An unexpected issue emerged, in which it was stressed that technicalities made via the Department and not the assessee must not be put forth by the department to defeat the legal rights and entitlements of the assessees.

It was carried out by the Bombay High Court that the related Revenue officials (respondent) could not refuse the advantage of the accrued Input tax credit to the taxpayer (applicant) merely because the specified forms had not been furnished electronically but furnished manually.

Since the GST ITC-02 Form was not available for electronic filing, neither the applicant nor TDN could be held responsible for not submitting Form GST ITC-02 electronically on the department’s common portal, the Court stated.

Consequently, the Division Bench of Justice M.S. Sonak and Justice Jitendra Jain asked the respondents to regard the manually filed forms via the TDS as expeditiously as feasible.

The bench therefore specified that if on the due consideration of manual forms the respondents still discovered that the ITC of Rs 18,30,58,995 was not due or was claimed erroneously of and used by the applicant, they are free to pass a relevant order.

Case Facts

The applicant has the business of providing internet services, entered in the Business Transfer Agreement (BTA) with Tikona Digital Networks (TDN), where TDN business was transferred before the applicant as a present concern. Hence TDN approached the AO jurisdictional notifying them of the non-availability of Form ITC-02 functionality on the department’s common portal.

TDN has the objective to transfer unused credit in its electronic credit ledger on the date of slump sale before the applicant. However as Form ITC-02 was not available till now on the GSTIN portal for filing, TDN can not follow with the electronic filing need of the mentioned form.

The applicant in the second half of the year 2017 claimed the ITC to the tune of Rs 18.30 crores. As the respondents do not incur the available electronic facility to file Form GST ITC-02, the applicant has furnished the form manually.

The applicant has received a notice after 6 years alleging that the applicant has erroneously claimed and used the ITC of Rs 18 crores, as the applicant manually furnished the forms. Therefore the applicant has approached the HC contesting the notice and the demand asked from the Respondent department.

High Court Observations

The Bench remarked that the only claim made in the show cause notice is related to the non-electronic submission of Form GST ITC-02 on the department’s shared portal.

The Bench expressed the view that these allegations would be valid if the Department’s shared portal were operating properly, allowing TDN or the petitioners to submit Form GST ITC-02 electronically through it.

The Bench acknowledged that the TDN or the petitioner was unable to submit Form GST ITC-02 on the department’s shared portal during the applicable period due to functionality problems associated with that portal.

Therefore the Bench noted that after the same has been considered that Form GST ITC-02 was not e-filed on the shared portal of the department as it was not operational to generate and accept the Forms, the issuance of the Show cause notice (SCN) is to practice of excessive jurisdiction under the CGST act and the rules.

The Bench noted that the petitioner only claimed the ITC after the CA’s certificate was submitted, which confirmed that the business transfer from TDN to the Petitioner included specific provisions for transferring liabilities.

Respondents can have processed the forms and wished on the issued of ITC if they had problems with the Form GST ITC-02 or GSTR-3B manual filing, the bench said.

The bench outlines that the respondents on the specious plea can not have avoided processing the manual return that Section 18(3) & Rule 41(1) of the CGST Act and Rules identify only electronic filing and not manual filing.

Similarly, the Bench determined that the Allahabad High Court observed that, at the time when BTA transferred its business along with liabilities to the petitioner, the option to file Form IT-02 was not accessible on the department’s common portal, thus ruling that the petitioner should not be denied the ITC.

Moreover, the Gujarat High Court, Delhi High Court, and Bombay High Court determined under the same conditions that the Department’s failure to recognize and transfer the ITC owed to the petitioner was highly unlawful, the Bench noted.

It was therefore specified that the respondents were bound from duty to take cognizance of the decisions of the Allahabad, Gujarat, and Delhi High Courts in dealing with the almost same problem related to the applicant, the Bench quashed the SCN asking for the ITC and permitted the petition of the taxpayer.

It was specified by the Bench that if the respondent concludes that the Input tax credit (ITC) was claimed erroneously. Then the respondents can take action by complying with natural justice.

