GST for Freelancers With Foreign Clients — Export of Services, LUT and Zero-Rating

If you are an Indian freelancer billing clients in the US, UK, EU or anywhere outside India, you are almost certainly exporting services. Done correctly, those invoices attract 0% GST. Done incorrectly, you end up paying 18% IGST out of pocket, fighting a slow refund or — worse — getting flagged in scrutiny. Here is the full picture, end to end.

1. Is your service an "export of services" under IGST law?

Section 2(6) of the IGST Act, 2017 sets five cumulative conditions for export of services. All five must be met:

• The supplier is located in India.
• The recipient is located outside India.
• The place of supply is outside India — determined under Section 13 IGST Act.
• Payment is received in convertible foreign exchange (or INR where permitted by RBI).
• The supplier and recipient are not merely establishments of a distinct person.

The Section 13 default rule is that the place of supply is the location of the recipient. So if your client is a US company with no Indian establishment and pays you in USD, you almost always meet the test.

2. Zero-rated supply — what Section 16(1) IGST actually means

An export of services is a "zero-rated supply" under Section 16(1)(a). Zero-rated is not the same as exempt: you still issue an invoice, report it in your returns and claim ITC on related inputs. You simply charge GST at 0%. There are two routes to do this — supply under a Letter of Undertaking (LUT) without paying tax, or supply on payment of IGST and then claim a refund.

3. LUT vs. bond — why LUT is always the better choice

Under Rule 96A of the CGST Rules, registered exporters can supply without paying IGST by filing a Letter of Undertaking in Form RFD-11. It is fully online, free, and valid for one financial year. A bond is only required where the LUT route is denied (typically for taxpayers with a tax-evasion prosecution of Rs2.5 crore or more in the last five years) and must be backed by a bank guarantee of up to 15% of the bond amount. For 99% of freelancers, LUT is the only sensible route.

4. How to file LUT on the GST portal

• Log in to gst.gov.in → Services → User Services → Furnish Letter of Undertaking (LUT).
• Select FY 2026–27 (file before your first export invoice of the year).
• Fill in two witnesses' details (name, occupation, address).
• Sign with DSC (companies / LLPs) or EVC (proprietors).
• Download the ARN acknowledgement — keep on file.

5. Invoicing correctly

Your foreign-client invoice should carry: your name, address and GSTIN; client name, address and country; invoice number and date; description of services; amount in USD/GBP/EUR; the words "SUPPLY MEANT FOR EXPORT OF SERVICES UNDER LUT WITHOUT PAYMENT OF INTEGRATED TAX"; your LUT ARN; SWIFT/IBAN for payment; and a clear "Place of Supply: [Country] — Export of Services". Do not charge GST on the invoice itself.

6. GSTR-1 and GSTR-3B treatment

• GSTR-1: report under Table 6A — "Exports". Tick "Without payment of tax" if filed under LUT.
• GSTR-3B: report the taxable value under Table 3.1(b) — "Outward taxable supplies (zero rated)". Tax columns remain zero under LUT.
• ITC on Indian inputs (laptop, internet, software subscriptions) continues to be available against your domestic output liability, if any.

7. FEMA realisation condition

Under FEMA, service export proceeds must be realised and repatriated within 9 months of the invoice date. Your AD-category bank credits the foreign currency, applies the correct RBI purpose code and issues a FIRC / e-FIRA as proof of receipt. Keep these on file for 8 years.

8. Common mistakes

• Treating export as "exempt" — wrong. Exempt blocks ITC and is reported in a different GSTR-3B row.
• Forgetting to renew the LUT in April — any invoice raised after the lapse is taxable.
• Getting the place-of-supply wrong when the client has an Indian liaison office — that can convert your export into a domestic supply.
• Receiving payment in INR via a non-AD route — breaks the "convertible foreign exchange" condition.

For a full walkthrough of LUT filing and invoice formats see our GST Export of Services — LUT service page, or read our deeper guide at Export of Services GST — LUT Filing Guide. If you bill foreign clients, see also our International Invoicing & Remittance Support.

Frequently Asked Questions