GST & Indirect Tax
GST on Export of Services: LUT, FIRC and Place of Supply: Calculator-Friendly Guide with Worked Example
Export of services is zero-rated under GST but only when all five conditions are met. LUT enables export without paying IGST. FIRC proves foreign exchange receipt. This guide walks through the complete workflow with numbers.
Five Conditions for Export of Services
Under Section 2(6) of the IGST Act, a supply qualifies as export of services only if all five conditions are met:
- The supplier is located in India
- The recipient is located outside India
- The place of supply is outside India
- The payment is received in convertible foreign exchange (or INR when permitted by RBI)
- The supplier and recipient are not merely establishments of the same person
Condition 5 Clarified (Circular 161/17/2021-GST): Condition 5 is narrower than it sounds. A separately incorporated Indian subsidiary providing services to its separately incorporated foreign parent (or vice versa, or to a sister/group concern) does NOT automatically fail Condition 5 — CBIC has clarified that two distinctly incorporated companies, even if related, are separate legal persons and are not "merely establishments of a distinct person" under Explanation 1 to Section 8. Condition 5 is genuinely triggered only where the supplier and recipient are the same legal entity operating through different establishments — for example, an Indian company's own branch, liaison office or representative office located abroad (not separately incorporated), or a foreign company's branch/liaison office in India providing services to its own head office overseas. Most India-incorporated subsidiaries billing their foreign parent for services therefore can qualify as export, subject to the other four conditions being met.
Place of Supply: Export Eligibility Matrix
| Service Type | Place of Supply | Export Eligible? |
|---|---|---|
| B2B consulting to foreign company | Recipient location (outside India) | Yes, subject to other four conditions and the intermediary test below |
| B2C online services (OIDAR) supplied BY an Indian provider TO a foreign individual | Recipient location (outside India), under Section 13(12) — OIDAR place of supply is always the recipient's location regardless of who supplies it | Yes, subject to other conditions — this is the export side of OIDAR, distinct from the import-side scenario below |
| B2C OIDAR supplied BY a foreign provider TO an Indian individual (the reverse direction) | Recipient location (India) | No — this is an import of service taxable in India at 18% IGST, payable by the foreign supplier (who must register in India) or via RCM if the Indian recipient is a registered business |
| IT services to foreign company | Recipient location (outside India) | Yes |
| Services for immovable property in India | Property location (India) | No |
| Event management for India event | Event location (India) | No |
| Legal services to foreign registered entity | Recipient location (outside India) | Yes |
| Intermediary services (e.g., agent/broker arranging a supply between two other parties) | Supplier's location (India) under Section 13(8), regardless of where the principal parties are | No — intermediary services are typically NOT export-eligible even if the client paying the commission is abroad, because place of supply defaults to the supplier's own location |
OIDAR Has Two Directions: Don't confuse the two OIDAR scenarios. An Indian business selling automated digital/online content to individuals abroad is generally exporting (zero-rated, subject to conditions). A foreign business selling automated digital content to Indian individuals is importing into India and that foreign supplier (or the Indian B2B recipient under RCM) owes Indian GST. The OIDAR import-tax compliance burden falls on the foreign-to-India direction, not the India-to-foreign direction.
LUT Workflow
- GST Portal → Services → User Services → Furnish Letter of Undertaking (LUT)
- Select financial year; confirm eligibility (no prosecution for Rs.2.5 Cr+ offence)
- Submit — auto-approved; no fee; no physical submission
- Download LUT acknowledgement with ARN
- Quote on every export invoice: “Supply meant for export under LUT without payment of IGST; LUT No. [ARN]”
- Re-file every April for the new financial year
Case Study: Pixel Labs — Monthly US Client Billing
Monthly export: Rs.15L; Input GST: Rs.2.7L
Export invoice (LUT route)
Rs.15L — zero IGST; LUT reference quoted
GSTR-1 reporting
Table 6A — export invoice details (invoice number, date, value, LUT reference); FIRC is NOT entered in GSTR-1 itself, it's retained separately as refund-claim evidence
ITC accumulated (AWS, Figma, office)
Rs.2.7L credited to ITC ledger monthly
ITC refund (RFD-01 quarterly)
Rs.8.1L filed per quarter; 45–60 day processing
FAQ
What is a FIRC and why is it needed?
A Foreign Inward Remittance Certificate (FIRC) is issued by the recipient’s bank confirming receipt of foreign currency. It proves payment was received in foreign exchange — Condition 4 for export of services. Without FIRC, the ITC refund or zero-rating claim can be questioned.
What is the time limit to realise export payment?
Payment must be realised within the time allowed by RBI (typically 9 months for services). If not received within the prescribed time, the zero-rated benefit may be denied and GST becomes payable with interest.
Can export refund be claimed monthly?
Yes. ITC refund under RFD-01 can be filed monthly or quarterly. Most service exporters file quarterly to reduce paperwork. The 2-year claim window for export of services runs from the relevant date under Section 54 — specifically the date of receipt of payment in convertible foreign exchange (or the invoice date, if payment was received in advance and preceded completion of the service) — not from the date of filing GSTR-3B.