1. NRI Meaning:

• Non-Resident Indian (NRI) refers to an Indian citizen or a person of Indian origin who resides outside India for employment, business, or any other purpose indicating an indefinite stay abroad.

2. NRI Status Calculation Process:

• NRI status is determined based on the individual’s physical presence in India during a financial year (April 1 to March 31).
• If an individual stays in India for less than 182 days in a financial year, they are considered an NRI for that year subject to meet out other conditions of status determination

3. Income Tax Applicable to NRIs:

• NRIs are taxed on income earned or accrued in India, such as income from property, capital gains, interest, dividends, etc.
• Income earned outside India is generally not taxable in India for NRIs.
• The tax rates applicable to NRIs are the same as those for residents of India.

4. Interest in NRE and NRO Accounts:

• NRE (Non-Resident External) accounts: Funds in NRE accounts are freely repatriable (can be transferred abroad) and are exempt from Indian taxes, including interest earned.
• NRO (Non-Resident Ordinary) accounts: Funds in NRO accounts are not freely repatriable, and the interest earned is subject to Indian taxes.

5. Double Taxation Avoidance Agreements (DTAA):

• DTAA aims to prevent double taxation of income in two countries.
• NRIs can benefit from DTAA provisions by claiming tax credits or exemptions in one country for taxes paid in the other country.

6. High-Value Transactions to be Kept in Mind by NRIs:

High-value transactions for NRIs can include various activities or financial transactions that involve significant sums of money or assets. Here are some examples of high-value transactions that NRIs should be mindful of:

Property Transactions:

• Purchase or sale of real estate: NRIs investing in or disposing of property in India should be aware of the high value associated with real estate transactions. This includes buying, selling, or gifting property.
• Rental income: NRIs earning rental income from properties in India should keep track of the high-value transactions associated with rental payments, lease agreements, etc.

Investments:

• Stock Market Investments: NRIs investing in the Indian stock market may engage in high-value transactions through buying or selling shares, mutual funds, or other securities.
• Fixed Deposits and Financial Instruments: Investments in fixed deposits, bonds, debentures, and other financial instruments may involve significant sums of money.

Banking and Remittances:

• Transfer of Funds: NRIs transferring large sums of money to or from India for investment, business, or personal purposes should be aware of the high-value nature of these transactions.
• Foreign Currency Accounts: Opening or closing foreign currency accounts, especially NRE and NRO accounts, involves high-value transactions that NRIs should monitor.

Loans and Borrowings:

• Loans and Mortgages: NRIs obtaining loans or mortgages from Indian banks or financial institutions for property purchase or other purposes may involve high-value transactions.
• Repayment of Loans: NRIs repaying loans or mortgages to Indian lenders also constitutes high-value transactions.

Business Transactions:

• Setting up Business Entities: NRIs establishing businesses or investing in Indian companies may engage in high-value transactions related to company formation, capital infusion, etc.
• Commercial Contracts: Business agreements, contracts, and transactions involving significant monetary values should be carefully documented and monitored.

Tax Payments and Compliance

• Payment of Taxes: NRIs fulfilling their tax obligations in India, including payment of income tax, property tax, or other levies, may involve high-value transactions.
• Compliance Reporting: Meeting reporting requirements for high-value transactions, such as filing tax returns, disclosing foreign assets, and complying with regulatory norms, is essential for NRIs.

7. Tax Filing for NRIs:

• NRIs are required to file income tax returns in India if their total income exceeds the basic exemption limit.
• Even if income is below the taxable threshold, filing a return may be necessary to claim a refund of taxes withheld at source or if certain types of income (like capital gains) are involved.
• Timely filing of tax returns and compliance with reporting requirements are crucial for NRIs to fulfill their tax obligations in India.

For personalized advice and assistance with tax matters, NRIs should consult with qualified tax professionals or chartered accountants familiar with Indian tax laws and regulations pertaining to NRIs.

