A service supplied by an Indian subsidiary to its foreign parent is an export of services under section 2(6) of the IGST Act, 2017 — and therefore zero-rated under section 16 — when all five conditions are met: the supplier is in India; the recipient is outside India; the place of supply is outside India (for most services, the recipient's location under section 13(2)); payment is received in convertible foreign exchange (or in Indian rupees where the RBI permits); and supplier and recipient are not merely establishments of the same person. CBIC's Circular No. 161/17/2021-GST confirms that a subsidiary incorporated in India and its foreign parent are separate persons, so the fifth condition is satisfied. From 30 March 2026, the Finance Act, 2026 has also removed the "intermediary" exception in section 13(8)(b), so even facilitation services to a foreign recipient now take the recipient's location as the place of supply.
Key facts
| Provision | Old reference (to 31 Mar 2026) | New reference (from 1 Apr 2026) | Rate / threshold | Timing | Form |
|---|---|---|---|---|---|
| Export of services — definition | s. 2(6) IGST Act, 2017 | Unchanged | Five cumulative conditions | — | — |
| Zero-rated supply | s. 16 IGST Act | Unchanged | Supply under LUT without IGST, or with IGST and refund | — | LUT: Form GST RFD-11 |
| Place of supply — default rule | s. 13(2) IGST Act | Unchanged | Location of the recipient | — | — |
| Intermediary services — place of supply | s. 13(8)(b): location of supplier (i.e. India) | Omitted by s. 157, Finance Act, 2026 — default rule applies | — | Supplies on or after 30 March 2026 (date of Presidential assent) | — |
| Subsidiary and parent are distinct persons | Circular No. 161/17/2021-GST (20 Sept 2021) | Unchanged | Export not barred by condition (v) | — | — |
| Consideration in foreign exchange | s. 2(6)(iv); RBI-permitted INR settlement | Unchanged; INR settlement via permitted mechanisms | — | Realisation within FEMA period (9 months; 12 for INR-settled) | EDF, FIRA/e-BRC |
| Tax invoice for services | s. 31(2) CGST Act; Rule 46, 47 | Unchanged | Export endorsement; recipient's address and country | Within 30 days of supply | — |
| Refund of unutilised ITC | s. 54(3) CGST Act; Rule 89(4) | Unchanged | Formula-based | Within 2 years of the relevant date | RFD-01 |
The five conditions, one at a time
(i) Supplier located in India
The Indian subsidiary, registered under GST in the state where it operates. Straightforward — but note that if the Indian company has offices in several states, each registration is a separate supplier and should invoice for the services it actually performs, or cross-charge internally.
(ii) Recipient located outside India
"Recipient" is the person liable to pay the consideration (section 2(93) CGST Act). The recipient's location is where it has its place of business, or the fixed establishment most directly concerned with receiving the supply (section 2(14) IGST). The contractual recipient and the paying entity should be the same foreign entity. If the parent has a branch or fixed establishment in India that is "most directly concerned" with the service, the recipient is treated as located in India and the export fails — a real risk where the parent has seconded staff or a liaison office supervising the Indian team.
(iii) Place of supply outside India
Section 13 of the IGST Act governs where either party is outside India. The default rule in section 13(2) is the recipient's location, which for a foreign parent is outside India. The exceptions in sections 13(3) to 13(13) — performance-based services on goods or individuals, immovable property, events, and the former intermediary rule — are covered on the place of supply page. For software development, IT support, back-office, design, consulting, marketing support and R&D services, the default rule applies.
The change that matters in 2026: section 13(8)(b), which fixed the place of supply of "intermediary services" at the supplier's location and so denied export status to Indian companies that arranged or facilitated supplies between the parent and its customers, has been omitted by section 157 of the Finance Act, 2026. The Finance Act received Presidential assent on 30 March 2026 and the omission carries no separate commencement date, so it applies to supplies from that date. Services supplied before 30 March 2026 remain governed by the old rule; disputes for those periods continue.
(iv) Payment in convertible foreign exchange
Or in Indian rupees where permitted by the RBI (for example, settlements through special rupee vostro accounts). The condition is tested on receipt. For refund purposes the bank's FIRA / e-BRC is the evidence; under FEMA the proceeds must be realised within the prescribed period — nine months from the invoice date under the Export and Import of Goods and Services Regulations, 2026 as amended, twelve months for rupee-invoiced and rupee-settled exports.
(v) Not merely establishments of a distinct person
Explanation 1 to section 8 of the IGST Act treats a person's establishment in India and its establishment outside India as "establishments of distinct persons" — so a branch cannot "export" to its own head office. For years field officers extended this to subsidiaries. Circular No. 161/17/2021-GST put the point to rest: a company incorporated in India and a foreign company incorporated abroad are separate legal persons under the Companies Act and the CGST Act, and a supply between them is not barred from being an export by condition (v), even if one is the subsidiary of the other. The circular applies equally to sister companies in the same group.
What zero-rating gives you
Under section 16, an export of services is a zero-rated supply. The Indian company may either (a) supply under a Letter of Undertaking in Form GST RFD-11 without charging IGST and claim a refund of unutilised input tax credit under section 54(3) and Rule 89(4); or (b) charge IGST on the export invoice, pay it through ITC or cash, and claim a refund of the IGST paid. Route (a) is used by almost every service exporter: no cash outflow, and the refund is of the ITC on Indian inputs (rent, software, professional fees) which would otherwise accumulate.
The process, end to end
- LUT filed on the GST portal before the first export invoice of each financial year.
- Agreement identifying the foreign recipient and the service (see checklist).
