Landing an international client is a huge milestone for any Indian freelancer! But when it's time to send the invoice, confusion strikes: Do I charge 18% GST to someone in the US or UK?
The short answer is: No. But you still need to follow a specific process.
Export of Services = Zero-Rated Supply
Under Indian GST law, exporting services is considered a "Zero-Rated Supply." This means the GST rate is 0%. You do not charge the foreign client any tax.
However, to legally export services without paying GST from your own pocket, you MUST file a Letter of Undertaking (LUT).
How to Invoice With an LUT
Once you have your LUT (filed online via the GST portal for the current financial year), your invoice should include this exact phrasing:
"Supply meant for export under Letter of Undertaking without payment of IGST."
Key Elements of an Export Invoice:
- Currency: You can bill in USD, EUR, or GBP.
- LUT Details: Mention your LUT Number and the financial year.
- Client Address: Their complete international address.
- Your GSTIN: Must be present.
- Tax: Show IGST as 0%.
Receiving Payments (FIRC)
When your foreign payment hits your Indian bank account, it is converted to INR. You must ask your bank or payment gateway (like Stripe or PayPal) for a Foreign Inward Remittance Certificate (FIRC) or FIRA. This document proves to the government that foreign exchange actually entered the country, validating your export status.
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Quick FAQs
1. What happens if I don't file an LUT?
If you export services without an LUT, you are technically required to pay the 18% IGST upfront to the government and then file for a refund later, which blocks your working capital and takes months.
2. Can I use PayPal for foreign clients?
Yes, PayPal handles the currency conversion and provides the necessary FIRA documentation. However, they charge a high conversion markup. Platforms like Wise or Payoneer often offer better exchange rates.
Disclaimer
This article provides general information. Consult your CA to ensure your export compliance and LUT filings are correct.