Grow · Startups
Does GST apply when a startup sells software to customers outside India?
Whether GST applies to software sold outside India, the letter of undertaking route, and refund of input tax credit.
A supply of software or a software-as-a-service subscription to a customer outside India can qualify as an export of service under goods and services tax law, provided the place of supply and payment conditions in the definition are met. An export of service is a zero-rated supply, so no GST is charged on the invoice. A registered exporter generally files a letter of undertaking to export without paying integrated tax, and can then claim a refund of unutilised input tax credit accumulated on inputs used to make the export.
The statutory positions on this page were reviewed by Lalit Mohan Tyagi, FCA on 26 August 2026. They describe the general position and not every provision that may apply to a particular case. Confirm your own position with the firm before you act on it.
When does a software sale to a customer abroad qualify as an export of service?
The transaction has to meet every condition in the statutory definition of export of service, not just involve a foreign customer.
The supplier has to be located in India, and the recipient has to be located outside India.
Payment has to be received in convertible foreign exchange, or in Indian rupees where permitted by the Reserve Bank of India.
What is 'place of supply' for a SaaS sale, and why does it matter?
Place of supply rules decide, for GST purposes, where a service is treated as having been supplied, which is not always simply where the customer is billed.
For an export of service to apply, the place of supply generally has to be outside India.
Certain categories of service have special place of supply rules that can produce a different result from the general rule.
What does zero-rated supply mean under GST?
A zero-rated supply is charged GST at a rate of zero, distinct from an exempt supply on which input tax credit cannot generally be claimed.
Export of goods and export of services are both treated as zero-rated supplies under the integrated tax law.
Treating exports as zero-rated is intended to prevent embedded domestic tax from making Indian exports less competitive.
What is a letter of undertaking, and why do most exporters file one?
A letter of undertaking is a filing on the GST portal that lets a registered exporter supply goods or services without paying integrated tax upfront.
Without it, an exporter would need to pay integrated tax on the export and then separately claim a refund of that tax paid.
Filing the letter of undertaking is generally simpler for a business with recurring export sales, since it avoids that cash flow gap.
How is a refund of unutilised input tax credit claimed?
Where an exporter has filed a letter of undertaking, input tax credit paid on inputs used to make the export accumulates rather than being immediately offset.
A refund of this unutilised credit is claimed through an application on the GST portal, calculated by a prescribed formula.
Supporting documents, including export invoices and bank realisation certificates for the foreign currency received, are needed for the refund application.
Does GST apply if the SaaS customer has an establishment or agent in India?
The export of service definition specifically excludes a transaction where the supplier and recipient are merely establishments of the same distinct person.
Where the foreign customer's Indian establishment is the one actually receiving and using the service, the transaction can fall outside the export definition.
This distinction should be reviewed carefully for a group structure with an Indian subsidiary or branch of the customer.
Does the intermediary rule ever bring a SaaS transaction back into Indian GST?
A supplier that merely arranges or facilitates a supply between two other parties, rather than supplying the service on its own account, can be treated as an intermediary.
Place of supply for an intermediary is generally the location of the intermediary itself, which can be in India even where the end customer is abroad.
A SaaS business selling its own software directly is usually not an intermediary, but a marketplace or referral-based model should be checked against this rule.
What records support an export of service claim during a GST audit?
Export invoices, the letter of undertaking, bank realisation certificates evidencing foreign exchange receipt, and the underlying customer agreement together support the export claim.
These records should be retained and reconciled against the GST returns filed for the same period.
Good record-keeping shortens the time a refund claim or an audit takes to resolve.
Statutory basis
| Position | Rests on | Stated as at | Status |
|---|---|---|---|
| A supply qualifies as an export of service where the supplier is in India, the recipient is outside India, the place of supply is outside India, payment is received in convertible foreign exchange or permitted rupee payment, and the supplier and recipient are not merely establishments of the same distinct person. | Integrated Goods and Services Tax Act, 2017, section 2(6) | August 2026 | Verified |
| Export of services is a zero-rated supply under the IGST Act, allowing supply without payment of integrated tax under a letter of undertaking, or payment of tax followed by a refund claim. | Integrated Goods and Services Tax Act, 2017, section 16 | August 2026 | Verified |
| A letter of undertaking is filed on the GST portal in Form GST RFD-11, generally valid for the financial year in which it is filed. | Central Goods and Services Tax Rules, 2017, rule 96A | August 2026 | Verified |
| Refund of unutilised input tax credit on export of services under a letter of undertaking is claimed under section 54 of the CGST Act, calculated by the formula prescribed in the CGST Rules. | Central Goods and Services Tax Act, 2017, section 54, and Central Goods and Services Tax Rules, 2017, rule 89 | August 2026 | Verified |
| The intermediary place of supply rule can treat a facilitation service as supplied in India regardless of where the end recipient is located, taking the transaction outside the export of service definition. | Integrated Goods and Services Tax Act, 2017, section 13(8) | August 2026 | Verified |
Does a startup need a GST registration to claim export status?
Yes. Export benefits, including the letter of undertaking route, apply to a registered person under GST.
Is GST charged if a SaaS customer pays in Indian rupees?
Payment in Indian rupees can still qualify where it is received through a route the Reserve Bank of India permits for this purpose; the position should be checked for the specific payment channel used.
How long does an input tax credit refund typically take to process?
Processing time depends on the completeness of the application and the department's workload, and can vary between filings.
Does selling to a foreign parent's Indian subsidiary count as an export?
It depends on which entity is actually receiving and using the service; a sale effectively made to the Indian entity can fall outside the export definition.
What happens if the letter of undertaking is not renewed on time?
Exports made without a valid letter of undertaking on file are generally expected to be made on payment of integrated tax, followed by a refund claim instead.
Related pages in this section
Last reviewed 26 August 2026.