Exporting Services Without Paying IGST: The LUT, the Conditions and the Foreign Payment Rule
Export of services is zero-rated: with a Letter of Undertaking filed each financial year in Form RFD-11, you can invoice foreign clients without IGST and keep input credit. All five export conditions must be met, including place of supply outside India and payment in convertible foreign exchange.
Software firms, design agencies and freelancers in India increasingly bill clients abroad. Under GST, exports are zero-rated: you can bill without tax and still keep your input credit. The paperwork has to be right.
When a service counts as an export
All five conditions must be met:
- The supplier is located in India.
- The recipient is located outside India.
- The place of supply is outside India.
- Payment is received in convertible foreign exchange, or in Indian rupees where the RBI permits.
- The supplier and recipient are not merely establishments of the same person, such as an Indian branch and its foreign head office.
Watch the place of supply. For some services, such as those relating to goods or property in India or certain intermediary services, the place of supply can be in India even when the client is abroad. Those are not exports.
Two ways to export
| With LUT | With IGST paid | |
|---|---|---|
| Tax on the invoice | None | IGST charged and paid |
| Cash flow | Better | Tax paid first, refund later |
| Refund | Refund of unused input credit | Refund of IGST paid |
Most small exporters use the LUT.
Filing the LUT
- ✓File Form GST RFD-11 on the GST portal. It is approved online, usually at once.
- ✓It is valid for one financial year. File a fresh one each year, before the first export of the year. For FY 2026-27, it should have been filed by the start of April 2026. If you missed it, file now, and speak to your CA about invoices issued before.
What you undertake
- ✓To receive payment within the time allowed under foreign exchange rules.
- ✓To pay IGST with interest if the conditions are not met.
Invoicing tips
- ✓Write "Supply meant for export under LUT without payment of IGST" on the invoice.
- ✓Show the LUT reference number.
- ✓Keep foreign inward remittance certificates (FIRC) or bank advices for every receipt.
- ✓Report exports in GSTR-1 in the export table, with the invoice in foreign currency and INR.
A worked example
A Gandhinagar web agency bills a Dubai client $6,000 a month. It filed its LUT for FY 2026-27 in March, issues invoices without IGST, receives dollars through its bank with a remittance advice for each payment, and claims a refund of input credit on its office rent and software every quarter.
Frequently asked questions
I am a freelancer below ₹20 lakh. Do I need GST registration?
Exports count towards turnover. Below the limit, registration is not required. Once you cross it, you need registration and an LUT.
Payment came through PayPal or a platform. Is that foreign exchange?
Usually yes, if it is settled in foreign currency converted by an authorised bank. Keep the settlement records.
What if the client never pays?
Under the LUT terms, you may have to pay IGST with interest if payment is not received in time.
Sources
- ✓How to file an LUT for export of services, Winvesta
- ✓GST LUT filing for FY 2026-27, SetIndiaBiz
- ✓LUT form RFD-11, Patron Accounting
This is a summary, not legal advice. Confirm with your chartered accountant.
Written by
Founder, Airwix Technologies (Sleet)
Vatsal Sutariya is the founder of Airwix Technologies in Ahmedabad, the company that builds Sleet: SleetHR for HR and payroll, and Sleet Accounting for GST billing and books. He writes about GST, invoicing, business tax and choosing software for Indian businesses, and checks each rule against the official notification before it is published.
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