place of business or fixed establishment, identify the one that receives the service. A foreign company’s registered address alone may not resolve that question. CBIC’s Sectoral FAQs describe the recipient-location test and address an unregistered recipient whose address is unavailable in the supplier’s records; apply the relevant facts to the transaction rather than assuming every customer follows the same pattern.
Determine place of supply under the applicable cross-border rule
For services where the supplier or recipient is outside India, section 13 of the IGST Act generally places the supply at the recipient’s location. That general rule is subject to statutory exceptions. Use the rule that applies to the particular service; a foreign recipient does not guarantee a place of supply outside India.
Check section 13(8) exceptions
Section 13(8) locates certain supplies at the supplier’s location, including intermediary services, specified services by banks or financial institutions to account holders, and short-term hiring of means of transport. If an exception applies and the supplier is in India, the place of supply is in India and the third export condition is not satisfied.
This is why payment in foreign currency cannot turn an otherwise non-export supply into an export. CBIC Circular No. 165/21/2021-GST, which addresses invoice QR-code treatment for supplies whose place of supply is India, also illustrates that payment currency and export status are separate questions.
Assess intermediary status from the actual arrangement
CBIC Circular No. 107/26/2019-GST addresses IT/ITES and support services and says intermediary status must be determined from the facts and circumstances, including which set of services is the principal or main supply. Map the supplier’s own contracted work, its role in any third-party supply, and the actual division of responsibilities. Do not assume that all outsourcing, marketing, back-office, or support work is—or is not—intermediary service.
Rank #3
If the service is intermediary service under the applicable rule, section 13(8)(b) places its supply at the supplier’s location. For an Indian supplier, that means the place of supply is in India, so the export definition is not met even if the customer is abroad and the payment arrives from abroad. A supplier of IT/ITES services that is not an intermediary may qualify, but still has to meet all five conditions.
What’s actually slowing this PC down?
Pick the symptom - the matching free tool is one click away.
Check whether the payment route is permitted
Do not rely on the shorthand that an export payment must always be received in foreign currency. Section 2(6) also permits Indian-rupee consideration wherever RBI permits it, and CBIC Circular No. 88/07/2019-GST addresses that wording. The permission is conditional: not every INR payment route qualifies. Check the rules applicable to the actual channel and transaction; the circular does not establish a universal list of permitted routes.
Older CBIC FAQ examples describe particular NRE-account payments as rupee receipts that do not satisfy the payment condition. Treat those as examples tied to their stated circumstances, not as a blanket answer for every present-day INR arrangement. The applicable statutory wording and RBI permission for the particular route matter.
Distinguish a group company from a branch or head office
A related-party relationship does not by itself disqualify a service as an export. CBIC Circular No. 161/17/2021-GST, dated 20 September 2021, clarifies that an Indian-incorporated subsidiary, sister concern, or group concern supplying a foreign company is not automatically excluded by the distinct-person condition merely because the companies are related. The relevant question remains whether the supplier and recipient are establishments of a distinct person under the statutory test.
Do not extend that clarification automatically to a branch and its head office. CBIC’s Sectoral FAQs give an example involving services by an Indian bank to an offshore branch or head office: the supply described is inter-State and taxable, but is not an export because the distinct-establishment condition is not met. This illustrates why an outside-India place of supply, where present, cannot replace the other conditions.
Compare the transaction patterns that can change the result
| Transaction feature | What to establish | Why it matters |
|---|---|---|
| Own-account service or intermediary arrangement | Whether the Indian supplier provides its own service or arranges another person’s supply; assess the principal or main supply and actual functions. | Intermediary services are subject to the section 13(8)(b) place-of-supply rule. |
| General rule or place-of-supply exception | Whether recipient location governs or a specific section 13 rule applies to the service. | The place of supply must be outside India for the export definition to be met. |
| Separate group company or branch/head office | The legal identity and establishment relationship between the Indian supplier and foreign recipient. | A related incorporated company is not automatically a distinct establishment; branch/head-office arrangements may fail the distinct-person condition. |
| Foreign currency or Indian rupees | The currency received and, for INR, whether RBI permits the particular payment route. | Foreign currency does not cure another failed condition, and INR is permitted only where RBI allows it. |
Keep evidence for each condition
Because the answer can turn on the contract and actual conduct, retain records that allow each part of the test to be checked. A practical file may include:
- the contract, statement of work, amendments, and invoice describing the service and parties;
- work records showing what the Indian supplier actually did and whether it arranged a third party’s supply;
- details identifying the recipient establishment that received the service;
- documents supporting the place-of-supply analysis and any relevant exception considered;
- the relationship and establishment records relevant to the distinct-person condition; and
- remittance evidence and support for the payment route, including the applicable RBI permission where the consideration is received in INR.
Separate export eligibility from the procedure for supplying without IGST
First determine whether the service meets the export definition. The procedure for making a qualifying export without payment of IGST is a separate question. CBIC guidance says a supplier using that route supplies under a bond or Letter of Undertaking (LUT) under Rule 96A. The version of Rule 96A cited in the CGST Rules as amended on 1 January 2022 provides a one-year period after the invoice for receipt of service-export proceeds, subject to extension and the rule’s other requirements. Check the current rule and filing requirements before relying on that period or making a claim.
If the classification affects registration, tax invoices, an LUT or bond, a refund claim, or material tax exposure, have an Indian GST professional review the contract, actual functions, recipient establishment, and payment evidence. A general decision sequence cannot determine an unidentified transaction.
Quick Recap
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
Free tools Windows power users keep installed
One-click scans. No signup required.
