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A sale of services to a foreign customer is an export under India’s GST rules only if it meets all five conditions in section 2(6) of the IGST Act. The customer’s location or the currency received, by itself, is not enough. In particular, the place-of-supply rule, whether the supplier is an intermediary, the RBI rules for an INR payment route, and the relationship between the parties can change the result.
Apply the five-condition test
Section 2(6) of the Integrated Goods and Services Tax Act, 2017 (IGST Act) defines an export of services through five cumulative conditions. A transaction must satisfy every row below; a failure on any one condition means it does not qualify under that definition.
| Condition | What to establish | Common point to check |
|---|---|---|
| Supplier is in India | Identify the person supplying the service and establish that the supplier is located in India. | Start with the actual supplier and its role, rather than relying only on an invoice description. |
| Recipient is outside India | Identify the person receiving the service and the relevant place of business or fixed establishment, or usual residence if there is no place of business. | The customer named in a contract may not, by itself, establish which establishment receives the service. |
| Place of supply is outside India | Apply the place-of-supply rule that fits the service under section 13 of the IGST Act. | Section 13’s general recipient-location rule has exceptions, including for intermediary services. |
| Payment meets the statutory condition | Consideration must be received in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India (RBI). | An INR receipt is not automatically acceptable; the specific payment route must be permitted under applicable RBI rules. |
| The parties are not merely establishments of a distinct person | Check whether the supplier and recipient are establishments of the same person in the circumstances covered by the Act. | A separate Indian-incorporated group company is not automatically the same as a foreign branch or head office. |
Identify the actual service and recipient
Before applying the test, describe what the Indian business has undertaken to do, who contracted for that work, and which person or establishment receives it. Also establish whether the supplier provides the service on its own account or arranges a supply made by someone else. Those facts matter both to identifying the supply and to the intermediary analysis.
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Use the actual arrangement and conduct alongside the contract, invoices, and payment records. A label such as “consulting,” “IT support,” or “commission” on an invoice does not, by itself, settle the legal characterization. CBIC’s Sectoral FAQs discuss how to identify the recipient’s location and include a specific rule relevant to an unregistered recipient whose address is unavailable in the supplier’s records; check that rule against the transaction rather than assuming the customer’s country from limited records.
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Determine the place of supply under the right rule
For a cross-border service, section 13 of the IGST Act generally places the supply where the recipient is located. But the general rule applies only after checking whether a more specific statutory rule governs the service. If an exception places the supply in India, the place-of-supply condition for export fails even if the recipient is abroad and payment comes from overseas.
Check the section 13(8) exceptions
Under section 13(8), the place of supply is the supplier’s location for intermediary services, specified banking or financial services to account holders, and hiring of a means of transport for a period up to one month. Confirm the service fits the wording of an exception before applying it; do not assume every financial, support, or transport-related service falls within one.
Assess intermediary status from the arrangement
The intermediary exception is especially consequential because it can put the place of supply in India. The relevant issue is not simply whether the supplier communicates with a foreign client, performs support work, or receives a commission. Examine whether the supplier is providing its own service on its own account or arranging or facilitating another person’s supply, together with the principal or main supply in the arrangement.
CBIC Circular No. 107/26/2019-GST addresses IT/ITES and support services. It says intermediary status must be determined from the facts and circumstances, including which set of services is the principal or main supply. Accordingly, IT/ITES outsourcing, marketing, back-office work, and support work do not all receive one categorical answer: the contract and actual functions determine the analysis. A supplier that is not an intermediary may qualify for export treatment if it also meets the other four conditions.
Check the payment route, including receipts in rupees
The IGST Act does not require every qualifying export payment to arrive in foreign currency. Its wording permits consideration in convertible foreign exchange or in Indian rupees wherever RBI permits. CBIC Circular No. 88/07/2019-GST addresses the rupee option and confirms that acceptance of a Letter of Undertaking (LUT) can apply to supplies to locations outside India or to Special Economic Zones when payment follows RBI guidelines.
That clarification does not make every INR transfer an eligible export receipt. Check the actual route against the applicable RBI requirements; the available official guidance does not provide an exhaustive current list of permitted INR channels. Keep records that let you match the receipt to the supply and establish the payment method used.
Payment currency cannot cure a different failure in the export test. CBIC Circular No. 165/21/2021-GST, which addresses invoice QR-code treatment for supplies whose place of supply is India, distinguishes payment in foreign exchange or permitted INR from whether a service is an export. A service whose place of supply is India does not become an export just because it was paid for in foreign currency.
Distinguish a group company from a branch or head office
Related-party status alone does not automatically disqualify a supply. CBIC Circular No. 161/17/2021-GST, dated 20 September 2021, clarifies that a separately incorporated Indian subsidiary, sister concern, or group concern supplying a foreign company is not automatically excluded by the distinct-person condition. Apply the statutory test to the entities and their legal relationship rather than treating all affiliated companies as one establishment.
Do not extend that clarification to a branch and head-office arrangement without examining the facts. CBIC’s Sectoral FAQs give the contrasting example of certain services supplied by an Indian bank to its offshore branch or head office: the FAQ describes an inter-State taxable supply that is not an export because the distinct-establishment condition is not met. This illustrates why an overseas location and an outside-India place of supply do not, on their own, satisfy the full definition.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Separate export eligibility from the procedure for supplying without IGST
First decide whether the supply meets the five-part definition. Then consider the procedure for making a qualifying export without payment of IGST. CBIC guidance says an exporter using that route supplies under a bond or LUT under Rule 96A of the CGST Rules. The cited Rule 96A text, amended as on 1 January 2022, provides a one-year period after the invoice for receipt of proceeds from an export of services, subject to extension and the rule’s other details. Because that text is not a current consolidated rulebook, verify the rule and filing requirements in force for the relevant transaction before relying on the period or submitting a return or refund claim.
Build a file that supports the conclusion
The result can turn on the contracted supply, the work actually performed, which recipient establishment receives it, payment arrangements, and the legal relationship between the parties. Retain a transaction file that allows those facts to be checked together, rather than relying on a customer’s foreign address or a payment record alone.
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- Records showing which person or establishment receives the service and how the recipient was identified.
- Invoices and descriptions of the actual work, together with evidence relevant to any intermediary analysis.
- Remittance and bank records identifying the payment received and, for INR receipts, the applicable RBI-permitted route.
- Documents establishing whether the parties are separately incorporated entities or establishments of the same person.
- The applicable LUT or bond and records required for the chosen tax and refund procedure, where relevant.
This is a general guide, not a determination of an unidentified transaction. If the classification affects tax invoices, LUT use, refunds, registration, or material tax exposure, have an Indian GST professional review the contract, actual conduct, recipient, and payment route.
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