GST
Foreign clients, export of services and the LUT
When foreign-client work counts as an export, why it is zero-rated, and how the yearly LUT saves cash.
By Siddharth Joshi4 min read
Working for clients abroad is one of the better deals in Indian GST. A genuine export of services is zero-rated, which means no GST is collected on the invoice and you can still recover GST paid on what you buy to do the work. But “my client is foreign” is not, on its own, enough. The supply has to meet a specific set of conditions, and if you are registered you need the paperwork that lets you skip the tax upfront.
When it counts as an export
Under the IGST Act, a supply of services is an export only when all five conditions hold:
- the supplier is located in India
- the recipient is located outside India
- the place of supply is outside India
- you are paid in convertible foreign exchange, or in Indian rupees where the RBI permits it
- the supplier and recipient are not merely establishments of the same person, such as an Indian branch billing its own foreign parent
The first two and the last are usually obvious. Payment is a matter of evidence: your bank issues a FIRA or FIRC for foreign inward remittances, and you should collect one for every payment. Platforms that pay out in rupees need a closer look at how the money actually reached you.
Place of supply is where it gets subtle. For most services the general rule follows the location of the recipient, so a London company buying your code or copy gives a place of supply outside India. But some services have their own rules. Services tied to immovable property or events in India, and services of an “intermediary” who arranges supplies between others, can have their place of supply in India even when the client is abroad. Agencies, referral businesses and anyone acting as a go-between should get a CA’s view, as this area has been contested for years.
Zero-rated, not exempt
The difference matters. An exempt supply carries no GST and blocks the credit on your inputs. A zero-rated export carries no GST but keeps the credit alive. That is why exporters care about registration even when their clients will never pay Indian GST.
Remember too that exports count towards your aggregate turnover. A freelancer billing only foreign clients still has to register once the year’s total crosses ₹20 lakh (₹10 lakh in special-category states).
Two ways to export as a registered person
Once registered, you can export in one of two ways:
- Under a Letter of Undertaking (LUT). You file Form GST RFD-11 on the GST portal, promising to meet the export conditions. Your invoices then go out without IGST.
- With IGST paid. You charge and pay IGST on the export, then claim it back as a refund.
For almost every freelancer the LUT is the better option. It is free to file, is usually accepted online the same day, and keeps cash out of the refund queue. The catch is that it is valid for one financial year at a time, so you must file a fresh LUT each year, ideally in early April before the first export invoice of the year.
A worked example
Rohan, a developer in Kochi, invoices a US client for work worth ₹1,70,000 (an illustrative figure for a dollar invoice converted to rupees).
| With LUT | Without LUT | |
|---|---|---|
| Invoice value | ₹1,70,000 | ₹1,70,000 |
| IGST paid upfront at 18% | ₹0 | ₹30,600 |
| Refund to chase later | none | ₹30,600 |
Without the LUT, Rohan funds ₹30,600 out of his own pocket and waits for a refund. With it, he pays nothing on the export. Separately, if he bought a laptop and paid ₹16,200 GST on it, that credit sits in his ledger. With no output tax to use it against, he can apply for a refund of the unused credit on exports made under LUT.
Invoices and returns
An export invoice should show the client’s overseas address, the currency, and a line noting that it is a supply meant for export under LUT without payment of IGST, along with your LUT reference. Report exports in GSTR-1 under the export section and reflect them in GSTR-3B as zero-rated supplies. Mismatches between the two are a common reason refunds get held up.
Practical habits
- File the LUT at the start of every financial year.
- Download the FIRA for each foreign payment and file it next to the matching invoice.
- Keep your contract or emails that show where the client is located and what you deliver.
- Match export figures in GSTR-1 and GSTR-3B every period.
- If you act as a middleman or your service is tied to something physically in India, check the place-of-supply rules with a CA before treating the work as an export.
General information, not tax advice. Rules change, so check the latest rules or speak to a CA before you act.