Yes, an Indian IT freelancer or company can export software and IT services without charging GST to a foreign client, but only when every statutory export condition is met. The supplier must be in India, the customer must be outside India, the place of supply must be outside India, payment must arrive in convertible foreign exchange or in Indian rupees where Reserve Bank of India (RBI) rules permit, and the parties must not be establishments of the same legal person. Qualifying exports are zero-rated, which gives the supplier a right to claim input-tax credit or a refund; zero-rated does not mean exempt.
Registration, invoicing, payment evidence and refund choices determine whether that treatment survives a GST review. The practical rules below apply to individual freelancers and companies, with the legal supplier, contracts, GST registration and books kept consistent.
What counts as an export of IT services?
Section 2(6) of the IGST Act requires all export conditions to be satisfied together. A foreign email address or a payment from an overseas bank is not enough by itself.
- Supplier in India: The freelancer, partnership, company or other taxable person making the supply must be located in India.
- Recipient outside India: The contracted customer must be located outside India. Identify the establishment that actually receives the service, rather than relying only on the group headquarters shown on a website.
- Place of supply outside India: The applicable section 13 rule must put the place of supply outside India. The default cross-border rule is the recipient’s location, but section 13 contains exceptions that can change the result.
- Permitted payment: Consideration must be received in convertible foreign exchange, or in Indian rupees where an RBI-permitted route applies.
- Independent establishments: The Indian supplier and overseas recipient must not merely be establishments of the same person. A branch or fixed establishment relationship can prevent export treatment even when the entities use different names.
CBIC’s sectoral FAQ confirms that software and IT-enabled services can qualify when these tests are met. Keep the contract, statement of work and customer-entity details aligned with the actual service delivered.
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Do you need GST registration?
Registration for refund claims
CBIC’s FAQ states: “Since, exports are zero rated, one needs to register for GST to claim refunds.” A registered exporter can report the supply in returns, use a Letter of Undertaking (LUT), and seek a refund of eligible input tax credit. Without registration, the exporter generally cannot use the GST refund mechanism for the export.
The ₹20 lakh threshold is only a starting check
The general aggregate-turnover threshold is above ₹20 lakh on a PAN basis, subject to section 24 compulsory-registration categories and applicable state rules. Registration applications are generally due within 30 days after liability arises. Do not treat ₹20 lakh as a safe harbour without checking the nature of your supplies: taxable inter-State supplies, refund claims and other section 24 categories can trigger registration independently of turnover.
Freelancer versus company
The export tests are the same for an individual freelancer and a private limited company. Their compliance identities differ: the GSTIN, legal name, bank account, contract signatory, invoice issuer and accounting records must all belong to the person that actually supplied the service. A founder who signs personally while invoicing through a company creates a supplier-identity problem that can delay refunds.
Place of supply: establish the receiving customer
For a cross-border service, section 13 generally places the supply at the recipient’s location. Document the overseas establishment that contracted for and receives the development, implementation, support or consultancy work. Useful evidence can include the signed agreement, purchase order, customer registration details, service-acceptance records and correspondence identifying the receiving office.
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Section 13 has exceptions for particular services. Before declaring export, test whether the service is connected with goods, immovable property, events, transportation, online information services or another special category. If an exception puts the place of supply in India, the supply cannot use export zero-rating for that transaction.
Is an IT consultancy an intermediary service?
“Intermediary” is a factual classification, not a label that applies to every consultant who works for an overseas customer. Circular 107/26/2019 distinguishes a provider’s own principal supply from a person who arranges or facilitates another person’s supply.
Own-account IT services
When you build software, provide implementation, maintain systems, deliver technical support or perform your own IT-enabled service for the foreign customer, you are supplying that service on your own account. CBIC states that a non-intermediary IT-enabled-service supplier can claim export treatment when the section 2(6) conditions are met.
Arranging another person’s supply
Risk increases when your contractual role is to connect a buyer and a separate vendor, negotiate or facilitate that vendor’s supply, or earn a commission while the underlying service is supplied by someone else. Map who contracts with whom, who bears performance risk, and whose invoice describes the principal service. If the facts support intermediary treatment, the place-of-supply rule and GST result can differ from an export of your own service.
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Keep a written classification memo for unusual consultancy, marketplace, staffing or commission arrangements. A disputed intermediary or related-establishment case warrants advice from a qualified GST professional before invoices are issued.
Zero-rated does not mean exempt
Exports and supplies to a unit or developer in a Special Economic Zone (SEZ) are zero-rated. Unlike an exempt supply, a zero-rated supply preserves input-tax-credit and refund rights. You choose one of two statutory routes:
| Route | What you do on the invoice | How recovery works | Cash-flow effect |
|---|---|---|---|
| Pay IGST | Charge and pay integrated GST, then claim a refund of that IGST. | Refund application and return values must reconcile. | You fund the tax until the refund is processed. |
| LUT or bond without payment | Do not charge IGST; include the prescribed LUT/bond endorsement. | Claim refund of eligible unutilised input tax credit under the applicable rules. | Preserves working capital, but requires a valid LUT and input-tax records. |
Select the route consistently for each supply and retain the supporting evidence. A zero-rated invoice that omits its required endorsement can create avoidable clarification requests.
How to file an LUT and make an export invoice
File the LUT for the financial year
- Obtain GST registration where required and ensure the legal name, GSTIN and authorised signatory are correct.
- On the GST Portal, open Services > User Services > Furnish Letter of Undertaking (LUT).
- File Form GST RFD-11 for the relevant financial year, complete the declarations and submit with the required verification.
