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The five-condition test for export of services
Apply the test to the actual supply and transaction structure—not just the invoice label or the customer’s address.
| Condition | What to establish | What to examine |
|---|---|---|
| Supplier is in India | The supplier of the service is located in India. | Identify the entity actually supplying the service and its location. |
| Recipient is outside India | The recipient of the service is located outside India. | Use the contract and transaction facts to identify the recipient; the payer, end user, or an affiliated company is not necessarily the recipient. |
| Place of supply is outside India | The applicable place-of-supply rule puts the supply outside India. | For cross-border services, section 13 generally applies. Its section 13(2) default is the recipient’s location, subject to statutory exceptions. |
| Payment meets the statutory condition | Payment is received in convertible foreign exchange, or in INR where permitted by the Reserve Bank of India (RBI). | Match the payment to the invoice and verify that any INR route is one permitted under applicable RBI requirements. |
| Parties are not merely distinct establishments | The supplier and recipient are not merely establishments of a distinct person under the explanation to section 8. | Check whether the arrangement is between separate persons or, for example, between a foreign head office and its branch. |
If any one condition fails, the supply does not meet the statutory definition of export of services, even if the customer is overseas and funds arrive from abroad.
Classify the service before applying the place-of-supply rule
“Software services” can describe development, implementation, maintenance, hosting, support, licensing, or marketing and sales facilitation. The label does not decide export eligibility. Determine what the Indian supplier has undertaken to provide, who receives that service, and whether the supplier is delivering its own service or arranging someone else’s.
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Own-account supply or intermediary activity?
The IGST Act’s intermediary definition covers a broker, agent, or other person who arranges or facilitates a supply between two or more persons; it excludes a person who supplies the relevant goods or services on its own account. This distinction can change the place of supply. Under section 13(8)(b), the place of supply for intermediary services is the supplier’s location. For an intermediary service supplied by an Indian supplier, that can put the place of supply in India and defeat the export condition.
- Who is contractually responsible for the deliverable?
- Who invoices whom, and who owes payment for the service?
- Does the Indian entity perform and supply the software service itself, or facilitate a supply made by another person?
- Do the parties’ actual conduct and records match the contract’s description?
These are fact questions; a contract’s terminology alone does not settle them. If section 13(8)(b) does not apply, section 13(2) generally places a cross-border service at the recipient’s location, provided that location is available in the ordinary course of business and no other section 13 exception governs.
Advance rulings are illustrations, not blanket classifications
A 2024 Telangana advance ruling considered the applicant’s described marketing, recruitment, and referral-consultant service to foreign colleges as an independent service under section 13(2), while noting that the other export conditions, including payment, still had to be met. A West Bengal ruling concerning arrangements for sales treated the applicant as an intermediary and applied section 13(8)(b), placing the supply in India. Those outcomes turn on their facts and applicable binding effect; they do not classify every software, marketing, or sales-support contract.
When an INR payment can satisfy the payment condition
The payment limb is not limited to foreign currency, but neither does every INR receipt qualify. CBIC Circular No. 202/14/2023-GST, dated 27 October 2023, recognizes eligible export proceeds paid in INR from designated Special Rupee Vostro Accounts of correspondent banks of partner trading countries, opened by authorized dealer banks. The clarification is subject to the conditions and restrictions in Foreign Trade Policy 2023 and applicable RBI circulars, as well as any other required permissions or approvals.
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For a proposed INR payment, verify the account route and applicable requirements for that transaction, and retain supporting bank and invoice records. The circular addresses only the payment condition; it does not establish the remaining export conditions.
What zero-rating means—and what it does not establish
Section 16 of the IGST Act treats an export of services as a zero-rated supply. Zero-rating is not the same as treating every overseas-customer invoice as exempt, and it does not automatically establish that a particular taxpayer can claim a refund. First determine whether the supply meets section 2(6); then consider the taxpayer’s registration, tax-payment route, input tax credit (ITC), documents, and applicable filing rules.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Refund routes depend on current rules and the taxpayer’s case
The current statutory framework provides routes for registered persons making zero-rated supplies, including supplying under a bond or Letter of Undertaking (LUT) without payment of IGST and claiming eligible refund of unutilised ITC, or paying IGST and claiming a refund where statutory and rules-based requirements allow it.
| Route | General framework | Important qualification |
|---|---|---|
| Bond or LUT without payment of IGST | Eligible unutilised ITC may be claimed as a refund. | An LUT does not itself guarantee a refund; eligibility and filing requirements still apply. |
| Pay IGST and seek a refund | A refund may be available where the statutory and rules-based requirements permit. | The route is restricted to prescribed classes; do not assume it is open to every exporter. |
For IGST paid on exported services, CGST Rule 96(9) directs the refund application to FORM GST RFD-01, handled under Rule 89. Check the latest Act, rules, notifications, and portal process before filing. An older CBIC sectoral FAQ describes two refund options for software exports, but it predates changes to section 16 and is not a complete statement of current eligibility. The GST Council’s IT/ITES FAQ states an 18% rate for IT services; verify the classification and current rate notifications before applying that figure to a particular service.
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- The contract, service description, deliverables, and evidence of how the work is performed.
- The identity and location of the recipient, including the role of any payer, end user, or affiliate.
- Details of any relationship between the supplier and recipient, including a branch or head-office relationship.
- Invoices, payment records, and evidence supporting the currency and payment channel.
- The basis for applying section 13(2) or any exception, particularly the intermediary rule in section 13(8)(b).
- Records relevant to the selected LUT/bond or IGST-paid route and any refund claim.
Whether a particular arrangement qualifies cannot be determined without those transaction facts. For a material classification or refund decision, verify the law and requirements applicable to the specific supply and taxpayer, and obtain case-specific tax advice where appropriate.
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