The GST Council concluded its discussion and held a press briefing at 3:30 P.M on October 7, 2023, to announce the following outcomes:

1. Regarding the formation of the GSTAT (Goods and Services Tax Appellate Tribunal), the Finance Minister stated that the council had previously made decisions. In this meeting, they recommended amending the law to set a maximum age limit of 70 years for the President and 67 years for members, with a minimum age requirement of 50 years. The age limit for members has been raised from 65 to 67, and for the President, it has been increased from 67 to 70 years. Additionally, advocates with up to 10 years of experience can now be appointed as judicial members of GSTAT.
2. Millet flour blended with other atta, comprising 70% millets under HS1901, will be subject to nil GST when sold unpackaged or in loose form, and 5% GST when pre-packaged or labeled.
3. Regarding the taxation of Extra Neutral Alcohol (ENA) used in alcoholic beverages, the Allahabad High Court ruled that states do not have the authority to tax ENA after the 101st Constitutional Amendment. The GST Council retains the right to tax ENA by law, but it has granted this right to states despite the court ruling.
4. The GST rate on molasses has been reduced from 28% to 5%, benefiting sugarcane farmers and lowering the cost of cattle feed.
5. Rectified spirit for industrial use will now have a separate HSN code, and an 18% tax will be applicable to ENA for industrial use.
6. To boost tourism, foreign-flagged/owned or foreign-going vessels will receive a conditional GST exemption of 5% if they operate in India’s coastal areas during the upcoming winter season.
7. An extension has been granted for the GST Amnesty Scheme, allowing appeals to be filed until January 31, 2024, with enhanced pre-deposit. An additional 2.5% pre-deposit will be charged for the extended period, payable from the electronic cash ledger.
8. Zari will be taxed at a 5% rate instead of 18% under GST.
9. Job work services related to the processing of barley into malt will attract a 5% GST rate for food and food products but 18% for the production of alcoholic beverages.
10. Exemptions have been provided to Government Authorities for services related to water supply, public health, sanitation, conservancy, solid waste management, slum improvement, and upgradation. This also applies to composite services involving up to 25% of the mentioned services. Clarification has been given regarding the eligibility of the District Mineral Foundation Trust (DMFT) for these exemptions.
11. All services provided by Indian Railways will be subject to forward charge, with Input Tax Credit (ITC) available for discharging liabilities.
12. The GST Rules will now specify a one-year time limit for the provisional attachment of property to avoid practical difficulties during property release from banks after one year.
13. The Finance Minister clarified that there were no discussions on GST rate rationalization or Input Tax Credit (ITC) recoveries.
14. Currently, 18 states have passed amendments to impose a 28% GST on gaming companies starting from October 1, 2023, along with corresponding GST Rules. Thirteen states are yet to pass such amendments.
15. The Revenue Secretary clarified that when a director provides a corporate guarantee to a company, it does not attract GST unless there is specific consideration. However, if a company provides a corporate guarantee to its subsidiary, 1% of the total guaranteed amount is considered as value and attracts an 18% GST.

Updated on 23rd February 2026

 

GST on Export of Software & IT Services from India – Complete Guide

 

Export of software and IT services from India is treated as a zero-rated supply under GST, subject to fulfillment of specific legal conditions. This allows exporters to supply services without GST burden while claiming refund of eligible input tax credit (ITC).

This guide explains GST applicability, legal conditions, LUT, invoicing, refund process, and compliance requirements for software service exporters in a clear and practical manner

Understanding GST for Freelancers in India

 

In India, Goods and Services Tax (GST) is applicable to the services provided by freelancers, as per the GST law. Freelancers are considered as service providers operating in the course or furtherance of business, making their services taxable under GST.

If a freelancer’s annual turnover exceeds ₹20 lakhs (₹10 lakhs for special category states), GST registration becomes mandatory. However, if a freelancer is engaged in the export of services, GST registration is required irrespective of turnover.

Once registered, freelancers must charge 18% GST on their taxable services. However, some services attract a lower rate or may be exempt from GST altogether.

