With businesses going global, exports and imports of services have become increasingly common. Whether you’re a freelancer serving overseas clients or a company receiving services from abroad, it’s important to understand how Goods and Services Tax (GST) applies to these transactions.
In this blog, we’ll simplify the concepts of export and import of services under GST, their taxability, and how to comply with the law effectively.
🚢 1. What is Export of Services under GST?
Under GST, export of services means supplying services to a person outside India, but with certain conditions.
✅ Conditions for a service to be treated as export:
As per Section 2(6) of the IGST Act:
- The supplier is in India
- The recipient is located outside India
- The place of supply is outside India
- Payment is received in foreign currency or convertible INR
- The supplier and recipient are not merely establishments of the same person (i.e., not branches of the same company)
If all these conditions are met, it’s considered an export of service.
💵 2. Is GST Payable on Export of Services?
No, export of services is considered a Zero-Rated Supply under GST.
This means:
- GST is not charged to the client
- You can claim refund of:
- Input Tax Credit (ITC), or
- IGST paid on export (if applicable)
Two options for exporters:
- Export with LUT (Letter of Undertaking) – No GST is charged, and refund of ITC can be claimed.
- Export with payment of IGST – IGST is paid at the time of export, and later a refund is claimed.
✅ Tip: Most service exporters prefer the LUT route to avoid blocking working capital.
🌍 3. What is Import of Services under GST?
Import of services means services received by a person in India from a person located outside India, for use in India.
🧾 Examples:
- Subscribing to foreign software (e.g., Adobe, Google Workspace)
- Hiring foreign consultants
- Outsourcing digital marketing to agencies abroad
💡 4. Is GST Applicable on Import of Services?
Yes, GST is applicable under the Reverse Charge Mechanism (RCM).
Under RCM:
- The recipient in India (you) has to pay GST on the imported service.
- This applies whether or not the service provider is registered in India.
📌 GST Rate:
The applicable rate depends on the nature of the service (commonly 18%).
For example, if you hire a designer in the US to make a website for ₹1,00,000, you will need to pay ₹18,000 (18%) as GST under RCM in India.
🔁 5. Can You Claim Input Tax Credit (ITC) on Imported Services?
Yes, if you’re registered under GST and using the imported service for business purposes, you can claim ITC of the GST paid under RCM.
This means:
- You pay GST on imported services
- Then claim the same amount as ITC in your returns (set-off)
🧾 6. Compliance Requirements
For Exporters:
- File Letter of Undertaking (LUT) if exporting without IGST
- Report exports in GSTR-1
- Claim refund through RFD-01
- Keep records of foreign remittances and invoices
For Importers:
- Report imported services in GSTR-3B
- Pay GST under RCM
- Claim ITC (if eligible)
- Maintain invoices, payment proofs, and foreign contracts
📌 7. Common Challenges in GST on Export & Import of Services
| Challenge | Tip to Overcome |
|---|---|
| Misclassification of services | Review GST rules & consult a tax expert |
| Delay in receiving foreign payments | Keep track and follow RBI timelines |
| Complexity in RCM calculations | Automate using accounting software |
| Refund delays | Ensure complete documentation and follow-up |
🏁 Conclusion
Understanding GST on export and import of services is essential for businesses operating in the global market. While export is zero-rated and can earn you refunds, import requires careful GST payment under RCM.
With proper documentation and compliance, you can manage international service transactions without any hassle.
📞 Need Help with GST for International Services?
If you’re exporting or importing services and need assistance with RCM, refunds, filing LUT, or GST compliance, contact us:
📍 Taxeasy Solution
Supaul Bazar, Biraul,
Darbhanga, Bihar – 847203
📞 Mob: 6289187606
📧 Email: jhajp96@gmail.com
