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

---

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.

---

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.

---

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.

---

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.

---

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.

---

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

---

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.

---

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

---

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.

---

---