Legal Provisions Governing Export of Software Services

• Section 2(6) of IGST Act – Definition of Export of Services

• Section 16 of IGST Act – Zero Rated Supply

• Section 13 of IGST Act – Place of Supply (when recipient outside India)

• Section 7 of IGST Act – Inter-State Supply

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Export of Services and GST Compliance

 

What Qualifies as Export of Services?

Export of services is classified as zero-rated supply under GST, meaning no GST is levied, but exporters can claim Input Tax Credit (ITC) on the GST paid for inputs and input services.

As per Section 2(6) of the IGST Act, for a service to qualify as an export of service, the following conditions must be met:

1. Supplier of service is located in India.
2. Recipient of service is located outside India.
3. Place of supply of service is outside India.
4. Payment for such service is received in convertible foreign exchange or in INR, as permitted by the RBI.
5. Supplier and recipient must not be merely distinct establishments of the same person (as per Section 8 of the IGST Act).

Important: Place of Supply for Software Services

• Under Section 13(2), place of supply is location of recipient (if recipient outside India).

• But if service qualifies as “intermediary” under Section 13(8), place of supply becomes location of supplier → GST becomes payable in India.

• Many IT companies wrongly classified as intermediary and faced 18% GST demands.

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How to Export Services Without Paying GST?

 

Freelancers and businesses exporting services have two options to avoid paying GST at the time of export:

1. Furnishing a Letter of Undertaking (LUT)

Freelancers and businesses with a good compliance history can submit an LUT to the GST department. This allows them to export services without paying GST upfront while still being eligible to claim Input Tax Credit (ITC).

2. Paying GST and Claiming a Refund

If a freelancer does not furnish an LUT, they must pay GST on the export of services and later claim a refund by filing a refund application in Form GST RFD-01.

👉 Key Note: Every payment received from a foreign client does not qualify as export of services. If any of the conditions under Section 2(6) of the IGST Act are not met, the transaction is treated as a domestic supply and becomes taxable under GST.

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GST Treatment on Export of Software and IT Services – Practical Scenarios

Export of software and IT services from India is treated as a zero-rated supply under GST when legal conditions are satisfied. The table below explains how GST applies in common real-world IT export situations.

GST Treatment Scenarios for Software & IT Service Exports

 

These examples help determine whether a software or IT service qualifies as export under GST.

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Example: GST Compliance for Software & IT Service Exporter

Example: An Indian IT services company provides cloud integration and software development services to a client in Australia.

Facts:

• Supplier located in India

• Recipient located outside India

• Services delivered electronically

• Payment received in USD

• LUT filed on GST portal

GST Treatment:

• Classified as export of IT services

• Zero-rated under GST

• Invoice raised at 0% GST

• Eligible for refund of ITC on expenses like cloud hosting, SaaS tools, professional fees

This structure is fully compliant with GST law for export of software and IT services.

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LUT vs IGST Payment for Software & IT Services Export

 

 

Software and IT service exporters can choose either route. The comparison below helps decide.

For most software and IT service exporters, LUT is the preferred route.

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Documents Required for Export of Software and IT Services Under GST

Maintaining proper documentation is essential to avoid refund rejection.

For a full suite of GST compliance services including registration and return filing, explore our GST Services page

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Common GST Mistakes by Software & IT Service Exporters

Many IT exporters face GST notices or refund delays due to:

• Treating IT service exports as exempt instead of zero-rated

• Not filing LUT before raising export invoices

• Incorrect place of supply determination for IT services

• Missing or delayed foreign remittance proof

• Incorrect reporting of export turnover in GST returns

Avoiding these mistakes ensures smooth GST compliance.

GST Return Filing for Export of Services

Freelancers and businesses exporting services must comply with regular GST return filings to remain compliant and claim ITC or refunds. The key GST returns are:

1. GSTR-3B (Monthly/Quarterly Filing)

• Must be filed on a monthly or quarterly basis based on turnover.
• Exported services must be reported in Table 3.1(d) of GSTR-3B.

2. GSTR-1 (Details of Outward Supplies)

• Filed monthly or quarterly based on turnover.
• Exported services must be reported in Table 6A of GSTR-1.

