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An export of services is one kind of zero-rated supply under India’s GST law, but the terms are not interchangeable. A service is an export only if it meets all five conditions in section 2(6) of the IGST Act. A foreign customer alone is not enough: the place of supply, qualifying payment receipt and relationship between the supplier’s and recipient’s establishments also matter. Zero-rating is the wider category and includes qualifying supplies to SEZ developers or units for authorized operations.
How export of services and zero-rated supply differ
The distinction is a two-step test: first determine whether the service qualifies as an export under section 2(6) of the Integrated Goods and Services Tax (IGST) Act; then determine the treatment available to that zero-rated supply under section 16. “Export,” “zero-rated” and “exempt” describe different GST concepts and should not be used as synonyms.
| Question | Export of services | Zero-rated supply |
|---|---|---|
| What does it identify? | A service meeting all five conditions in IGST Act section 2(6). | A broader statutory category under section 16, which includes exports of goods or services and qualifying supplies to SEZ developers or units for authorized operations. |
| Does a foreign customer alone qualify? | No. The supplier’s and recipient’s locations, place of supply, payment receipt and distinct-establishments condition must all be checked. | No. The supply must fall within a category covered by section 16 and meet the applicable requirements. |
| Is it the same as exempt? | No. Export describes whether the supply meets the statutory export definition. | No. Zero-rated treatment is distinct from exempt status; the Act provides for input tax credit subject to statutory restrictions. |
Apply the five export conditions
Section 2(6) requires every condition below to be satisfied. The Telangana Commercial Taxes Department’s Handbook on Refunds under GST, third edition, January 2026, states: “Thus, in order to qualify as export of service, it is mandatory to fulfil all the 5 conditions mentioned in Section 2(6) above.”
- The supplier is located in India. Identify the establishment most directly involved in making the supply and determine its location under the Act’s definitions.
- The recipient is located outside India. Identify the actual recipient and the establishment receiving the service, rather than relying only on the payer’s identity or the contract’s labels. The Act’s recipient-location rules consider the place of business, relevant fixed establishment or usual residence, as applicable.
- The place of supply is outside India. Determine this separately under the service-specific place-of-supply rules. A customer’s foreign address does not, by itself, establish the place of supply.
- Payment is received in a permitted form. The current wording covers payment in convertible foreign exchange, or in Indian rupees wherever permitted by the Reserve Bank of India. Older CBIC FAQ wording that refers only to convertible foreign exchange is not the complete current formulation.
- Supplier and recipient are not merely establishments of a distinct person. Examine the legal relationship and establishment structure. A transaction between establishments of the same person can fail this condition even when one establishment is overseas.
Resolve place-of-supply and intermediary questions
Recipient location is not the place of supply
These are separate statutory questions. A recipient may be outside India while a service’s place of supply is determined by a special rule that does not place it outside India. The service’s actual nature and the relevant statutory provision therefore matter; do not classify a transaction from the customer’s address alone.
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Check whether the supplier acts on its own account
The IGST Act’s intermediary definition includes a broker, agent or other person arranging or facilitating a supply between two or more persons, while excluding a person supplying services on its own account. The Act provides a special place-of-supply rule for intermediary services, so how the work is characterized can affect export treatment.
For this analysis, document what the Indian supplier actually undertakes, which parties contract with one another, and whether the supplier delivers its own service or arranges another supply. The label in an agreement is not a substitute for examining the actual role.
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Distinguish a subsidiary from a branch or representative office
Group-company ownership does not by itself settle the distinct-establishments condition. CBIC Circular 161/17/2021-GST clarifies that an Indian-incorporated company and a foreign company incorporated abroad are separate legal persons. A service supplied by an Indian-incorporated subsidiary to its foreign parent is therefore not disqualified merely because of the shareholding relationship.
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Scan for outdated or missing drivers - takes under a minuteDriver Scan →Repair Windows errors before they cause bigger problemsFix Now →Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →The circular treats a different arrangement differently: an Indian branch, agency or representative office of a foreign company supplying that foreign company’s overseas establishment is a supply between distinct establishments and is not an export under condition (v). Map the actual supplier, recipient and contracting establishments before applying either clarification.
What zero-rating means for GST and refunds
For a qualifying export, the current default route is to make the zero-rated supply without payment of IGST under a bond or Letter of Undertaking (LUT), then claim a refund of eligible unutilized input tax credit (ITC), subject to section 54 and the applicable rules. Zero-rating does not mean that every input credit is refundable automatically: eligibility, blocked-credit restrictions, calculation, documentation and deadlines still apply.
Section 16 was amended with effect from 1 October 2023. Under the amended framework, making a zero-rated supply on payment of IGST and claiming a refund is available only to notified classes of persons or classes of goods or services. Do not assume that this route is open to a particular supplier or transaction; check the applicable notification and eligibility. The Telangana Commercial Taxes Department’s January 2026 handbook describes the amended structure.
For supplies to an SEZ developer or unit, verify that the supply is for authorized operations and that the relevant endorsement and evidence requirements are met. A recipient’s SEZ status alone does not establish that every supply qualifies for zero-rating.
Prepare the export refund evidence
For a refund claim on eligible unutilized ITC under the LUT or bond route, the rules provide for an electronic application in Form GST RFD-01. For export-of-services claims, relevant evidence includes invoice numbers and dates and Bank Realization Certificates (BRCs) or Foreign Inward Remittance Certificates (FIRCs), as applicable. The invoice must carry the prescribed endorsement for the chosen route. For a supply without payment of IGST under bond or LUT, the endorsement is: “SUPPLY MEANT FOR EXPORT UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF IGST”.
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Keep the invoice details and payment-realization evidence aligned with the refund application. The applicable refund calculation, safeguards, procedures and deadlines also govern whether and how much eligible credit can be refunded.
A practical classification sequence
- Identify the actual supplier and recipient establishments. Confirm who performs and receives the service, not just who signs or pays.
- Determine the service and place-of-supply rule. Check whether a special rule, including the intermediary rule, applies.
- Verify payment and establishment structure. Confirm the payment form is permitted and assess whether the parties are distinct establishments of the same person.
- Classify the supply under section 16. If it meets the export definition, it is within the zero-rated category; separately assess whether another category, such as an SEZ supply for authorized operations, applies.
- Choose and document the eligible refund route. Check current notification-based eligibility before using an IGST-payment route; otherwise assess the LUT or bond route and the refund of eligible unutilized ITC.
This is general information about Indian GST, not a conclusion on a particular contract or transaction. Complex service arrangements, intermediary roles and cross-border group structures may require transaction-specific tax advice.
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