An Indian business does not qualify a service as an export merely because its client is in the UAE, it invoices in US dollars, or it has filed an LUT. Export treatment depends on all five statutory conditions—especially the place-of-supply rule for the actual service and the tax period in question. The Union Budget 2026 memorandum describes a change to the intermediary rule, but its effective date must be confirmed before relying on it.
When does a service supplied from India to a UAE client count as an export?
Under section 2(6) of the Integrated Goods and Services Tax Act (IGST Act), the export-of-services test is cumulative. The supplier must be in India, the recipient outside India, the place of supply outside India, payment must meet the applicable foreign-exchange or permitted-rupee condition, and the supplier and recipient must not merely be establishments of a distinct person under the Act. If any condition is not met, the service does not qualify as an export under this definition.
| Condition | What to establish | Why the UAE client alone is not enough |
|---|---|---|
| Supplier location | The supplier of the service is located in India. | This identifies the supplier’s location, not the service’s place of supply. |
| Recipient location | The recipient is located outside India; for this case, establish that the recipient is the UAE-based customer. | A foreign recipient satisfies only this one part of the test. |
| Place of supply | Apply the place-of-supply rule for the specific service and relevant tax period. | The recipient’s UAE location matters under the general rule, but statutory exceptions can assign the place of supply elsewhere. |
| Payment | Establish receipt in convertible foreign exchange or, where permitted by RBI, in Indian rupees under the applicable route. | An invoice denominated in USD does not establish how payment was received or whether an INR route meets applicable conditions. |
| Distinct establishments | Supplier and recipient must not merely be establishments of a distinct person within the meaning of the Act. | A customer’s foreign address does not settle the legal relationship between the parties’ establishments. |
Keep evidence that supports each part of the test: the engagement and service description, the parties’ identities and locations, the place-of-supply analysis, and payment and banking records. The documents should describe the real arrangement, not just the invoice label.
How should you determine the place of supply?
For services where either the supplier or recipient is outside India, section 13 of the IGST Act applies. Section 13(2) is the general rule: “The place of supply of services except the services specified in sub-sections (3) to (13) shall be the location of the recipient of services.” For an ordinary service supplied to a UAE recipient, that rule points to the recipient’s location—but only after checking whether an exception covers the service.
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Classify the service before applying the default
Start with what the Indian business is actually contracted to do and deliver. A consultancy, design, software, marketing or other service should not be assigned a place of supply solely from the broad name used in a proposal or invoice. Section 13 contains rules for defined categories of service; identify whether one applies before using section 13(2).
Separate service delivery from arranging another supply
One important exception in the CBIC-hosted IGST Act text reviewed is section 13(8)(b), which assigns the place of supply for intermediary services to the supplier’s location. Section 2(13) defines an intermediary as a broker, agent or other person who arranges or facilitates a supply of goods or services between two or more persons. The definition excludes a person supplying the relevant service on its own account.
| Question to ask | Direct supplier of its own service | Potential intermediary role |
|---|---|---|
| What is the contracted deliverable? | The supplier undertakes and delivers its own substantive service to the customer. | The supplier arranges or facilitates another person’s supply between parties. |
| Whose service is being supplied? | The Indian business supplies the service on its own account. | The underlying service is supplied by another party, while the Indian business facilitates the transaction. |
| What facts should be checked? | Scope of work, responsibility for delivery, customer relationship and actual performance. | Agency or brokerage terms, the parties to the underlying supply, and the supplier’s role in arranging it. |
These are fact-finding prompts, not a substitute for applying the statutory definition to the contract and conduct. A job title such as “consultant,” “agent” or “business development partner” does not decide the classification by itself.
What does the 2026 intermediary change mean for different tax periods?
The Union Budget 2026 explanatory memorandum says clause 141 omits section 13(8)(b), with the intended result that intermediary services would fall under section 13(2)’s recipient-location default instead. That describes the stated amendment; it does not, by itself, establish when the change became operative.
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| Relevant period or status | What the available material establishes | Practical treatment |
|---|---|---|
| Before the amendment takes effect | The CBIC-hosted IGST Act text reviewed lists intermediary services in section 13(8)(b), assigning place of supply to the supplier’s location. | For a period governed by that provision, assess whether the supplier is an intermediary and apply the rule then in force. |
| After the amendment takes effect | The 2026 Budget memorandum states the intended result is to omit section 13(8)(b), leaving section 13(2)’s recipient-location rule to apply. The memorandum says commencement is by a date to be notified unless otherwise specified; the commencement notification for clause 141 was not verified in the material available for this article. | Confirm the notification and current statutory text for the period before treating the change as effective. Do not infer the operative date from the Budget memorandum alone. |
Even once effective, the described change concerns the place-of-supply rule. It does not automatically establish that a particular intermediary service is an export: the other section 2(6) conditions, including payment and the distinct-establishment condition, still need to be met.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Does payment from the UAE have to be in foreign currency?
The export test includes a payment condition. The statutory wording on the CBIC-hosted IGST Act page reviewed specifies receipt in convertible foreign exchange. Separately, GST Council material discussing RBI’s International Trade Settlement in Indian Rupees mechanism says Indian exporters can receive export proceeds in INR from balances in designated Special Rupee Vostro Accounts, subject to the referenced RBI and Foreign Trade Policy procedures. That discussion appears in material for the Council’s 52nd meeting that also contains draft circular content; it is not a basis for treating every INR receipt as qualifying.
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If using an INR settlement route, check the applicable RBI and Foreign Trade Policy conditions for the transaction and period. Retain the contract, invoice, remittance advice and bank evidence showing the route used. Currency printed on the invoice is not proof of the currency or route by which payment was received.
What does filing an LUT establish—and what does it not establish?
An LUT is relevant to supplying eligible services without payment of IGST, subject to the applicable GST rules. It does not turn a non-export into an export or cure a place-of-supply problem. First determine whether the supply meets the export conditions and whether the correct place-of-supply rule applies to the service and period.
The sources available for this article do not establish the current prescribed LUT form, filing steps, validity period, renewal timing, or invoice and return instructions. Check current GST rules and official GST portal guidance for those procedural details rather than relying on an assumed form, deadline or validity period.
Quick Recap
A practical decision sequence for an Indian service business
- Identify the parties and establishments. Record where the supplier and recipient are located, and assess whether they are merely establishments of a distinct person under the Act.
- Describe the actual service. Use the contract, scope, deliverables and conduct to identify what the Indian business supplies, rather than relying on an invoice label or job title.
- Apply section 13 for the relevant tax period. Check for a service-specific exception first. If none applies, assess section 13(2)’s recipient-location rule.
- Check intermediary status against the operative law. Determine whether the business supplies its own service or arranges or facilitates another party’s supply. For the 2026 change, verify the commencement notification and current law applicable to the period.
- Verify payment and preserve evidence. Establish receipt in convertible foreign exchange or a permitted INR route, as applicable, and keep the supporting contract, remittance and bank records.
- Use the applicable LUT and compliance procedure. Confirm current official filing and invoicing requirements; an LUT is not a substitute for the export test.
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