- Download and retain the acknowledgement with your export records. The portal workflow and screen labels can change, so confirm the current form before filing.
Use the exact endorsement
For the LUT route, the invoice must state: “SUPPLY MEANT FOR EXPORT UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF IGST”. For the tax-paid route, use: “SUPPLY MEANT FOR EXPORT ON PAYMENT OF IGST”. Do not substitute informal wording.
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Include a complete audit trail
Identify the supplier’s GSTIN and legal name, invoice number and date, service description, currency and value, customer legal name and overseas address, contract or purchase-order reference, and the applicable endorsement. Preserve the agreement, milestones or timesheets, delivery evidence, bank advice and any correspondence showing the recipient establishment. Your invoice, return and bank records should describe the same supply and value.
Can an overseas client pay in Indian rupees?
Do not assume that an INR receipt automatically disqualifies export treatment. CBIC Circular 88/07/2019 records that LUT acceptance for supplies outside India or to an SEZ can be permitted when payment is received in Indian rupees or convertible foreign exchange, provided the arrangement is consistent with RBI rules. Verify the RBI-permitted route that applies to your transaction and retain the bank’s realization evidence.
There is a specific caution for Nepal and Bhutan: CBIC’s circular states that services to those countries are treated as exports only when payment is received in convertible foreign exchange. An INR settlement that may be acceptable in another permitted route should not be presumed valid for Nepal or Bhutan.
Return reporting and refund workflow
- Classify the supply: Confirm the five export conditions, place-of-supply rule and intermediary analysis before filing.
- Issue the invoice: Apply the correct LUT or IGST endorsement and preserve the contract reference.
- Report the transaction: Include export invoices in the applicable GST returns, using the customer’s country and invoice data required by the portal.
- Track realization: Retain foreign-inward-remittance or permitted INR bank records and match them to invoices. Resolve short payments, credit notes and exchange differences in your books.
- Choose the refund claim: Use the IGST-paid refund route or apply for refund of eligible input tax credit under the LUT/no-IGST route. Reconcile the refund values with GSTR-1, the relevant return and your ledger.
- Keep input documents: Maintain supplier invoices, tax-payment evidence, credit ledgers and the calculation supporting the eligible amount.
Refund applications are document-driven. A mismatch between invoice values, return data, bank realization and the refund statement is a common reason for queries or delay.
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What GST rate applies if the supply is not an export?
CBIC’s sectoral FAQ states: “The rate of GST on IT services is 18%.” That published rate applies when the supply is taxable in India rather than qualifying for export zero-rating. For example, the result can change if the customer is actually an Indian establishment, a section 13 exception places the supply in India, or the facts make you an intermediary.
Do not add 18% merely because a customer has an Indian group company, and do not omit GST merely because payment comes from abroad. Determine the legal recipient and place of supply for the contracted service first. If one engagement contains separate supplies, analyse each component rather than applying one label to the whole project.
Freelancer and company compliance comparison
| Compliance axis | Individual freelancer | IT company |
|---|---|---|
| Supplier identity | The registered individual whose name appears in the contract and invoice. | The incorporated entity named in the contract, GST registration and books. |
| Service characterization | Own development, consultancy, support or another service, unless the facts show facilitation. | The same principal-service versus intermediary test, applied to the company’s contracts and operating model. |
| Recipient and place of supply | Document the overseas establishment receiving the work and test section 13 exceptions. | Document the same facts; group-company structures require careful entity-level analysis. |
| Payment evidence | Bank realization tied to the individual’s invoices and the applicable RBI permission. | Bank realization tied to the company’s invoices, accounts and authorized signatories. |
| Tax route | LUT/no IGST with eligible input-tax-credit refund, or IGST payment followed by refund. | The same two statutory routes, with company-level ledger and return reconciliation. |
| Records | Contract, invoice, customer evidence, bank advice and input-tax documents. | Those records plus board or authorization records where relevant and consistent company books. |
Common failure cases and corrective action
- No GST registration but a refund is expected: Register when required and do not promise a refund for past periods without checking eligibility and deadlines.
- Missing LUT endorsement: Correct future invoices immediately; obtain professional advice before amending returns or claiming a refund for affected invoices.
- Customer described only as an overseas brand: Record the exact legal entity and establishment that receives the service.
- Intermediary language in the contract: Reconcile the wording with the actual work. “Commission,” “arrange,” or “facilitate” can conflict with a claim that you supplied software on your own account.
- INR received without RBI evidence: Obtain the bank documentation and verify that the payment route is permitted for the relevant country and service.
- Return, invoice and bank values differ: Reconcile exchange rates, credit notes, withholding and partial receipts before filing the refund application.
Records to retain for each export
- GST registration certificate and annual LUT acknowledgement, where used.
- Signed master service agreement, statement of work and purchase orders.
- Evidence of the customer’s legal identity, overseas address and receiving establishment.
- Invoices carrying the correct export endorsement and service description.
- GSTR-1 and other return filings, refund applications and reconciliation workings.
- Foreign-exchange or permitted-INR bank realization records linked to each invoice.
- Input-tax invoices, electronic-credit-ledger extracts and tax-payment records supporting any refund.
- Written analysis for section 13 exceptions, intermediary questions or related-establishment structures.
When to obtain professional advice
Use a qualified GST adviser when the customer is part of your own corporate group, the engagement mixes principal services with commissions, the work relates to goods, property or events, payment is routed through a nonstandard INR arrangement, or a refund has been questioned. GST Portal procedures and RBI permissions can change; confirm the live requirements immediately before filing an LUT, return or refund claim.
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