Is Your SaaS Export Really "GST-Free"? Here's What Most Indian Founders Get Wrong

How to export software services without paying GST starts with one document most founders file too late: the Letter of Undertaking, or LUT. If you're an Indian SaaS founder, freelance developer, or IT services exporter billing clients in the US, UK, or anywhere outside India, you've probably heard that exports are "zero-rated" under GST. That's true. But zero-rated does not mean zero paperwork, and skipping one small compliance step can cost you an 18% IGST hit on every invoice you raise.

This guide breaks down exactly how GST applies to software and SaaS exports from India in 2026: what zero-rating actually means, how place of supply decides whether your invoice qualifies as an export at all, and the exact LUT filing process on gst.gov.in so you never pay tax you didn't need to.

What Does "Zero-Rated Supply" Mean for Software Exports?

Under Section 16 of the IGST Act, 2017, export of goods or services is treated as a zero-rated supply. This gives you two real benefits, not one:

You charge 0% GST on the invoice to your foreign client.

You can still claim input tax credit (ITC) on business expenses used to deliver that service, things like AWS bills, software subscriptions, office rent, or a developer's laptop.

This is what separates zero-rated from exempt supply. An exempt supply also has no tax on it, but you lose your ITC. A zero-rated supply lets you keep the credit chain intact, which is a meaningful cash flow difference for a bootstrapped SaaS team.

But none of this applies automatically. Your invoice has to first qualify as an "export of service" under GST law, and that depends entirely on place of supply.

Place of Supply Rules: The Test That Decides If You're Exporting

Under Section 2(6) of the IGST Act, a software or SaaS transaction only counts as an export of service if it clears five conditions together:

Miss even one of these, and your invoice is treated as a domestic supply attracting regular GST, currently 18% on software and IT services (9% CGST + 9% SGST for intra-state, or 18% IGST for inter-state).

One place-of-supply trap catches a lot of SaaS and IT consulting founders off guard: the intermediary classification. If you're arranging or facilitating a service between two other parties rather than delivering the service directly, GST law treats you as an intermediary, and the place of supply shifts back to India, meaning your export loses its zero-rated status entirely. CBIC's clarification here is specific: a person who delivers the main service directly, even while using subcontractors during execution, is not automatically an intermediary. If you're a SaaS company billing end users directly, you're almost never at risk here. Agencies and consultants reselling third-party services should get this checked by a CA before assuming export status.

LUT Filing: The Step That Actually Unlocks 0% GST

Filing a Letter of Undertaking (Form GST RFD-11) on the GST portal is what lets you invoice at 0% without paying IGST upfront and chasing a refund later. Without a valid LUT, you have two options: pay 18% IGST on every export invoice and file for a refund, or don't export at all. Neither is practical for a growing SaaS business.

How to file LUT on gst.gov.in:

A few things founders consistently get wrong:

LUT is not retroactive. If you raise an export invoice before your LUT is approved, that invoice can't be treated as zero-rated after the fact. File it before your first export invoice of the financial year, not after.

It expires every 31 March. LUT validity runs for one financial year only. Many exporters file the next year's LUT in the last week of March so there's no gap on 1 April.

Payment realization has a deadline. If foreign payment doesn't land within one year of the invoice date, IGST becomes payable with interest under Rule 96A of the CGST Rules. Keep your FIRC or e-FIRA records organized for every receipt.

SaaS-Specific GST Points Worth Knowing

If you sell subscription software to Indian customers alongside your export clients, remember that domestic SaaS sales are taxed normally at 18%, only genuine exports get the zero-rated treatment. Also worth noting: if you're consuming OIDAR services from a foreign SaaS provider (think an overseas-hosted tool billed to your Indian entity), that's a separate compliance question under Section 14 of the IGST Act and works in the opposite direction, it's the foreign provider's registration obligation, not yours, in most B2C scenarios.

Frequently Asked Questions

Q1. Is GST applicable on software export from India?
No IGST is charged on the invoice if the transaction qualifies as an export of service and you've filed a valid LUT. GST registration itself is still mandatory.

Q2. Do I need GST registration to export software services?
Yes. Exports are treated as inter-state supplies under Section 7 of the IGST Act, which makes registration compulsory under Section 24 of the CGST Act, regardless of your turnover.

Q3. What happens if I export without filing LUT?
You must pay IGST at 18% upfront and then apply for a refund via Form GST RFD-01, a slower, more document-heavy process than the LUT route.

Q4. How long is a GST LUT valid?
One financial year, from 1 April to 31 March. You need to file a fresh LUT every year before your first export invoice.

Q5. Can a freelance developer file LUT?
Yes. Any GST-registered person, including individual freelancers, sole proprietors, and consultancies serving clients abroad, can furnish an LUT, provided there's no history of tax evasion prosecution above ₹2.5 crore.

Q6. Is payment in INR from a foreign client still considered an export?
Only if it comes through RBI-permitted trade settlement mechanisms. Straightforward INR payment that doesn't meet these conditions may not qualify as export of service. Check with a CA before assuming zero-rated status.

The One-Line Takeaway

Zero-rating on software exports isn't a default status, it's something you actively secure by filing LUT before you invoice and getting your place-of-supply classification right. Get both correct, and your export revenue stays untaxed with full ITC intact. Get either wrong, and you're funding an 18% IGST bill you never needed to pay.

Author Bio

Vishnu Sain is an SEO Executive at LegalDev, specializing in SEO strategy, content optimization, and creating user-focused content around GST, taxation, registration, and business compliance topics. He works on making complex regulatory updates easier to understand through clear, practical, and search-optimized content. His focus is helping businesses and professionals stay updated with changing GST rules and improve their digital visibility through high-quality informational content