A practical guide for Indian exporters navigating indirect tax rules.

Exporting from India brings significant tax advantages, but only when you understand how GST applies to your category of exports. Goods exports and service exports are both treated as zero rated supplies under GST, yet the rules that apply to each category are not the same. Many freelancers, agencies, software companies and product exporters confuse the two and end up claiming refunds incorrectly or filing documentation that does not satisfy GST officers.

This blog explains how GST treatment differs for goods and service exports, what documentation each category requires and how settlement flows and inward remittances interact with GST compliance for exporters.

The Common Ground: Both Are Zero Rated, But Not Tax Free by Default

Under the GST law, exports of both goods and services are considered zero rated supplies. This means exporters can make sales without charging GST to foreign customers and still claim input tax credit (ITC) for the taxes paid on purchases.

However, zero rated does not mean tax free in the accounting process. Exporters must follow specific rules to either:

1. Pay GST and claim a refund later (with payment of IGST).
2. Export under bond or Letter of Undertaking (LUT) without paying tax (and claim refund of accumulated ITC).

The difference lies in how the export is defined and documented.

How GST Defines the Export of Goods

Export of goods means physically taking goods out of India to a place outside the country. The movement must be proven through shipping bills, customs clearances and transport documentation. The GST system recognises export only when the goods leave Indian territory.

Key Features of Goods Export:

• The sale is treated as zero rated.
• No GST is charged to the foreign customer.
• Exporters can export without paying GST by filing a Letter of Undertaking (LUT).
• Alternatively, they can pay IGST at the time of export and claim a refund later.
• Shipping bill and customs data automatically flow into GST systems for refund processing.

The GST benefit is linked to the physical movement of goods and the corresponding proof.

How GST Defines the Export of Services

Service exports do not involve physical movement, so GST uses a different test. A supply is considered an export of services only if all five conditions are satisfied:

1. The supplier is in India.
2. The recipient is outside India.
3. The place of supply is outside India.
4. Payment is received in convertible foreign currency or in a permitted manner under RBI rules.
5. The supplier and recipient are not establishments of the same entity.

Crucial Note: If any one of these conditions fails, the supply is not treated as an export under GST. For example, a freelancer or agency working for an overseas branch of an Indian company may not qualify as an exporter even if the payment comes from abroad.

Major GST Differences Between Goods and Service Exports

Parameter	Goods Exports	Service Exports
Defining Factor	Physical movement out of India (via customs/shipping).	Satisfying all five non-physical conditions (e.g., place of supply, currency receipt).
Documentation	Requires Customs documentation (shipping bills, customs clearances, transport documentation, export invoices).	Requires Export Invoices and Proof of Inward Remittance (FIRA or bank advice).
Refund Mechanism	Relies heavily on shipping bill integration with GST systems; refunds are linked to customs confirmation.	Requires filing refund applications manually with explicit proof of foreign currency receipt.
Place of Supply	Always outside India once the goods cross the border.	A legal requirement that depends on the nature of the service; usually the recipient’s location for IT/consulting/design.
Currency Receipt	Receive payment in foreign currency or rupees permitted under RBI rules without affecting export status.	Must show receipt in foreign currency or in an RBI-approved manner. Failure to do so may disqualify the supply as export.

Impact: Service exporters do not need customs documentation, which makes their process simpler but also more dependent on correct payment records.

Why Inward Remittance Records Matter More for Service Exports

Since service exports rely on verifying foreign currency receipt to qualify as exports, documentation such as FIRA, bank advice or digital inward remittance certificates becomes essential.

Without these, GST authorities may not process refunds or may question whether the supply qualifies as export. Service exporters must maintain:

• Export invoices
• Foreign inward remittance records
• Purpose codes
• Reconciliation showing invoice wise payment receipt

Goods exporters, by comparison, rely more on customs data and shipping proofs.

Challenges Exporters Face When Using Global Payment Gateways

Many service exporters depend on global platforms such as PayPal or Stripe. These platforms create complications:

• Credit to the Indian bank may not clearly show purpose codes.
• FX conversion markup reduces the invoice value and may confuse reconciliation.
• Documentation required for GST refund is often not issued automatically.
• Settlement delays complicate export reporting cycles.

Because GST relies on timely and accurate inward remittance proof, missing or incomplete documentation slows refund claims.

Why India Focused Platforms Simplify GST for Service Exporters

Export focused payment platforms in India handle currency conversion, purpose code mapping and inward remittance documentation according to FEMA and banking rules. This creates a clean audit trail for GST.

A platform like BRISKPE, which issues inward remittance documentation and maps purpose codes accurately, reduces complexity for service exporters who rely on foreign clients. GST refunds become easier because the bank records match the invoices exactly.

For service exporters dealing with recurring invoices, predictable settlement and proper documentation help maintain compliance without manual follow ups.

Final Thoughts

GST treats goods exports and service exports differently because one involves physical movement and the other relies solely on financial flows. Goods exporters depend on customs documentation and shipping bills, while service exporters depend entirely on correct foreign currency receipt and internal documentation.

Understanding these differences helps exporters prepare the right paperwork, avoid delays and benefit fully from zero rated supplies under GST. India focused export payment platforms simplify the compliance side for service exporters and help maintain a clean trail for inward remittances, refunds and reconciliation.