I remember landing my first major freelance client from the United States. I was thrilled. But when it came time to send the invoice, panic set in.
Do I charge them 18% GST? Will they even pay it? Am I breaking the law if I don't?
If you're a freelancer or agency owner in India working with foreign clients, you're probably asking the exact same questions right now.
Look, here's the good news: You don't need to charge your foreign clients GST.
But there's a catch. You have to do the paperwork correctly. Let's break down exactly how to legally export your services with zero GST, without making it overly complicated.
The "Export of Services" Rule
Under Indian GST law, providing a service to someone outside India is considered an "Export of Service."
The government actually wants you to bring foreign currency (like USD, GBP, or EUR) into India. Because of this, exports are treated as "Zero-Rated Supplies." This means the GST rate is literally 0%.
But "Zero-Rated" doesn't mean "Ignore GST Completely." You still have to play by the rules.
Rule 1: You Need a GST Registration (Even if it's 0%)
Here's where most freelancers make a costly mistake. If you're exporting services, you technically need a GSTIN (GST Identification Number)—even if your turnover is way under the ₹20 Lakh exemption limit.
Why? Because inter-state and international transactions require it. Don't worry, getting a GSTIN is totally free and you can do it entirely online on the GST Portal. No CA required if you're willing to read a few tutorials.
Rule 2: The Magic "LUT" (Letter of Undertaking)
This is the most critical part of this whole process.
To legally invoice a foreign client with 0% GST, you must file a Letter of Undertaking (LUT) on the GST portal before you send that invoice.
Filing an LUT is basically you telling the government: "Hey, I'm exporting services. I promise to bring the foreign currency into my Indian bank account within a year. Please let me export without paying IGST upfront."
Filing an LUT is free, instant, and it stays valid for the entire financial year (April to March).
How to Format Your Invoice
When you send your invoice to a client in New York or London, it needs to look slightly different than a domestic invoice you'd send to someone in Mumbai.
Here's exactly what must be on it:
- The Exact Phrase: You must print this exact sentence somewhere on your invoice:
"Supply meant for export under bond or Letter of Undertaking without payment of integrated tax."
- Your Details: Your Name/Business Name, Address, and GSTIN.
- Client Details: Their Name and Foreign Address.
- Currency: You can invoice in USD (or their local currency).
- Bank Details: Your SWIFT code and Account Number (or your Payoneer/PayPal details).
Pro Tip: Don't want to build this from scratch? Grab our Freelance Invoice Template which already has all the GST logic and legal phrases baked right in.
Getting Paid: The FIRC Requirement
When your client finally pays you, the money usually comes through a payment gateway (like Stripe, PayPal, or Payoneer) or a direct bank wire (SWIFT) to your HDFC or ICICI account.
To prove to the government that the money actually came from outside India, you need an FIRC (Foreign Inward Remittance Certificate) or a FIRA (Foreign Inward Remittance Advice).
If you use Payoneer or PayPal, they usually provide this automatically or if you ask support for it. Save these PDFs! Your CA will ask for them when filing your GST returns to prove your exports were legit.
Summary Checklist
- Get a GSTIN.
- File an LUT for the current financial year.
- Put the mandatory "Export without payment of tax" phrase on your invoice.
- Collect the FIRC when the money hits your bank.
Invoicing foreign clients seems intimidating at first, but once you have your LUT filed and your invoice template locked in, it becomes totally automated. Now go close that international client!