Export of Services under GST: Conditions, LUT, Intermediary

GST Composition Scheme: A Boon for Small Businesses

24 Oct 2026

Updated 24 October 2026 · By Regi Tom Antony, FCA, MBA (Australia), ACMA (UK), CGMA (USA), CISA (USA)

Almost every week someone sits across my desk with the same worry. They bill a client in the US or the Gulf, the money comes in dollars, and yet their GST consultant, or the department, is asking whether it is truly an export. Sometimes the person is a sales agent for a foreign company and has spent years paying 18% GST on commission they were sure was export income.

Here is the honest position. A service is an export under GST only if all five conditions in the law are met, not just because the client is abroad and pays in foreign currency. And for one group in particular, intermediaries, the law changed in their favour this year.

The five conditions

Section 2(6) of the IGST Act defines export of services. All five of these must be true:

The supplier of the service is located in India.
The recipient of the service is located outside India.
The place of supply of the service is outside India.
Payment is received in convertible foreign exchange, or in Indian rupees wherever the RBI permits it.
The supplier and the recipient are not merely establishments of the same person, as described in Explanation 1 to section 8.

The first two are usually easy. The third is where most disputes happen, because place of supply is a legal test under section 13 of the IGST Act, not a matter of where your client sits. The fourth trips up people who receive money through a relative's account or through a domestic platform that pays out in rupees from its own funds. The fifth catches the Indian branch of a foreign company billing its own head office, which the law treats as the same person.

Zero-rating and the LUT

Once a supply qualifies as an export, section 16 of the IGST Act treats it as a zero-rated supply. You then have two routes. You can supply under a Letter of Undertaking, filed online in Form GST RFD-11, without paying IGST, and claim a refund of the unused input tax credit. Or you can pay IGST on the export and claim a refund of that tax.

For most service businesses the LUT is the practical choice, because it keeps cash out of the refund queue. The one thing people forget is that the LUT is valid for a financial year. It has to be filed again each year, ideally in April before the first export invoice of the year goes out.

The intermediary change

For years, section 13(8)(b) of the IGST Act said that the place of supply of intermediary services was the location of the supplier, that is, India. So an Indian agent who arranged sales for a foreign principal and earned commission in dollars still failed the third condition. The service was taxed in India at 18%, no matter how foreign everything else looked.

The Finance Act, 2026 omitted section 13(8)(b). The Act received assent on 30 March 2026, and the omission took effect from that date. Intermediary services now fall under the general rule in section 13(2), where the place of supply is the location of the recipient. If your recipient is a foreign principal located outside India, the place of supply is outside India, and the service can qualify as an export, provided the other four conditions are also met.

This does not reopen invoices before 30 March 2026. Those remain governed by the old rule, and anyone with pending notices or appeals for earlier periods should look at them separately.

A story from this summer

Take Arun (not his real name). He has represented a Singapore machinery maker in South India for eight years. He finds buyers, negotiates, and earns a commission on each order the principal ships directly to the Indian buyer. Until March, his commission was intermediary income with an Indian place of supply, and he paid IGST on every invoice.

In April we went through the five conditions with him. He is in Kochi. His principal is in Singapore. With section 13(8)(b) gone, the place of supply follows the recipient, so it is Singapore. His commission arrives in Singapore dollars into his current account. And he is an independent proprietor, not a branch of the principal. All five conditions met. He filed his LUT for 2026-27, and from his April invoices onwards he raises them as zero-rated exports without IGST.

There was one more step. Because his commission is an export of services, from 1 October 2026 he also has to file an Export Declaration Form with his bank under the new FEMA export regulations. I have written about that separately in EDF for service exporters under the new FEMA export rules. GST and FEMA now ask for parallel records of the same invoice, so it pays to keep them consistent.

Things that still need care

People often ask me whether they can simply stop charging GST on all foreign invoices. Not without checking each type of service. Section 13 still has specific rules, for example for services performed on goods physically in India, or services connected with immovable property in India, and those can keep the place of supply in India even when the client is overseas.

Others ask whether receiving rupees through a payment gateway spoils export status. It depends on how the money is routed and whether the RBI permits the rupee settlement; the gateway's inward remittance documentation matters here.

And many ask about the reverse direction. When you buy services from abroad, such as software subscriptions or overseas consulting, you are the importer and pay IGST under reverse charge, which you can usually claim back as input tax credit if the service is used for your business.

For the official text, the CBIC GST portal carries the IGST Act and the relevant circulars. And I explain how GST, FEMA and treaty questions fit together on our cross-border tax and FEMA advisory page.

If you are unsure whether this applies to you, write to us at letstalk@rtaandassociates.com.

For how this fits with FEMA, treaties and GST more broadly, see our guide to cross-border tax and FEMA advisory.

Related guides

Regi Tom Antony, FCA, MBA (Australia), ACMA (UK), CGMA (USA), CISA (USA)
Regi Tom Antony & Associates, Chartered Accountants, Kochi

This is general information based on the law as at 24 October 2026, not advice for your particular situation.