3. Invoice & Document Maintenance

Export invoices must comply with GST rules and should include:

• Clear mention of “Supply meant for export under LUT without payment of IGST” or IGST payment reference

• Name, address, and country of recipient outside India

• Invoice value in foreign currency

• GSTIN and LUT number (where applicable)

• Correct place of supply declaration

Supporting documents such as FIRC or bank realization proof should be preserved.

Besides GST export compliance, many exporters also require an Import Export Code (IEC) — read our detailed IEC registration guide.

4. GST Refund for Exported Services

• If GST is paid, a refund can be claimed via Form GST RFD-01.
• If LUT is filed, no GST is paid, but ITC can still be claimed.

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Additional Insights: GST for Freelancers in Special Cases

1. GST on Freelancers Providing Services to Indian Clients

• If a freelancer provides services within India, GST is charged at 18% (unless the service is exempt).
• Reverse charge mechanism (RCM) may apply for specific services.

2. GST on Freelancers Receiving Payments from Foreign Clients

• Every transaction must meet the export criteria to be zero-rated.
• If the criteria are not met, GST must be charged at 18% even for foreign clients.

3. GST Exemptions for Freelancers

Some services like education, healthcare, and specific government-related services may be exempt from GST. Always check the latest GST rate notifications.

Step-by-Step GST Compliance for Export of Software Services & IT Services

• GST registration (mandatory even if turnover below ₹20 lakh for exports)

• Apply LUT before exporting

• Raise export invoice without GST

• Report in GSTR-1 (Table 6A)

• Report in GSTR-3B under zero-rated supplies

• File refund application (RFD-01)

• Maintain FIRC/BRC proof

Common Mistakes in GST on Software Export

• Treating export as exempt instead of zero-rated

• Not filing LUT before export

• Misclassifying intermediary services

• Not reconciling GSTR-1 and 3B before refund claim

• Delay in refund due to invoice mismatch

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FAQs on GST for Freelancers in India

Q1: Is GST registration mandatory for freelancers in India?

👉 Yes, if your turnover exceeds ₹20 lakhs (₹10 lakhs for special category states). However, GST registration is mandatory for exporters irrespective of turnover.

Q2: What is the GST rate on freelance services?

👉 The standard GST rate for freelance services is 18%. Some services may be exempt or attract a lower rate.

Q3: Can freelancers claim Input Tax Credit (ITC)?

👉 Yes, freelancers registered under GST can claim ITC for GST paid on business-related expenses.

Q4: How can freelancers export services without paying GST?

👉 By submitting an LUT to the GST department, freelancers can export services without paying GST.

Q5: Can freelancers claim a GST refund?

👉 Yes, if they have paid GST on exported services, they can claim a refund via Form GST RFD-01.

Q6: What happens if I receive payments from a foreign client but don’t meet export conditions?

👉 If your transaction does not meet the conditions of export under Section 2(6) of IGST Act, then it is treated as a domestic taxable service, and GST at 18% is applicable.

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43rd Council Meeting Announcement – Dated 28th May 2021-

GST Amensty Scheme Announed For Pending Return From July 17 to April 21

1) अगर किसी की टैक्स Liability नही है तो उसकी लेट फ़ीस 500 लगेगी

2) अगर किसी की टैक्स liability है तो उसकी लेट फ़ीस 1000 लगेगी

लेकिन डीलर को अपना पेंडिंग रिटर्न GSTR 3B 01st June से 31st Aug के बीच भरना होगा

Late Fees for Future Return :-
1) अगर किसी का Output Tax नही है तो 500 Per Return होगी

2) जिसका पिछले साल sales 1.5 Cr है, उसकी 2000 Late Fees होगी Per Return

3) जिसका पिछले साल sales 1.5 Cr से 5 Cr है, उसकी late fees 5000 होगी

4) जिसका 5 Cr से ज़ायद है उसके लिए 10000 होगी

5) Composition वालों के लिए अगर टैक्स liability नही है तो 500 और अगर टैक्स है तो 2000 होगी GSTR 4 के लिए

6) GSTR 7 के लिए ये 50 Per day और maximum 2000 होगी