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A foreign client does not, by itself, make a services sale an export under India’s GST rules. Under section 2(6) of the Integrated Goods and Services Tax (IGST) Act, all five conditions must be met: the supplier is in India, the recipient is 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 (RBI) permits, and the parties are not merely establishments of a distinct person.
The practical test is to identify the actual service and recipient, apply the right place-of-supply rule, and then check payment and the parties’ legal relationship. A failure on any one condition means the supply does not meet the statutory definition of an export of services.
Apply the five conditions to the actual transaction
Section 2(6) of the IGST Act makes export status a cumulative test, not a label determined by the customer’s country, invoice wording, or currency alone. Work through each condition using the contract, the work actually performed, the recipient establishment, and payment records.
- The supplier is in India. Identify the person supplying the service and confirm that the supplier is located in India.
- The recipient is outside India. Identify the person receiving the service and the relevant place of business or fixed establishment. CBIC’s Sectoral FAQs also describe how to determine the recipient’s location where there is no place of business, and address cases where an unregistered recipient’s address is unavailable in the supplier’s records.
- The place of supply is outside India. Apply the specific place-of-supply provision for the service. Do not assume the recipient’s overseas location decides this condition; exceptions can locate the supply in India.
- Payment meets the statutory condition. Consideration must be received in convertible foreign exchange or in Indian rupees where the RBI permits that route. The payment channel matters.
- The parties are not merely establishments of a distinct person. Examine whether the supplier and recipient are separate incorporated entities or establishments of the same person, such as a branch and head office. Relatedness alone does not answer this question.
The statutory reference is section 2(6) of the IGST Act, 2017. Check the current statutory text and applicable rules when assessing a live transaction.
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Determine the place of supply before deciding whether to charge GST
For a service supplied when either the supplier or recipient is outside India, section 13 of the IGST Act generally places the supply where the recipient is located. But the section contains special rules. If one applies, it can override the general rule and cause the place of supply to be in India, so the third export condition is not met.
Check for a specific exception
Section 13(8) locates intermediary services, certain services by banks or financial institutions to account holders, and specified short-term hiring services at the supplier’s location. This means that an overseas customer and payment from abroad do not establish export status if the applicable place-of-supply rule locates the service in India.
CBIC’s Circular No. 165/21/2021-GST addresses invoice QR-code treatment for supplies whose place of supply is in India. It illustrates the distinction between payment in foreign exchange or permitted rupees and the separate legal question of whether the service qualifies as an export. Payment currency cannot repair a failed place-of-supply condition.
Assess whether you are supplying a service or arranging someone else’s
The intermediary question is especially important for IT/ITES, support, marketing, back-office, and commission arrangements. The name used on an invoice is not decisive. Map what the supplier has agreed to do, what it actually does, and whether it supplies services on its own account or arranges or facilitates a supply between other parties.
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Random freezes, missing sound and display glitches usually trace back to one bad driver. Find and replace yours safely.Free scan · under a minuteCBIC Circular No. 107/26/2019-GST says intermediary status must be determined from the facts and circumstances, including which set of services is the principal or main supply. It does not make every IT/ITES or support service an intermediary service, nor does it rule out intermediary status for any particular industry. If the service is an intermediary service under the statutory test, section 13(8)(b) places it at the supplier’s location; the recipient’s overseas address and the payment route do not change that result.
Questions to resolve from the contract and actual work
- What service has the Indian supplier undertaken to provide, and who receives it?
- Does the supplier deliver that service on its own account, or arrange or facilitate a supply made by another person?
- Which service is the principal or main supply in the arrangement?
- Do the supplier’s actual functions match the contractual description?
Check the payment route, including permitted rupee receipts
The statutory condition is not that every export payment must arrive in foreign currency. Section 2(6) also permits receipt in Indian rupees wherever the RBI permits it. CBIC Circular No. 88/07/2019-GST addresses this rupee-payment provision and confirms that the relevant payment must follow RBI guidelines.
That does not mean every INR receipt qualifies. Verify the actual payment channel against the applicable RBI requirements; the cited clarification does not establish a complete list of permitted routes. Older examples in CBIC’s Sectoral FAQs concerning payments through NRE accounts should be read as examples tied to their stated circumstances, not as a universal rule that all rupee receipts fail the statutory test.
Distinguish a foreign group company from a branch or head office
The fifth condition concerns establishments of a distinct person; it is not a blanket ban on exports to related companies. Under CBIC Circular No. 161/17/2021-GST, an Indian-incorporated subsidiary, sister concern, or group concern is not automatically excluded from export treatment merely because it supplies a foreign group company. The actual legal relationship and the other four conditions still need to be assessed.
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Clear out junk files and repair common Windows errorsFree Scan →Scan for outdated or missing drivers - takes under a minuteDriver Scan →A branch and its head office can produce a different result because they may be establishments of the same person. CBIC’s Sectoral FAQs describe certain services supplied by an Indian bank to its offshore branch or head office as an inter-state taxable supply that is not an export because the distinct-establishment condition is not met. The example shows why an overseas location for the recipient, even if relevant to place of supply, cannot substitute for checking all five conditions.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Compare common fact patterns on the points that change the result
| Question | Fact pattern A | Fact pattern B |
|---|---|---|
| What does the supplier do? | Supplies its contracted service on its own account. | May arrange or facilitate another person’s supply; intermediary status depends on the arrangement and actual functions. |
| Which place-of-supply rule applies? | The general section 13 rule generally uses the recipient’s location. | A specific exception, including section 13(8)(b) for intermediary services, may locate the service at the supplier’s location. |
| How are the parties related? | Indian incorporated company supplies a foreign group company; relatedness alone does not disqualify export treatment. | Indian branch and foreign head office may be establishments of a distinct person, potentially failing the fifth condition. |
| How is payment made? | Convertible foreign exchange. | Indian rupees, which count only where the RBI permits the payment route. |
These comparisons identify issues to verify; none is a stand-alone determination of export status. The statutory conditions still apply together.
Keep export status separate from the procedure for supplying without IGST
Qualifying as an export and using a procedure to supply without payment of IGST are related but distinct questions. CBIC states that an exporter supplying without payment of IGST uses a bond or Letter of Undertaking (LUT) under Rule 96A. The cited version of Rule 96A, in the CGST Rules amended as of 1 January 2022, provides a one-year period after the invoice for receipt of service-export proceeds, subject to extension and the rule’s other details.
Because that rule text is dated, verify the current rule, filing requirements, and any refund procedure that applies before acting. An LUT or bond does not turn a transaction that fails one of the five statutory conditions into an export.
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What to assemble before making a filing or tax decision
- The contract and a clear description of the service actually performed.
- Evidence identifying the recipient and the establishment that receives the service.
- An analysis of the applicable section 13 place-of-supply rule, including any relevant exception.
- For potentially intermediary work, the roles of each party and whether the supplier acts on its own account or facilitates another supply.
- Documents showing the supplier-recipient relationship, including whether either is a branch, head office, or separately incorporated company.
- Invoice and remittance evidence, plus confirmation that any INR payment route is permitted by the RBI.
The result can turn on the arrangement and actual conduct, not just labels. For a transaction affecting registration, invoices, an LUT, refunds, or material tax exposure, have an Indian GST professional review the facts and current law.
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