To export services from India without payment of tax under GST, a registered supplier files a Letter of Undertaking on the GST portal before the export takes place, then delivers the service as a zero-rated supply. No IGST is charged on the invoice, and the input tax credit accumulated on business expenses can be claimed back as a refund. The mechanism sits under Section 16 of the IGST Act and Rule 96A of the CGST Rules, and it holds only as long as the transaction meets every condition the law lays down for an export of service.
The Five Conditions Your Transaction Must Meet
Section 2(6) of the IGST Act defines an export of service through five conditions, and all of them must be satisfied at once. Miss one and the supply becomes an ordinary taxable domestic supply, with the full GST rate applying as if the client were sitting next door.1Central Board of Indirect Taxes and Customs. Integrated Goods and Services Tax Act 2017 – Section 2
- 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 Indian rupees where the Reserve Bank of India has permitted it (as under the Special Rupee Vostro Account arrangement).
- The supplier and recipient are not merely two establishments of the same legal person under Section 8 of the IGST Act.
The fifth condition catches a scenario that trips up large organizations. A domestic office billing an overseas branch of the same company is not exporting a service under this definition, because both establishments belong to the same legal person. The work crosses borders, but the transaction does not.
Where Your Place of Supply Actually Falls
The third condition is where most disputes happen, because “place of supply” is a legal construct, not a physical one. Section 13 of the IGST Act sets the rules when either the supplier or the recipient is outside India. The default is simple: for most services, the place of supply is the location of the recipient.2Central Board of Indirect Taxes and Customs. Integrated Goods and Services Tax Act
That default takes care of the bulk of cross-border IT, consulting, accounting, and professional work. Client in London, developer in Bengaluru, place of supply is London. Condition met. But several exceptions override the default and can pull the place of supply back into India:
- Services related to goods the recipient must physically make available to the supplier are supplied where the work happens.
- Services requiring the recipient’s physical presence (training, personal care) are supplied where the recipient meets the supplier.
- Services connected to immovable property (architecture, interior design, hotel work, construction coordination) are supplied where the property is located.
- Services tied to cultural, sporting, scientific, or entertainment events are supplied where the event is held.
These exceptions can knock out the export claim even when everything else looks international. An architect in Mumbai designing a building in Delhi for a foreign client has a place of supply in India, because the property is in India. That transaction pays regular GST no matter who signs the contract or where the money comes from.
Who Can File a LUT and Who Cannot
The LUT facility is open to essentially every registered exporter. The single exclusion is a person who has been prosecuted for tax evasion of an amount exceeding ₹2.5 crore under the CGST Act, IGST Act, or any earlier tax law. Anyone in that category must furnish a bond backed by a bank guarantee instead.3Central Board of Indirect Taxes and Customs. Circular No 37/11/2018-GST
The distinction matters commercially. A LUT is a promise on paper with no security deposit. A bond ties up working capital in a guarantee. For exporters with a clean compliance record, the LUT is the only route they will need.
Filing the LUT on the GST Portal
Rule 96A of the CGST Rules requires the LUT to be filed before the export using Form GST RFD-11, submitted electronically.4Central Board of Indirect Taxes and Customs. Central Goods and Services Tax Rules – Rule 96A
The steps on the portal:
- Log in to the GST portal and go to Services, then User Services, then Furnish Letter of Undertaking (LUT).
- Select the financial year for which the LUT will apply.
- Enter the names, addresses, and occupations of two independent witnesses.
- Have the authorized signatory verify the form with a Digital Signature Certificate or an Electronic Verification Code.
- Preview, submit, and record the Application Reference Number the system generates.
The ARN is your proof that the LUT was filed before the export took place. Keep it accessible for audits and departmental queries.5Goods and Services Tax. Furnishing of Letter of Undertaking for Export of Goods or Services
Renew Every Financial Year
A LUT is valid only for the financial year in which it is furnished. After March 31, you need a fresh one before making any further exports without payment of tax. Filing once and assuming permanent coverage is a common mistake. The renewal follows the same portal workflow as the original filing, with the previous LUT uploaded and witness details re-entered. Filing early in April avoids a gap where exports would technically lack LUT coverage, which the department can question later.
Claiming Back the Input Tax Credit
Exporting under LUT means no output tax on the invoice, but GST still gets paid on inputs like office rent, software subscriptions, and professional fees. Section 16 of the IGST Act allows a refund of that unutilised input tax credit when the supply is zero-rated under bond or LUT.6Central Board of Indirect Taxes and Customs. Integrated Goods and Services Tax Act 2017 – Section 16 Zero Rated Supply
The refund application goes under Section 54 of the CGST Act. You have two years from the relevant date to file. For service exports, the relevant date is the date payment is received in foreign exchange (or permitted Indian rupees), or the date of the invoice where payment was received in advance. The proper officer must issue a refund order within 60 days of receiving a complete application.7Central Board of Indirect Taxes and Customs. Central Goods and Services Tax Act 2017 – Section 54
Document the Foreign Payment
After the export, you need documentary proof that the money actually arrived from abroad. Two documents matter: the Foreign Inward Remittance Certificate (FIRC), issued by your bank confirming that foreign currency entered the domestic banking system, and the Electronic Bank Realisation Certificate (eBRC), which runs on the Directorate General of Foreign Trade’s system under a self-certification model based on inward remittance messages from banks.8Directorate General of Foreign Trade. Electronic Bank Realisation Certificate
Each zero-rated invoice needs to link cleanly to a corresponding FIRC or eBRC. During an audit, that mapping is the first thing the department will test. Gaps between invoices and bank records generate most audit problems in this space. A simple tracking spreadsheet mapping each invoice number to its remittance reference saves a lot of trouble later.
Export proceeds also have to be realized within the timeframe the RBI prescribes under the Foreign Exchange Management Act. For most exporters this is currently nine months from the date of export, though the RBI has adjusted the deadline periodically and different categories of exporters may have different timelines.9Reserve Bank of India. Master Circular on Export of Goods and Services
What Goes Wrong If Conditions Are Not Met
If you export under LUT but the payment does not arrive in the required form, or the export itself never happens, Rule 96A sets out an escalation.
First, you become liable to pay the full IGST that would have applied to the transaction, plus interest under Section 50 of the CGST Act, at up to 18% per annum from the date the tax should have been paid.10Central Board of Indirect Taxes and Customs. Central Goods and Services Tax Act 2017 – Section 50
Second, if you do not pay the tax and interest, the LUT or bond facility is withdrawn entirely. The department can then recover the amount under Section 79 of the CGST Act, which includes attaching bank accounts and other assets. The facility is restored only after the dues are cleared.4Central Board of Indirect Taxes and Customs. Central Goods and Services Tax Rules – Rule 96A
Third, on the refund side, Section 16 requires that if you already claimed a refund of ITC on a zero-rated supply but the sale proceeds never come in, the refund plus interest must be returned within 30 days after the FEMA deadline for receiving foreign exchange expires.6Central Board of Indirect Taxes and Customs. Integrated Goods and Services Tax Act 2017 – Section 16 Zero Rated Supply
Exporting without payment of tax is a conditional deferral, not a permanent exemption. The conditions run from filing the LUT before the first invoice all the way through to collecting the foreign payment and documenting it. If any link in that chain breaks, the full tax and interest come back on the exporter.