Billing Foreign Clients as an Indian Freelancer: GST on Export of Services, the LUT, FIRC and How to Report It in Your ITR

A client in the US or the UK is paying you monthly. Someone in a Telegram group told you exports are exempt so you can forget GST entirely. Someone else told you registration is compulsory the moment a dollar lands. Your bank has now emailed asking for a purpose code and an invoice copy before it will credit the money, and you have no idea what a purpose code is. If you are a freelance developer, designer, writer or consultant billing overseas from Rajkot, Junagadh, Ahmedabad or anywhere in Gujarat, this is the usual state of things. Getting it wrong is expensive in a specific way: an unfiled LUT means you should have charged 18% IGST you never collected, and the department will look for it from you, not your client.

Direct answer: Services supplied to a client outside India are a zero-rated supply under Section 16 of the IGST Act, not exempt. Once registered, file a Letter of Undertaking and you can invoice without charging IGST. The payment must arrive in convertible foreign exchange into your Indian bank account, with a FIRC or eFIRA and a purpose code as proof.

What counts as export of services under GST?

Section 2(6) of the IGST Act defines it, and every clause has to be satisfied. There are five in the statute, though four do most of the work in a freelancer's case:

• You are located in India. Straightforward for a resident freelancer.
• The recipient is located outside India. Judged by the client's place of business or incorporation, not by where the person emailing you happens to be sitting.
• The place of supply is outside India. For most professional and IT services this follows the recipient's location under the default rule, but it does not always. If you are acting as an intermediary, or the service relates to immovable property or goods physically in India, the place of supply can land back inside India and the export treatment collapses.
• Payment is received in convertible foreign exchange, or in Indian rupees where the RBI permits it (which it does for certain neighbouring-country arrangements).
• You and the client are not merely establishments of the same person. This matters if you are billing a foreign parent or a related entity. The CBIC has issued clarifications on this clause, and it is not the trivial condition it looks like.

Zero-rated is not the same as exempt. That distinction is the whole reason the LUT and refund machinery exists: with an exempt supply you get no input credit, with a zero-rated supply you keep the credit and can get it back.

Do I need GST registration if all my clients are abroad?

Only once your aggregate turnover crosses Rs 20 lakh in a financial year (Rs 10 lakh in special category states). Below that, registration is not compulsory even where every rupee comes from exports, because a notification relieves inter-state service suppliers of the mandatory registration that otherwise attaches to inter-state supply.

Two things people get wrong here. Export receipts count towards the Rs 20 lakh figure, so you cannot treat them as invisible and stay unregistered at Rs 35 lakh. And any domestic billing you do adds to the same pot. A freelancer with Rs 14 lakh from a US client and Rs 8 lakh from Indian clients has crossed the line.

Now the honest part. A fair number of practitioners advise voluntary registration under Section 25(3) even below the threshold, and there is a real argument for it: you cannot file an LUT unless you are registered, you cannot claim a refund of input tax on your laptop, software subscriptions and rent unless you are registered, and some foreign platforms and larger clients ask for a GSTIN. The counter-argument is that registration brings monthly or quarterly returns forever, and a small freelancer with almost no input tax gets very little back for the compliance. There is no single right answer, and we would want to see your numbers first. Our separate article on whether you need GST registration works through the threshold in more detail, and the piece on GST for influencers and content creators covers the same question where income comes from ad networks and brand deals.

Not sure whether to register, and worried about the year that has already gone?

Send us your bank statement for the year and a couple of invoices. We will tell you whether you crossed the threshold, whether an LUT is needed, and what the exposure looks like if you have already billed without one.

First consultation is free. Call or WhatsApp +91 82005 28355.

What is an LUT and do I have to file one every year?

An LUT is a Letter of Undertaking in Form GST RFD-11 in which you undertake to fulfil the export conditions, and it lets you supply without paying IGST. Yes, it is annual. You file a fresh one for each financial year.

On the portal the path is Services, then User Services, then Furnish Letter of Undertaking (LUT). Pick the financial year, enter the name and address of two independent witnesses, upload if required, and sign with DSC or EVC. It is a same-day job. Filing takes maybe fifteen minutes once you have the witness details, which is the part that stalls people.

Any registered person exporting goods or services can file, unless prosecuted for tax evasion exceeding Rs 250 lakh. If you do not have an LUT in place, the alternative route is to pay IGST on the export invoice and claim a refund afterwards. That works, but it parks your working capital with the government for months, and refund claims stall for reasons that have nothing to do with your file. Our article on GST refunds getting stuck explains the usual causes.

Do the LUT in April. Filing it in November for a year in which you have already raised eight invoices is where the arguments start.

What is a FIRC and why does my bank keep asking for a purpose code?

A FIRC, or its electronic version the Foreign Inward Remittance Advice (eFIRA), is the bank's confirmation that money reached you from abroad in foreign currency. It is your evidence for the fourth condition in Section 2(6), and Rule 89(2) of the CGST Rules names the BRC or FIRC as proof of payment in convertible foreign exchange in a refund claim. Without it, a zero-rated claim has a hole in it.

The purpose code is a FEMA classification the bank reports to the RBI under FETERS, describing what the money was for. Software and IT services, professional and consultancy services, and so on each have their own code. Your bank asks because it cannot report the credit without one. If you ignore the email, the remittance sits in a suspense account and you spend a fortnight chasing a relationship manager. Answer it the same day, with the invoice attached, and it clears.

Platform payments are the messy case. Receiving through PayPal, Wise, Payoneer or a marketplace does not change anything: the money still has to land in your Indian bank account against a purpose code, and you still need remittance documentation. Most of these platforms now generate an FIRC or eFIRC automatically, but the amount credited is net of their fees, so it will not match your invoice. Keep the platform statement alongside the bank credit so the difference is explainable. And if the platform holds a balance for you offshore and you never repatriate it, the export condition is not met for that amount.

