GST on export of services for freelancers: LUT, zero-rating and the paperwork

Almost every guide to freelancing abroad skips the part that actually causes problems: the twelve months after you send the invoice.

Export of services is zero-rated. That single sentence hides three obligations — define the supply correctly, report it, and prove you were paid in foreign exchange. This page walks through the first two; the payment routes are covered in how to get paid.

When your work is an export

A supply of services qualifies as an export when all of these are true:

1. You, the supplier, are in India.
2. The recipient is outside India.
3. The place of supply is outside India.
4. You receive payment in convertible foreign exchange, or in Indian rupees where the RBI has permitted it.

The fourth condition is where freelancers get caught. An invoice to a foreign client paid into an Indian rupee account by a domestic intermediary is not automatically an export. If the contract is with an Indian entity, the supply is domestic regardless of who ultimately consumes it.

Two common patterns that still qualify:

• A US company contracts you directly and pays in dollars to your Indian account.
• A foreign marketplace collects from end customers abroad and remits to you in foreign currency.

Two patterns that usually do not:

• You invoice an Indian subsidiary of a foreign company, in rupees. That is a domestic supply.
• You invoice a foreign entity but the money is routed from an Indian account without a foreign-exchange leg.

When the structure is ambiguous, document it: the signed contract, the invoice currency, and the remittance advice all need to tell the same story.

Zero-rated, not exempt

The practical difference for a freelancer is the input tax credit. If you pay for cloud hosting, software subscriptions or a laptop and you are registered, that tax is recoverable against your other supplies — and on exports it is refundable. Filing as exempt throws that credit away.

The LUT decision

You have two ways to invoice an export:

With an LUT. File Form RFD-11 on the GST portal, get an acknowledgement with an ARN, and quote that ARN on every export invoice. You charge no IGST. This is the default for freelancers and the only route that keeps cash flow sane.

Without an LUT. You charge IGST at the applicable rate, pay it, then file a refund application with the shipping bill or, for services, the relevant statements and FIRC. It works. It also means funding the tax for months.

The LUT is valid for a financial year and must be renewed annually — a detail people remember in April when their first invoice of the year is rejected by the client’s finance team.

The export invoice

For services you do not need a shipping bill. You do need an invoice that satisfies the GST invoice rules and states clearly that the supply is for export without payment of integrated tax. At minimum:

• Your legal name, address and GSTIN
• A consecutive invoice number and the date
• The client’s name, address and country
• Description of the service and the period it covers
• Currency, amount and the exchange rate you used
• The LUT acknowledgement reference
• A declaration that the supply is meant for export without payment of IGST

The invoice format guide has a copy-ready layout.

Proving you were paid

The tax position is only half of it. Keep, for every export invoice:

• The bank credit or provider receipt showing the inward remittance
• The FIRC or FIRA from your bank, or the provider’s equivalent
• The contract or purchase order
• A reconciliation sheet matching invoice number to remittance reference

If a payment arrives net of fees, reconcile the difference in the sheet rather than adjusting the invoice. The invoice value is the export value; bank charges are an expense.

The presumptive option

Many independent professionals file under presumptive taxation, declaring a fixed percentage of gross receipts as income instead of maintaining detailed books. It reduces compliance work, but it does not remove the GST obligation, and it does not remove the requirement to keep export evidence.

Whether it suits you depends on your expense ratio and your other income. That is a conversation with a chartered accountant, not a blog post.

A calendar that prevents panic

• April — renew the LUT before the first export invoice of the financial year.
• Every invoice — check the client name, currency, LUT reference and the export declaration.
• Every month — reconcile receipts against invoices; chase missing FIRCs immediately, not in March.
• Every quarter — confirm cumulative turnover against the registration threshold, and check that no export is nearing the one-year realisation window.

General information, not tax advice. Rates, thresholds and forms change; verify against the GST portal and with a chartered accountant before filing.