Export of services is a zero-rated supply under Section 16 of the IGST Act, meaning no GST is finally borne on it and related input tax credit is refundable. A service qualifies as an export only if all five conditions of Section 2(6) are met, including that payment is received in convertible foreign exchange (or INR where RBI permits).
The five conditions: Section 2(6)
A supply is an 'export of service' only if all of the following are satisfied:
- The supplier is located in India.
- The recipient is located outside India.
- The place of supply is outside India.
- Payment is received in convertible foreign exchange (or in INR where permitted by RBI).
- The supplier and recipient are not merely establishments of the same person (distinct persons).
Fail any one — for example, an Indian branch billing its foreign head office — and the supply is not an export and may be taxable.
Zero-rated: the two routes
| Route | How it works | Refund |
|---|---|---|
| LUT / Bond (without payment) | Export under Letter of Undertaking; no IGST charged | Refund of unutilised ITC |
| Pay IGST, then refund | Charge IGST on the export and pay it | Refund of the IGST paid |
Most service exporters use the LUT route to avoid blocking cash in IGST. The LUT is filed annually in Form RFD-11.
Claiming the refund
Refund is filed in Form RFD-01 within two years of the relevant date. For ITC refunds under the LUT route, the eligible amount is computed by the formula in Rule 89(4) using the 'turnover of zero-rated supply' and 'adjusted total turnover'. Provisional refund of 90% can be granted, with the balance after verification.
Common pitfalls
- Missing FIRC/BRC evidence of forex receipt — refunds are rejected without it.
- Intermediary services (Section 13(8)(b)) where POS is the supplier's location — may not qualify as export. Verify post-amendment position.
- Branch-to-head-office billing treated as export — it fails the distinct-persons test.
- Filing the LUT late, forcing the pay-IGST route for that period.
Key takeaways
- Export of services is zero-rated under Section 16, IGST Act.
- All five Section 2(6) conditions must be met, including forex receipt.
- Choose LUT (no IGST, refund ITC) or pay-IGST-and-refund.
- File RFD-01 within two years; keep FIRC/BRC evidence.