Under GST, buying a service from abroad and selling a service abroad sit at opposite ends. When you export a qualifying service, it is a zero-rated supply: no GST is charged to the foreign client (under LUT) or IGST is paid and refunded. When you import a service, you as the Indian recipient generally pay IGST yourself under reverse charge, and can usually claim it back as input tax credit. On the FEMA side, exports involve the EDF and realisation; imports involve outward remittances through your bank.
Key takeaways
- Export of services: zero-rated under Section 16 of the IGST Act, if all five Section 2(6) conditions are met.
- Import of services: the Indian recipient generally pays IGST under reverse charge. Credit is usually available if the service is used for business.
- Zero-rating means you can export without tax (under LUT) and still claim input credits, or pay IGST and claim a refund.
- FEMA: exports go on the monthly EDF and must be realised within 9 months; imports are paid by outward remittance under your bank's process.
- Many businesses do both every month. Keep the two flows separate in your books and with your bank.
The two flows side by side
| Export of services | Import of services | |
|---|---|---|
| Who is in India | You, the supplier | You, the recipient |
| Where the counterparty is | Outside India | Outside India |
| GST treatment | Zero-rated supply | Generally IGST under reverse charge, paid by you |
| Invoice you issue/receive | You issue an export invoice | You receive the foreign supplier's invoice; you may need to raise a self-invoice |
| Tax on the invoice | None under LUT; or IGST paid and refunded | Foreign invoice has no Indian GST; you pay IGST yourself |
| Input tax credit | Allowed; refund of unutilised ITC possible under LUT route | IGST paid under reverse charge is usually claimable as ITC |
| FEMA document | EDF to AD bank (or STPI/SEZ DC) | Outward remittance through AD bank |
| Money direction | Inward | Outward |
Export of services: zero-rating in practice
A supply is an export of services under Section 2(6) of the IGST Act when:
- The supplier is located in India.
- The recipient is located outside India.
- The place of supply is outside India.
- Payment is received in convertible foreign exchange, or in rupees where RBI permits.
- The supplier and recipient are not merely establishments of a distinct person.
If all five hold, the supply is zero-rated. You either export under LUT (Form GST RFD-11), with the invoice wording "Supply meant for export under LUT without payment of IGST", or charge IGST and claim a refund. Our explainer on zero-rated supply goes deeper.
Import of services: reverse charge in practice
When an Indian business receives a service from a supplier outside India, the foreign supplier usually is not registered for Indian GST and does not charge it. Instead, the Indian recipient generally pays IGST under the reverse charge mechanism and reports it in its returns. If the service is used for business and the conditions for input tax credit are met, that IGST can usually be claimed back as credit, often making the net cost neutral.
Typical imports for service exporters include software subscriptions, cloud hosting, design tools, freelance subcontractors abroad, foreign legal or advisory fees and online advertising bought from overseas platforms. Which of these attract reverse charge, and whether certain online services are taxed differently, depends on the facts. Your CA should map your regular foreign purchases once.
Worked example: one company, both directions
Ridgeview Labs Pvt Ltd, Ahmedabad, builds web apps for clients in the US. It also pays a design subcontractor in Portugal and a cloud provider abroad.
October 2026:
Export side - Invoice to US client: USD 12,000, under LUT, no IGST. - At an illustrative ₹84 per dollar: ₹10,08,000. - Goes on the October EDF, due 30 November 2026, as one row in Part 2B. - Must be realised within 9 months of the invoice date.
Import side - Portuguese designer invoices EUR 2,000 for UI work. At an illustrative ₹92: ₹1,84,000. - Ridgeview generally pays IGST under reverse charge on this import. At 18%, that is ₹33,120. - If eligible, Ridgeview claims ₹33,120 as input tax credit. - The payment to Portugal is an outward remittance through its bank, with whatever documentation the bank and tax rules require.
Because Ridgeview exports under LUT and has little domestic output tax, its input credits (including the reverse-charge IGST) may build up. It can claim a refund of unutilised ITC on its zero-rated exports, subject to the refund rules. Our article on the GST refund on export of services explains the process.
The GST rate in the example is illustrative; confirm the applicable rate for the specific service with your CA.
Where people get confused
"My foreign supplier didn't charge GST, so there's no GST"
For imports, the absence of GST on the foreign invoice usually means you owe it under reverse charge, not that none is due.
"My export invoice has no GST, so it isn't reportable"
Zero-rated exports are still reported in your GST returns (exports have their own table in GSTR-1). They are also declared on the EDF under FEMA.
"I can net the import against the export"
If your foreign client is also your supplier, it is tempting to settle the difference. Under FEMA, that is a set-off and needs your AD bank's involvement. Under GST, both supplies are still reported in full.
"Intermediary services are exports"
Not always. If you arrange services between a foreign principal and others, the place of supply may be in India, which fails the export test. Get the classification right before relying on zero-rating.
The FEMA side in one paragraph
Exports of services are declared on the EDF, filed monthly with your AD bank (or STPI for software, or the SEZ Development Commissioner for SEZ units), and must be realised within 9 months from the invoice date. Imports are paid by outward remittance through your bank under its own process. The EDF covers exports only. It does not change your GST or income-tax obligations on either flow.
This is general information, not legal or tax advice.
Frequently asked questions
What is the difference between import and export of services under GST?
Export of services is a zero-rated supply: no tax under LUT, or IGST paid and refunded. Import of services generally attracts IGST under reverse charge, paid by the Indian recipient, usually with input credit available.
Do I pay GST when I hire a freelancer abroad?
Generally, yes, under reverse charge, if you are a registered business receiving the service. You can usually claim the IGST as input credit if used for business. Confirm the treatment for your specific services with your CA.
Does an export under LUT get input tax credit?
Yes. Zero-rating allows you to claim input tax credit, and if credits remain unutilised because exports carry no output tax, you can apply for a refund under the refund rules.
Do I file an EDF for import of services?
No. The EDF is for exports. Payments for imported services are outward remittances handled through your bank under its own process and the applicable rules.
Can my foreign client's invoice to me be offset against my invoice to them?
Not informally. Under FEMA, netting export receivables against import payables is a set-off that needs your AD bank's involvement. Under GST, both supplies are reported in full regardless.
Bottom line
Exports are zero-rated and go on the EDF; imports usually mean reverse charge and an outward remittance. Keep both flows clean, and declare your exports each month with the free EDF form generator using correctly worded export invoices.
This guide is general information for Indian businesses, not legal or tax advice. Rules and bank processes change — confirm specifics with your AD bank or chartered accountant.