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Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →Outbyte Driver Updater FREEFix the driver behind crashes, sound loss and screen glitchesFind Drivers →A service supplied to a foreign customer is not automatically an export under Indian GST. First, it must meet all five conditions in the IGST Act’s definition of “export of services.” If it does, it is one kind of zero-rated supply—a broader category that also includes qualifying supplies to SEZ developers or units. The classification matters because zero-rating has its own input-tax-credit and refund rules.
How export of services and zero-rated supply fit together
Think of the rules as a two-step test: determine whether the transaction is an export of services under section 2(6) of the Integrated Goods and Services Tax (IGST) Act; then apply the zero-rating provisions in section 16. An export that meets the definition is zero-rated, but zero-rated supply is not limited to exports.
| Question | Export of services | Zero-rated supply |
|---|---|---|
| What is it? | A service meeting all five conditions in IGST Act section 2(6). | A category under section 16 that includes qualifying exports and specified supplies to SEZ developers or units for authorized operations. |
| Does a foreign customer establish it? | No. The recipient’s location is only one condition; the place of supply, payment receipt, supplier location and establishment relationship must also qualify. | No. The transaction must first fit a category that section 16 treats as zero-rated. |
| What follows? | If all five conditions are met, the export is zero-rated. | Eligible input tax credit and refunds may be available subject to the law, applicable restrictions and procedures. |
“Zero-rated” is not interchangeable with “exempt.” They are separate GST classifications, and zero-rating does not by itself mean there is no compliance obligation or an automatic cash refund.
Check all five export conditions
All five statutory conditions must be met together. The Telangana Commercial Taxes Department’s Handbook on Refunds under GST, January 2026, third edition, states: “Thus, in order to qualify as export of service, it is mandatory to fulfil all the 5 conditions mentioned in Section 2(6) above.”
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- The supplier is located in India. Identify the establishment most directly involved in making the supply and determine its location under the statutory rules.
- The recipient is outside India. Identify the actual recipient and the establishment receiving the service. Do not rely only on the payer’s location or the name of the contract counterparty: the recipient-location rules look to the relevant place of business, fixed establishment or usual residence in the circumstances.
- The place of supply is outside India. This is a distinct requirement, determined under the applicable place-of-supply provision for the service. A foreign customer address alone does not settle it.
- Payment is received in a qualifying form. The current wording permits payment in convertible foreign exchange or in Indian rupees wherever the Reserve Bank of India permits. The Telangana department’s January 2026 handbook reproduces this wording. Older CBIC FAQ language refers only to convertible foreign exchange and should not be treated as the complete current rule.
- The supplier and recipient are not merely establishments of a distinct person. Examine the legal identity and structure of the parties, including whether the transaction is between separate companies or between establishments of the same person.
Why place of supply can change the answer
The customer may be abroad while the place of supply, determined by the applicable statutory rule, is in India. In that case, the export test fails even if the other conditions appear satisfied. Work out the specific service and applicable rule rather than treating the customer’s billing address as decisive.
Services supplied on your own account or as an intermediary
The IGST Act’s intermediary definition covers a broker, agent or other person who arranges or facilitates a supply between two or more persons, but excludes a person supplying services on its own account. A special place-of-supply rule applies to intermediary services, so the characterization can affect export status.
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For the analysis, document what the Indian supplier actually does, who contracts with whom, and whether it provides its own service or arranges another person’s supply. The label in an agreement is not a substitute for examining the work performed and contractual relationships.
Subsidiary and branch transactions are not the same
Group affiliation alone does not determine whether the distinct-establishments condition is met. CBIC Circular 161/17/2021-GST distinguishes between an Indian-incorporated company and a foreign-incorporated company, which are separate legal persons, and establishments of the same foreign company.
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| Structure | Effect described in CBIC Circular 161/17/2021-GST |
|---|---|
| Indian-incorporated subsidiary supplies a foreign parent | The parties are separate legal persons. The shareholding relationship alone does not disqualify the service under the distinct-establishments condition. |
| Indian branch, agency or representative office supplies the foreign company’s overseas establishment | The circular treats this as a supply between distinct establishments of the same person, so it does not qualify as an export under condition (v). |
Map the actual supplier, recipient and establishments involved before applying the circular; a group chart or invoice description may not show which establishment made or received the supply.
What zero-rating means for refunds
Section 16 covers exports of goods or services and specified supplies to SEZ developers or units for authorized operations. For an SEZ service, confirm that the authorized-operations requirement and relevant endorsement and evidence are satisfied; a customer’s SEZ status alone is not enough.
Default route: supply under LUT or bond without IGST
Under the amended section 16 framework, the current default route for a registered person making a zero-rated supply is to supply without payment of IGST under a bond or Letter of Undertaking (LUT), and claim a refund of eligible unutilized input tax credit under section 54 and the rules. The claim remains subject to credit restrictions, conditions, safeguards, the prescribed calculation and procedure.
IGST-payment route: check current notified eligibility
Since the section 16 amendments effective 1 October 2023, payment of IGST followed by a refund is available only to notified classes of persons or classes of goods or services. The Telangana Commercial Taxes Department’s January 2026 handbook describes this amended framework. Do not assume that an older summary presenting both routes as generally available applies to a particular transaction; verify current notifications and the taxpayer’s eligibility.
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Records and filing points for a service-export refund
For a LUT or bond refund claim, the rules provide for an electronic application in Form GST RFD-01. Export-of-services evidence includes invoice numbers and dates and, as applicable, Bank Realization Certificates (BRCs) or Foreign Inward Remittance Certificates (FIRCs). The invoice should carry the prescribed endorsement for the route used; for a supply without payment of IGST under bond or LUT, the wording is “SUPPLY MEANT FOR EXPORT UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF IGST”.
- Keep invoice details consistent with the refund application.
- Retain applicable BRC or FIRC evidence supporting realization of payment.
- Check credit eligibility, applicable restrictions, calculation requirements and filing deadlines for the claim.
- For an SEZ supply, retain the relevant evidence and endorsement for authorized operations.
Zero-rating does not guarantee that every input credit can be refunded: eligibility, blocked-credit restrictions, documentation, deadlines and any applicable notification conditions still matter.
A practical sequence for classifying a transaction
- Identify the supplier, actual recipient and the establishments involved in performing and receiving the service.
- Determine the applicable place-of-supply rule for the service, including whether the supplier is acting as an intermediary or supplying on its own account.
- Check that the payment has been received in convertible foreign exchange or in Indian rupees where permitted by the Reserve Bank of India.
- Confirm that the parties are not merely distinct establishments of the same person.
- If all five export conditions are satisfied, apply the zero-rated framework and establish which refund route is available under current law and notifications.
- Assemble invoices, payment-realization evidence and other records required for the selected route before filing.
This is a general explanation of Indian GST classification and refund rules, not a determination of how a particular contract or supply should be treated.
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