A SaaS founder lands a US customer, raises the first invoice, and freezes on one question: do I add 18% GST? Many add it “to be safe.” Others ignore GST entirely and quietly build up a liability. Both are usually wrong. For most software and service startups selling abroad, the sale is a zero-rated export — and handled right, it can actually put money back in your pocket.
The good news: exporting services is zero-rated
When you sell a service to a customer outside India, it is generally an export of services, which is zero-rated under Section 16 of the IGST Act. In plain terms: you charge your foreign customer 0% GST. Adding 18% to a US client’s invoice is not “playing safe” — it is charging tax that isn’t due.
“Zero-rated” is better than “exempt” — and that’s the whole point
This is the part founders miss. Exempt means no tax on your sale and no credit for the tax you paid on your costs. Zero-rated means no tax on your sale and you can claim back the GST you paid on your inputs — cloud bills, software tools, rent, professional fees. So export isn’t just “no GST”; it is a route to a refund.
When does your sale actually count as an export?
All five of these must be true (Section 2(6), IGST Act):
- You (the supplier) are in India;
- Your customer is outside India;
- The place of supply is outside India;
- You are paid in convertible foreign exchange (keep the bank’s FIRC / e-FIRA proof);
- You and the customer are not just two branches of the same entity.
The one form that keeps it clean: the LUT
There are two ways to export. You can pay 18% IGST on every invoice and claim it back later (your cash is stuck for weeks), or — far better — you file a Letter of Undertaking (LUT, Form RFD-11) once a year and then invoice at 0% with no payment at all.
The catch is timing: an LUT is valid for one financial year and must be renewed before 1 April. Forget to renew, and every export invoice you raise in the gap technically attracts 18% IGST that you must pay and then chase as a refund. Diarise the LUT renewal for the first week of April, every year.
The refund founders leave on the table
Because you collect no GST but pay it on your costs, that input GST piles up. You claim it back by filing Form RFD-01 with your export invoices and foreign-exchange proof. For a growing SaaS startup, this can be a meaningful, recurring cash refund — yet many never file it because they assumed “no GST on exports” meant there was nothing to do.
Should you register if you’re below ₹20 lakh?
GST registration is mandatory once your turnover crosses ₹20 lakh (₹10 lakh in some special-category states). Below that, it’s optional — but for an exporter it’s usually worth registering voluntarily, because only a registered business can file an LUT and claim those input-tax refunds. Staying unregistered to “keep it simple” often just means leaving refund money behind.
The trap to watch: are you an “intermediary”?
One grey area has caught many service exporters. If you merely facilitate a deal between two other parties (an agent or middleman) rather than supplying the main service yourself, the old rule (Section 13(8)(b)) deemed the place of supply to be India — so it was taxed at 18% and did not count as an export, even with a foreign client paying in dollars.
The three situations, side by side
| What you do | GST treatment |
|---|---|
| SaaS / software / IT service delivered remotely to a foreign client | Export — 0%, refund input GST (with LUT) |
| Acting as an agent / intermediary between two parties | Was 18% (India); export from 30 Mar 2026 |
| Service physically performed in India (e.g. an on-site workshop) | 18% — place of supply is India |
The common mistakes, in one place
- Charging 18% to a foreign customer — usually wrong; exports are zero-rated.
- Letting the LUT lapse — turns clean 0% invoices into an 18% cash drain.
- Never claiming the input-GST refund — real money left behind.
- Not keeping FIRC / e-FIRA — without proof of forex receipt, the export claim fails.
Frequently asked questions
Do I charge GST to my foreign (US/UK) customers?
Usually no. Selling a service to a customer outside India is normally an export of services, which is zero-rated under Section 16 of the IGST Act — you charge 0% GST. You should not add 18% to a genuine foreign-export invoice; that is charging tax that isn’t due.
What is the difference between zero-rated and exempt?
Both mean no GST on your sale, but only zero-rated lets you claim back the GST you paid on your costs. Exports are zero-rated, so an exporter can recover input GST on cloud bills, tools, rent and professional fees as a refund. Exempt supplies get no such credit.
What is an LUT and why do I need it?
A Letter of Undertaking (Form RFD-11) lets you export services without paying IGST upfront, so you invoice at 0% and keep your cash free. It is valid for one financial year and must be renewed before 1 April each year. Without a valid LUT, you must pay 18% IGST on exports and claim it back later.
Should I register for GST if my turnover is below Rs 20 lakh?
It is optional below Rs 20 lakh (Rs 10 lakh in special states), but for an exporter it is usually worth registering voluntarily. Only a registered business can file an LUT and claim refunds of input GST, so staying unregistered often just means leaving refund money on the table.
I act as an agent between foreign parties — is that an export?
Historically no: intermediary services were deemed supplied in India under Section 13(8)(b) and taxed at 18%. The GST Council has moved to remove this, so for supplies on or after 30 March 2026 intermediary services to a foreign recipient are expected to be treated as exports (zero-rated) based on the recipient’s location. If your model is agency or back-office, plan around this change.
CA Vijay R Singh, FCA
Founder, Vijay R Singh & Co., Chartered Accountants · ICAI M.No. 153926 · FRN 136869W
Chartered Accountant for startups, NRIs and SMEs in Mumbai, in practice since 2013. More about CA Vijay →
Educational content, not tax advice — GST classification is fact-specific and rules change; the intermediary change is based on GST Council recommendations and should be confirmed against the final notification. Consult your advisor before deciding your GST position. Vijay R Singh & Co., Chartered Accountants · FRN 136869W · ICAI M.No. 153926 · Mumbai, in practice since 2013.
