GST on Export of Services: Zero-Rating, LUT & Refund Guide

Under Section 16(1)(a) of the IGST Act, 2017, export of services is treated as a zero-rated supply. This means the transaction attracts a GST rate of 0%, and unlike exempt supplies, the exporter retains full eligibility to claim Input Tax Credit (ITC) on inputs, input services, and capital goods used for providing those exported services. Zero-rating ensures Indian service exporters remain competitive globally because the tax embedded in their costs can be fully recovered. There are two modes: export under LUT (Letter of Undertaking) where no IGST is charged on the invoice and accumulated ITC is refunded via Form RFD-01; or export with payment of IGST on the invoice followed by a refund claim. Most exporters prefer the LUT route as it avoids upfront cash outflow on tax. Zero-rating applies only when all five conditions under Section 2(6) of the IGST Act are satisfied simultaneously — the conditions relate to the supplier being in India, the recipient being outside India, payment in convertible foreign exchange, and the place of supply being outside India.

Section 2(6) of the IGST Act, 2017 defines export of services as a supply that satisfies all five conditions simultaneously: (1) The supplier of the service is located in India. (2) The recipient of the service is located outside India. (3) The place of supply of the service is outside India as determined under Sections 12 and 13 of the IGST Act. (4) The payment for such service has been received by the supplier in convertible foreign exchange or in Indian Rupees wherever permitted by the Reserve Bank of India. (5) The supplier and recipient of service are not merely establishments of the same person in accordance with Explanation 1 of Section 8 of the IGST Act. All five conditions must be satisfied concurrently. If even one condition fails — for instance, the place of supply falls within India (e.g., services related to immovable property located in India supplied to an NRI) — the transaction is not an export of service and IGST or CGST+SGST becomes applicable at the relevant rate.

FIRC stands for Foreign Inward Remittance Certificate and BRC stands for Bank Realisation Certificate. Both serve as documentary proof that the payment for exported services has been received in convertible foreign exchange, which is one of the mandatory conditions under Section 2(6) of the IGST Act for a transaction to qualify as export of services. FIRC is issued by the AD (Authorised Dealer) bank when foreign currency is remitted into the exporter's account. BRC is issued by the bank after the export proceeds are fully realised and reconciled with the shipping bill or export contract. For GST refund claims under RFD-01 for service exporters, the GST portal requires submission of the FIRC/BRC details as proof of receipt of foreign exchange. Without valid FIRC or BRC, the GST officer may reject the refund application on the ground that the payment was not received in convertible foreign exchange and therefore the transaction does not qualify as an export. Exporters should maintain these certificates meticulously and ensure bank account details on FIRC match the GST registration.

When a service exporter exports under LUT (Letter of Undertaking by filing Form RFD-11 on the GST portal), no IGST is charged on the export invoice. However, ITC accumulates on inputs and input services used to provide those exported services. To recover this accumulated ITC, the exporter must file Form RFD-01 on the GST portal within 2 years from the relevant date. The relevant date for services is the date of receipt of foreign exchange. Steps: (1) File LUT at the start of the FY via GST portal > Services > User Services > Furnish Letter of Undertaking. (2) Issue export invoice without IGST, mentioning "Supply meant for export under LUT without payment of IGST." (3) Collect FIRC/BRC from the bank. (4) File Form RFD-01 online, selecting "Refund of ITC accumulated due to zero-rated supplies under LUT/Bond." (5) Attach export invoices, FIRC/BRC details, GSTR-2A reconciliation, and CA certificate (if amount exceeds ₹2 lakh). The refund is sanctioned within 60 days; provisional refund of 90% can be received within 7 days of acknowledgement in Form RFD-04.

Yes. IT companies, software development firms, and technology service providers exporting their services to foreign clients are squarely covered under the export of services definition in Section 2(6) of the IGST Act. These include services such as application development, software maintenance, cloud hosting managed services, business process outsourcing (BPO), IT consulting, and data processing. Since the service recipient is outside India, the place of supply is determined under Section 13 of the IGST Act and generally falls outside India for these service categories, satisfying the zero-rating condition. The exporter must: (a) ensure payment is received in foreign exchange (USD, EUR, GBP, etc.) and collect FIRC from the AD bank; (b) file LUT at the beginning of each financial year; (c) issue invoices without IGST mentioning the LUT reference number; (d) file GSTR-1 reporting these as zero-rated supplies; (e) file RFD-01 to claim ITC refund. One caveat: if an Indian software company bills a foreign parent/group company for services, and both are deemed to be "establishments of the same person," the transaction may be treated as between distinct persons and not qualify as export — this is a common compliance risk for MNC subsidiaries in India.