How do I report freelance foreign income in my ITR?

As business or professional income, in ITR-3 or ITR-4, in rupees. There is no separate treatment for foreign clients on the income tax side. It is not exempt, it is not capital gains, and no, the money being received abroad does not put it outside the net for a resident.

Section 44ADA offers presumptive taxation to specified professionals: declare 50% of gross receipts as income and skip the books and audit. Gross receipts must not exceed Rs 50 lakh, or Rs 75 lakh where cash receipts do not exceed 5% of total receipts, which an export-only freelancer satisfies comfortably. The catch is eligibility. Section 44ADA covers the professions specified in Section 44AA(1) such as legal, medical, engineering, architectural, accountancy, technical consultancy and interior decoration. A software engineer or technical consultant usually fits. A social media marketer or a video editor is a harder call, and 44AD may be the better route for them. Our article on presumptive taxation under 44AD and 44ADA sets out the difference.

Here is an illustrative example. You invoice USD 5,000 a month for twelve months and, at an assumed rate of Rs 85, that is roughly Rs 51,00,000 for the year. All of it comes through banking channels, so the Rs 75 lakh limit applies. Under 44ADA you declare Rs 25,50,000 as professional income. GST-wise, you are past Rs 20 lakh, so registration is compulsory, an LUT should be on file, and the invoices carry no IGST. Illustrative figures only.

Advance tax is the part freelancers forget, because there is no employer deducting anything. Where 44ADA is used, the whole liability can be paid in a single instalment by 15 March. Otherwise the usual quarterly instalments apply, and interest under Sections 234B and 234C runs on shortfalls. It is not a large amount per quarter, but it accumulates quietly and turns up in the intimation.

What if my foreign client deducts tax before paying me?

You claim a foreign tax credit, and you file Form 67 to do it. Some clients, particularly in the US and in a few European countries, withhold tax at source on service fees. That tax is not lost, but the credit is not automatic either.

Form 67 has to be filed electronically along with proof of the tax paid or deducted abroad, and under Rule 128(9) it can be filed up to the end of the relevant assessment year. Missing it has cost people the credit outright. The credit is limited to the lower of the foreign tax paid and the Indian tax on that income, and the treaty with the client's country governs what can be withheld in the first place. If your client's country has a DTAA with India, a tax residency certificate and Form 10F from you will often reduce or eliminate the withholding before it happens, which is a much better outcome than reclaiming it later.

Which exchange rate do I use, and when does the income arise?

Two different rules, and they do not give the same answer. For GST, the value of a supply in foreign currency is converted using the applicable reference rate for the date the time of supply arises, generally the invoice date. For income tax, Rule 115 requires the SBI telegraphic transfer buying rate, and for business income the rate on the last day of the month immediately preceding the month in which the income is due or received, whichever is earlier.

The practical consequence is a gap between your invoiced rupee value and the rupee amount actually credited weeks later. That difference is a foreign exchange gain or loss and belongs in your accounts. Under 44ADA it largely washes out, since you are declaring a percentage of receipts anyway. Also remember that money going the other way, such as a remittance abroad, can attract TCS. Our article on TCS on foreign remittance covers when that applies.

Get your export compliance set up once, properly

Gadhia Associate is a tax and compliance firm based in Junagadh, Gujarat, working with clients throughout India. In practice since 2007, with more than 7,000 clients across Saurashtra and Gujarat and a 5.0 Google rating from over 100 reviews. Same-day appointments at our Junagadh office, entirely digital service for clients elsewhere in India and for NRIs, and fixed-fee or monthly plans so the cost is known upfront.

Free first consultation. Call or WhatsApp +91 82005 28355.

Frequently asked questions

Is export of services exempt from GST or zero-rated?

Zero-rated under Section 16 of the IGST Act, which is different from exempt. Under a zero-rated supply you charge no GST but keep your input tax credit and can claim it back. Under an exempt supply the credit is denied. This is why the distinction matters even when the tax you charge is nil either way.

Can I file an LUT without GST registration?

No. The LUT is filed in Form RFD-11 from inside your GST account on the portal, so a GSTIN is a precondition. If you are below the Rs 20 lakh threshold and unregistered, you have no LUT and no refund route, but you also have no output liability on export supplies. Voluntary registration is the way in if you want the credit.

My client pays through Upwork and the amount is less than my invoice. Is that a problem?

Not by itself, as long as the shortfall is the platform's commission and you can show it. Keep the platform statement with the bank credit and the eFIRC so the reconciliation is visible. Trouble comes when the balance stays on the platform and is never repatriated, because the payment condition in Section 2(6) is not satisfied for that portion.

Do I have to issue a GST invoice to a foreign client?

If you are registered, yes. The export invoice must carry the prescribed particulars, state that it is a supply meant for export, and endorse whether it is under LUT without payment of integrated tax or on payment of integrated tax. Clients abroad rarely care what is on it, but it is what a refund claim or a departmental query will be tested against.

Does the Income-tax Act, 2025 change any of this?

The Act came into force on 1 April 2026 and renumbered provisions across the statute, so the section numbers for presumptive taxation and foreign tax credit differ from the older references you will find online. The substance of the presumptive scheme and the credit mechanism carries over. Check the current numbering before quoting a section in any filing or reply.

This reflects the position as of September 2026. GST, income tax and FEMA rules change regularly through CBIC and CBDT notifications and circulars and RBI directions, and the Income-tax Act, 2025 has renumbered many provisions. Outcomes depend on your specific contracts, place of supply and banking arrangements. Please confirm the current position with us, or with your own adviser, before acting on anything here.