- Export invoice within 30 days of the end of the service period, carrying the Rule 46 export endorsement, recipient's name, address and country, SAC code and value in foreign currency with INR equivalent; e-invoicing if the turnover threshold applies.
- GSTR-1: report in Table 6A (exports) with "without payment of tax"; GSTR-3B Table 3.1(b).
- Receive the foreign exchange; obtain FIRA / e-BRC; file the monthly EDF with the bank from October 2026.
- Refund application in RFD-01 for the period, with Statement 3, FIRCs and the Rule 89(4) computation — within two years of the relevant date.
Worked example
An Indian subsidiary provides software engineering to its Singapore parent. Tax year 2026-27: service fee USD 3.6 million (₹30 crore); Indian inputs carrying GST: rent ₹1.2 crore (GST ₹21.6 lakh), software and cloud ₹80 lakh (GST ₹14.4 lakh), professional and other services ₹40 lakh (GST ₹7.2 lakh). Total ITC ₹43.2 lakh. No domestic sales.
| Test | Finding |
|---|---|
| (i) Supplier in India | Yes — Bengaluru registration |
| (ii) Recipient outside India | Yes — Singapore entity is the contracting and paying party; no Indian fixed establishment of the parent involved |
| (iii) Place of supply | Section 13(2): Singapore. Not performance-based, not immovable property, not an event |
| (iv) Consideration | USD received in the Indian company's EEFC/INR account; FIRAs obtained; realised within 45 days |
| (v) Distinct persons | Separate companies — Circular 161/17/2021-GST |
| Result | Export of services; zero-rated under LUT; refund claim = (30 ÷ 30) × ₹43.2 lakh = ₹43.2 lakh for the year, filed quarterly |
If the Indian company had also earned ₹2 crore from an Indian customer, the Rule 89(4) formula would allocate ITC: (30 ÷ 32) × ₹43.2 lakh = ₹40.5 lakh refundable, with the balance used against the domestic output tax.
Common mistakes we see
- Invoicing a group entity other than the one that pays, so the 'recipient' test and the foreign-exchange test point to different persons.
- Letting a parent's seconded manager or liaison office become the 'fixed establishment most directly concerned' with the service, which relocates the recipient to India.
- Treating sales-support or lead-generation work for the parent as an intermediary service and paying IGST on it after 30 March 2026, when the exception no longer exists — or, for earlier periods, treating a genuine intermediary service as an export.
- Not filing the LUT before the first invoice of the year and discovering in audit that the exports were made 'without payment of tax' without the cover of an LUT.
- Raising a single annual invoice, breaching the 30-day rule in section 31 and compressing the refund into one period.
- Missing the two-year refund window because the relevant date (receipt of foreign exchange, for services completed before payment) was not tracked per invoice.
Frequently asked questions
Can an Indian subsidiary export services to its own parent company under GST?
Yes. CBIC Circular No. 161/17/2021-GST confirms that a company incorporated in India and its foreign parent are separate persons, so the supply is not barred by the 'establishments of a distinct person' condition in section 2(6)(v) of the IGST Act.
What are the five conditions for export of services?
Supplier in India; recipient outside India; place of supply outside India; consideration received in convertible foreign exchange or RBI-permitted Indian rupees; and supplier and recipient not merely establishments of the same person — section 2(6) IGST Act, 2017.
Is GST charged on an export of services?
No. It is zero-rated under section 16 of the IGST Act. Supply under a Letter of Undertaking without charging IGST and claim a refund of unutilised input tax credit, or charge IGST and claim a refund of the tax paid.
What changed for intermediary services in 2026?
Section 13(8)(b) of the IGST Act, which fixed the place of supply of intermediary services at the supplier's location in India, was omitted by section 157 of the Finance Act, 2026 with effect from 30 March 2026. Intermediary services to a foreign recipient now follow the default rule — the recipient's location — and can qualify as exports.
Can export proceeds be received in Indian rupees?
Yes, where the RBI permits the settlement mechanism — for example through special rupee vostro accounts. Section 2(6)(iv) recognises Indian rupee receipts 'wherever permitted by the Reserve Bank of India'. The FEMA realisation period for rupee-settled exports is twelve months from October 2026.
Do I need to register for GST if all my supplies are exports?
Yes. Zero-rated supplies are taxable supplies; registration is required once the threshold is crossed, and in practice from the start, because the LUT and the refund both require registration.
Within how long must the export proceeds be received?
Under FEMA, within nine months of the invoice date (twelve months for rupee-invoiced and rupee-settled exports) unless extended by the bank; under Rule 96A of the CGST Rules, if payment for exported services is not received within one year of the invoice date, the IGST becomes payable with interest.
What evidence should I keep for the export claim?
The agreement, invoices with the Rule 46 endorsement, the LUT acknowledgement, FIRAs or e-BRCs for each receipt, the bank's EDF acknowledgements, and the GSTR-1 Table 6A disclosures.
Sources
Primary sources only. Statutory text is read from the official publication; where a provision has been renumbered, the pre-2026 reference is given alongside so older material can be reconciled.
- CGST Act, IGST Act, CGST Rules and GST circulars — CBIC
- GST portal — LUT (Form GST RFD-11), refunds and returns
- FEMA notifications — Reserve Bank of India
- RBI Master Directions — Reporting under FEMA; External Commercial Borrowings; Overseas Investment; Export of Goods and Services; LRS
- e-Gazette of India — Finance Act, 2026; Income-tax Rules, 2026; FEMA notifications
Last reviewed on 1 November 2026 by Monal Agarwal, FCA, VMS Jhunjhunwala & Co. Law stated as at that date; the Income-tax Act, 2025 and Income-tax Rules, 2026 apply from 1 April 2026.
