A supply counts as an export of services under GST only if it meets all five conditions in Section 2(6) of the IGST Act: 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 rupees where RBI permits), and the two parties are not merely establishments of the same person. Miss one, and the invoice is a taxable domestic supply rather than a zero-rated export.
Key takeaways
- Zero-rating under Section 16 of the IGST Act applies only when every one of the five conditions is met.
- The place of supply condition is the one most often misjudged, because it follows specific rules, not simply where the client sits.
- Payment must arrive in convertible foreign exchange, or in Indian rupees where RBI permits. Unpaid invoices can unsettle export status.
- You can export under LUT (no IGST) or pay IGST and claim a refund.
- GST status and the EDF are separate. Filing an EDF does not make a supply an export for GST, and vice versa.
The five conditions at a glance
| Condition | What it asks | Quick test |
|---|---|---|
| 1. Supplier in India | You supply from a location in India | Is the invoice raised from your Indian GSTIN? |
| 2. Recipient outside India | The client is located outside India | Is the contracting party's business establishment abroad? |
| 3. Place of supply outside India | The IGST place-of-supply rules point abroad | Has your CA confirmed the rule that applies to your service? |
| 4. Payment in convertible foreign exchange (or INR where RBI permits) | Money arrives in an eligible form | Does the FIRA show foreign currency, or an RBI-permitted rupee route? |
| 5. Not merely establishments of a distinct person | You and the client are not two branches of one entity | Is the client a separate legal person, not your own office abroad? |
Now each one with the practical wrinkles.
Condition 1: the supplier is located in India
This is usually the easy one. If your registered place of business is in Pune and you raise the invoice from your Maharashtra GSTIN, you satisfy it. The question becomes interesting only when a founder lives abroad and runs the Indian company remotely, or when work is done by a team overseas but invoiced from India. In those cases, talk to your CA about where the supply is actually made from.
Condition 2: the recipient is located outside India
The recipient is the person who contracts for and pays for the service, not whoever happens to use it. If Coral Bay Media Inc in Toronto signs the contract and pays, Coral Bay is the recipient even if its Mumbai-based marketing manager briefs you.
Watch for this trap: a foreign company asks you to bill its Indian subsidiary "for convenience". The moment the Indian subsidiary becomes the contracting party, the recipient is in India and the supply is domestic.
Condition 3: the place of supply is outside India
This is where most disputes happen. Place of supply for cross-border services is fixed by specific rules in the IGST Act. For many services, the default rule looks at the recipient's location, which is why a software developer billing a US client normally qualifies.
Some services follow different rules. Services connected with goods physically in India, services tied to immovable property in India, certain event-related services and services classed as intermediary services can have a place of supply inside India even when the client is abroad. If you arrange deals between a foreign principal and third parties, or your work involves physical goods located in India, get a written view from your CA before treating the invoice as an export. Our glossary entry on place of supply gives the basic idea.
Condition 4: payment in convertible foreign exchange or permitted rupees
The money must arrive in convertible foreign exchange, or in Indian rupees where RBI permits. In practice, keep the FIRA or bank advice for every invoice, because that document shows how and in what form the payment came.
Two common situations need care:
- Payment never arrives. The supply was planned as an export, but without receipt of payment the condition is not met. Your CA will advise on how to treat it if it remains unpaid.
- Platform payouts. When a marketplace collects from the client and pays you, check how the funds arrive in your account and what your bank's remittance advice shows.
A worked example
Fernleaf Analytics Pvt Ltd in Bengaluru invoiced a Dublin client EUR 9,800 (₹9,02,000) in November 2026 under LUT. The payment arrived in January 2027 in euros through normal banking channels, and the bank issued a FIRA showing purpose code P0802.
All five conditions held: supplier in India, recipient in Ireland, place of supply outside India under the default rule for its consulting work, payment in convertible foreign exchange, and two unrelated companies. Fernleaf reported it as a zero-rated export in its GST return. Separately, it listed the invoice in its November 2026 EDF, which was due on 30 December 2026.
Condition 5: not merely establishments of a distinct person
GST treats an Indian company and its own branch abroad as establishments of the same person. If your Indian entity "bills" its own London branch, that is not an export, however real the work is. A separately incorporated subsidiary abroad is a different legal person, so this condition can be met, though related-party transactions bring their own valuation and documentation questions.
LUT or IGST paid: two ways to zero-rate
Once the five conditions are met, you choose how to zero-rate:
| Route | How it works | Invoice wording |
|---|---|---|
| Under LUT | File Form GST RFD-11, then export without charging IGST | "Supply meant for export under LUT without payment of IGST" |
| With IGST paid | Charge and pay IGST, then claim a refund | Shows IGST charged |
Most small exporters prefer the LUT route because cash is not blocked. Our guide to filing an LUT on RFD-11 covers the steps, and the free export invoice generator adds the LUT wording for you.
Where the EDF fits
The EDF is a FEMA declaration to your AD bank. It does not change your GST or income-tax position. A supply can be a FEMA export needing an EDF and still fail a GST condition (for example, an intermediary service). Treat the two checks separately, and keep one consistent set of invoice numbers across both.
This article is general information, not legal or tax advice.
Frequently asked questions
What are the five conditions for export of services under GST?
Section 2(6) of the IGST Act requires that 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 rupees where RBI permits, and the two are not merely establishments of a distinct person. All five must be satisfied.
Is a service to a foreign client always an export?
No. If the place of supply rules point to India, for instance for certain intermediary services or services on goods located in India, the supply is not an export even though the client is abroad. Confirm the applicable rule with your CA.
Does receiving payment late affect export status?
The payment condition requires receipt in convertible foreign exchange or permitted rupees. Late payment within the FEMA realisation window is common, but an invoice that is never paid may not meet the condition. Ask your CA how to treat long-unpaid export invoices.
Can I bill my own overseas branch as an export?
Not under GST. An Indian entity and its branch abroad are establishments of the same person, so condition five fails. A separately incorporated foreign subsidiary is a different person, though related-party rules then apply.
Does filing the EDF make my supply an export under GST?
No. The EDF is a FEMA requirement and does not change GST treatment. GST export status depends only on the Section 2(6) conditions.
Bottom line
Export of services under GST is a five-part test, and the place of supply condition deserves the most attention. Check all five, choose LUT or IGST-paid, and keep FIRAs on file for every invoice. When you are ready to bill, the free export invoice generator prints compliant LUT wording automatically.
This guide is general information for Indian businesses, not legal or tax advice. Rules and bank processes change — confirm specifics with your AD bank or chartered accountant.