GST on Export of Services —
Zero-Rated at 0%
How export of services is zero-rated under the IGST Act: the two routes (LUT vs pay-and-refund), the 5 mandatory conditions, FIRC/BRC proof and the RFD-01 refund process.
Export of services is a zero-rated supply taxed at 0% under Section 16(1) of the IGST Act, 2017 — not an exempt supply. You can either export under LUT (no IGST on the invoice) and claim a refund of accumulated ITC, or pay IGST and claim a refund of the tax paid. Payment must be received in convertible foreign exchange with a FIRC/BRC as proof. GST 2.0 (22 Sep 2025) did not change export zero-rating.
What Qualifies as Export of Services — 5 Conditions
A supply is an export of services only when all five conditions are satisfied at the same time. If even one fails, the transaction is a normal domestic supply and IGST or CGST+SGST applies at the usual rate.
| # | Condition | Practical implication |
|---|---|---|
| 1 | Supplier located in India | The GST-registered Indian entity providing the service |
| 2 | Recipient located outside India | A foreign company or individual abroad — not a branch/liaison office in India |
| 3 | Place of supply outside India | Determined under Sec. 13 IGST Act — generally follows recipient location for B2B services |
| 4 | Payment in convertible foreign exchange | USD/EUR/GBP etc. (or INR where RBI permits); FIRC issued by the AD bank as proof |
| 5 | Supplier & recipient not the same person | Explanation 1, Sec. 8 — MNC subsidiaries billing a parent must be careful here |
Legal basis: Section 2(6) & Section 16, IGST Act 2017. Confirm the place-of-supply position on the official portal before invoicing.
On an exempt supply you cannot claim Input Tax Credit. On a zero-rated export you charge 0% and keep full ITC on inputs, input services and capital goods — which you then recover as a cash refund. Treating an export as merely "exempt" and reversing ITC is a common and costly error.
Two Routes to Export Services Under GST
The law gives exporters two options. Most service exporters prefer the LUT route because it avoids any upfront cash outflow on IGST.
Export under LUT — no IGST paid
- Invoice raised without IGST (quote LUT ARN)
- No upfront tax outgo — best for cash flow
- Refund of accumulated ITC via RFD-01
- Preferred by almost all service exporters
- File Form RFD-11 (LUT) once each financial year
Pay IGST, then claim refund
- IGST charged at the applicable rate on the invoice
- Tax paid upfront — blocked till refund
- Refund of the IGST paid on the export
- Useful when the ITC balance is minimal
- No LUT needed — export and file refund directly
| Aspect | Route 1 — Under LUT | Route 2 — Pay IGST + refund |
|---|---|---|
| Invoice | No IGST; mention LUT ARN | IGST charged at applicable rate |
| Cash flow | No upfront tax outgo | IGST paid; blocked till refund |
| Refund type | Accumulated ITC via RFD-01 | IGST paid on the export invoice |
| Prerequisite | File Form RFD-11 (LUT) on portal | None — file refund directly |
| Preferred by | Almost all service exporters | Cases with a minimal ITC balance |
Both routes keep the supply zero-rated at 0% — the difference is only in how the embedded tax is recovered.
Not sure which route saves you more — LUT or pay-and-refund?
Get My Export GST Plan →LUT Filing Process (Form RFD-11)
The Letter of Undertaking is filed online at the start of each financial year. There is no physical document, no bank guarantee and no fee.
- Quote the LUT ARN on every export invoice for the financial year.
- Mention "Supply meant for export under LUT without payment of IGST."
- Report the supplies as zero-rated in GSTR-1 and GSTR-3B.
Any registered taxpayer may file an LUT except those prosecuted for a GST or earlier indirect-tax offence where the tax evaded exceeds ₹2.5 crore. Such taxpayers must furnish a bond with a bank-guarantee surety instead of an LUT.
GST Refund on Export of Services — RFD-01
After exporting under LUT, the ITC that accumulates on your inputs is claimed as a cash refund by filing Form RFD-01 on the portal.
| Detail | Rule |
|---|---|
| Time limit to file RFD-01 | Within 2 years of the relevant date (date of receipt of foreign exchange) |
| Provisional refund (RFD-04) | 90% of the claim within 7 days of the RFD-02 acknowledgement |
| Final sanction (RFD-06) | Within 60 days of filing a complete RFD-01 |
| Documents | Export invoices, FIRC/BRC, GSTR-2B reconciliation, CA certificate if > ₹2 lakh |
| Refund formula | (Turnover of zero-rated supply ÷ Adjusted total turnover) × Net ITC |
FIRC (Foreign Inward Remittance Certificate) / BRC (Bank Realisation Certificate) prove receipt in foreign exchange — condition 4 above.
Which Service Exports Are Zero-Rated?
| Service | SAC | Zero-rated? | Key condition to watch |
|---|---|---|---|
| IT / software development export | 9983 | Yes | Recipient abroad; paid in forex |
| Management & business consulting | 9983 | Yes | Delivered remotely to an overseas client |
| BPO / data processing | 9985 | Yes | Place of supply must be outside India |
| Engineering / design services | 9983 | Yes | Contract must specify the foreign recipient |
| Intermediary / commission agent | 9961 | No | Sec. 13(8): place of supply is India |
| Service on immovable property in India | 9972 | No | Place of supply is India — CGST+SGST applies |
SAC codes are indicative — verify the exact code and place-of-supply rule for your service.
If an Indian entity bills a foreign group company and both are treated as "establishments of the same person" (Explanation 1, Sec. 8), the transaction fails condition 5 and is not an export — even if paid in forex. Check the corporate relationship before claiming zero-rating.
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