Foreign clients without the GST leak: export of services and the LUT

A freelancer billing a client in another country expects the invoice to come clean of domestic tax. It usually does, but only when five separate conditions line up at once. Miss one, and what you assumed was an export stops counting as one under the GST Act.

The five conditions, all of them, every time

• The supplier is located in India.
• The recipient is located outside India.
• The place of supply of the service is outside India.
• Payment is received in convertible foreign exchange, or in Indian rupees wherever the Reserve Bank permits it.
• The supplier and the recipient are not merely establishments of a distinct person, as defined in Explanation 1 to section 8.

Zero-rated gives you two ways to get there

A registered person making a zero-rated supply chooses between two routes. File a Letter of Undertaking and bill without charging IGST at all, claiming a refund of whatever input tax credit goes unused. Or charge IGST on the invoice and claim a refund of the tax paid afterward. For a freelancer with little input tax credit sitting on the books, the second route means paying tax you never wanted to charge and then waiting for it back. The Letter of Undertaking route skips that step entirely.

The Letter of Undertaking is not an approval you wait on

• Filed as FORM GST RFD-11, on your letterhead, in duplicate.
• Open to every registered person except those prosecuted for tax evasion above ₹2.5 crore. Almost everyone qualifies.
• Valid for the whole financial year in which you furnish it. One filing covers every invoice that year.
• Deemed accepted if the department has not responded within three working days.

That last point is worth sitting with. Most people picture a government filing as something they wait on. This one accepts itself by default if nobody objects inside three working days.

The payment clock people get wrong

Rule 96A gives you one year from the invoice date to actually receive payment, or the tax and interest you avoided charging becomes payable after all. That deadline can stretch further if the Reserve Bank or FEMA permits a longer collection period, or if the Commissioner allows more time on request. A three-month figure circulates online as the deadline for export payments, and it is wrong for services. Three months is the goods clause, a different sub-rule entirely. If a client sits on your invoice for five months, you are still inside the year.

Miss the year and the Letter of Undertaking facility gets withdrawn. The withdrawal is not limited to the overdue invoice; it applies going forward until you pay what is owed, and then it is restored immediately.

Where the client sits usually decides where the supply happened

Section 13 sets the default place of supply at the recipient's location. For a freelancer sending finished work to a client abroad, that ordinarily puts the place of supply in the client's country, which is exactly what the third condition above needs.

The intermediary trap is no longer in the text

Freelancers who connect a client to someone else, rather than delivering the work themselves, used to sit inside a separate rule. The old section 13(8)(b) pinned an intermediary's place of supply to India regardless of where the client sat or which currency paid the invoice. That killed zero-rating for anyone doing agency-style work even when every other condition above was met.

That clause was removed by section 157 of the Finance Act 2026, which reads simply that in section 13 of the IGST Act, in sub-section (8), clause (b) shall be omitted. The change carried no separate commencement date of its own, so it took effect on the day the Act received Presidential assent, 30 March 2026. From that date the intermediary carve-out is gone, and agency-style work is judged on the same place-of-supply default as any other service.

BuildWright prepares the Letter of Undertaking, files it against your GST registration, and diarises the renewal so an invoice never goes out against one that has lapsed.