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One free scan finds every outdated or missing driver and matches the right update for your exact hardware.Free scan · exact hardware matchA software-services supply from India is eligible for GST zero-rating as an export only when it meets all five conditions in section 2(6) of the Integrated Goods and Services Tax Act, 2017 (IGST Act): the supplier is in India, the recipient is outside India, the place of supply is outside India, payment is received in convertible foreign exchange or in INR permitted by the RBI, and the parties are not merely establishments of a distinct person. An overseas customer or foreign payment alone is not enough.
The five conditions an export of services must meet
Apply the test to the actual supply and transaction structure—not just the invoice label or the customer’s address.
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- Supplier in India. The supplier of the service must be located in India.
- Recipient outside India. Identify the recipient from the contract and transaction facts. The payer, end user, and recipient may not be the same entity.
- Place of supply outside India. Determine the place of supply under the applicable IGST Act rule. For cross-border services, section 13 is generally relevant; its recipient-location default has exceptions.
- Qualifying payment. Payment must be received in convertible foreign exchange or in INR where the RBI permits it.
- Not merely establishments of a distinct person. The supplier and recipient must not simply be establishments of a distinct person under the explanation to section 8. A head-office and foreign-branch arrangement requires particular scrutiny.
All five are cumulative. If even one condition fails, the supply does not meet the statutory definition of an export of services, even if the customer is overseas and the payment comes from abroad.
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“Software services” can describe development, implementation, maintenance, hosting, support, licensing, or marketing and sales facilitation. The label does not decide the GST result. Identify what the Indian business has promised to deliver, who owes that deliverable under the arrangement, and who receives the service.
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For cross-border services, section 13(2) generally places the supply at the recipient’s location when that location is available in the ordinary course of business. A specific exception can override that rule.
Why intermediary classification can defeat zero-rating
Section 13(8)(b) sets the place of supply for intermediary services at the supplier’s location. If an Indian supplier provides an intermediary service, the place of supply can therefore be in India, failing the export condition that it be outside India.
The IGST Act’s intermediary definition covers a broker, agent, or other person who arranges or facilitates a supply between two or more persons. It excludes a person who supplies the relevant goods or services on its own account. The practical distinction is whether the Indian business is delivering its own software service to the foreign customer or arranging someone else’s supply.
- Review who is contractually responsible for the deliverable.
- Check who invoices whom and which entity pays.
- Compare the written scope with how the parties actually perform.
- Examine whether the Indian entity supplies the service itself or facilitates a transaction between other parties.
Advance rulings illustrate why the facts matter, but they do not establish a blanket rule for software businesses. A Telangana 2024 ruling treated the applicant’s described marketing, recruitment, and referral-consultant service to foreign colleges as an independent service considered under section 13(2), while noting that the other export conditions, including payment, still had to be met. A West Bengal ruling on arranging sales treated the applicant as an intermediary and applied section 13(8)(b), placing the supply in India. Compare the facts and applicable binding effect before relying on either result.
When payment in INR can satisfy the payment condition
INR receipts are not automatically disqualifying, but neither does every INR payment qualify. CBIC Circular No. 202/14/2023-GST, dated 27 October 2023, recognizes eligible export proceeds received in INR from designated Special Rupee Vostro Accounts of correspondent banks of partner trading countries, opened by authorized dealer banks. The clarification is subject to the conditions and restrictions in Foreign Trade Policy 2023, applicable RBI circulars, and any other required permissions or approvals.
For a payment using this route, verify the account and payment path and retain supporting bank and invoice records. The circular addresses only the payment condition; the other four export conditions still apply.
What zero-rating means—and what it does not guarantee
Section 16 of the IGST Act treats exports of services as zero-rated supplies. Zero-rating is distinct from treating every invoice to an overseas customer as exempt, and it does not by itself establish that a particular refund is available.
The Act provides routes for registered persons making zero-rated supplies, including supply under a bond or Letter of Undertaking (LUT) without payment of IGST and a refund of eligible unutilised input tax credit. A route involving payment of IGST and a refund is available only where the statutory and rules-based requirements permit it, including prescribed-class restrictions. For IGST paid on exported services, CGST Rule 96(9) directs the refund application to FORM GST RFD-01, handled under Rule 89.
An older CBIC sectoral FAQ describes two refund options for software exports, but later amendments changed section 16 and restricted the IGST-paid route to prescribed classes. Do not treat that older summary as a complete statement of current eligibility. Check the applicable Act, rules, notifications, and portal process before choosing a route or filing. An LUT does not guarantee a refund; registration, input-tax-credit eligibility, documentation, and filing requirements still matter.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What to check before treating an arrangement as an export
For each software-services model, assemble the facts that determine the statutory test:
- Contract, scope of work, and deliverables.
- Identity and location of the contractual recipient, distinguished from the payer or end user where necessary.
- Whether the Indian supplier provides its own service or arranges another person’s supply.
- The applicable place-of-supply rule and any exception.
- The relationship between the supplier and recipient, including any head-office, branch, or affiliate relationship.
- Invoice and payment trail, including evidence that any INR Special Rupee Vostro route meets applicable conditions.
- Registration status, selected LUT/bond or IGST-payment route, eligible input tax credit, and records needed for any refund claim.
The GST Council’s IT/ITES FAQ states an 18% rate for IT services, but that general statement should be checked against current classification and rate notifications before applying it to a particular service. The rate question is separate from whether a supply qualifies as an export and is zero-rated.
A transaction-specific conclusion depends on the contract, service description, recipient, entity relationship, payment route, and any intermediary role. Where classification or a material refund is uncertain, obtain case-specific tax advice.
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