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Section 2(6) & Section 16 Zero-Rated Supply

SaaS & Export LUT Calculator

Verify the 5 legal conditions for Export of Services, monitor your annual LUT validity, and optimize your cash flow between LUT refund vs paying IGST.

Section 2(6) Statutory Export of Services Diagnostic

All 5 conditions must be met cumulatively to enjoy 0% IGST treatment.

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Valid Export of Services (0% IGST under LUT)

Your revenue qualifies as Zero-Rated Supply under Section 16(1)(a). You can invoice at 0% IGST without paying tax, provided your Letter of Undertaking (LUT) is active.

Option A (Recommended for SaaS)

Export Under LUT (0% Tax)

File Form GST RFD-11 annually on the GST portal. Issue invoices with 0% IGST. You never block cash paying output tax. You can claim a cash refund of accumulated ITC on AWS/GCP servers, laptops, and SaaS tools via Form RFD-01 under Rule 89(4).

Option B

Export on Payment of IGST

Charge 18% IGST on your invoice and pay it using your electronic credit ledger. The GST portal automatically refunds this IGST to your bank account without detailed scrutiny of input invoices under Rule 96. Useful if you have huge accumulated ITC from previous years.

Frequently Asked Questions

When does a SaaS subscription qualify as an Export of Services under GST?
Under Section 2(6) of the IGST Act, 5 conditions must be simultaneously satisfied: (1) Supplier is in India, (2) Recipient is outside India, (3) Place of supply is outside India under Section 13, (4) Consideration is realized in convertible foreign exchange or permitted INR, and (5) Supplier and recipient are not distinct establishments.
Why is Place of Supply under Section 13 critical for SaaS companies?
For SaaS and cloud software, Section 13(2) sets the place of supply as the location of the recipient outside India. However, if the company is classified as an "Intermediary" under Section 13(8)(b), place of supply shifts to India, rendering the supply taxable at 18% GST.
Is GST payable when exporting SaaS products under a Letter of Undertaking (LUT)?
No. Exports of services are Zero-Rated Supplies under Section 16(1)(a) of the IGST Act. Furnishing an annual LUT in Form GST RFD-11 allows you to export at 0% IGST without paying tax upfront.
How long is a Letter of Undertaking (LUT) valid under GST?
An LUT is valid for one entire financial year (from 1st April to 31st March). It must be filed on the GST portal before commencing export supplies for each upcoming financial year.
Can SaaS exporters claim a refund of accumulated Input Tax Credit (ITC)?
Yes. Exporters operating under LUT are eligible to claim a cash refund of unutilized ITC accumulated on input services (such as AWS/cloud hosting, software licenses, consulting) under Section 54(3) using the Rule 89(4) formula.
Does receiving payments via Stripe, PayPal, or Wise satisfy foreign remittance rules?
Yes, provided the funds originate in foreign convertible currency and your Indian bank issues a Foreign Inward Remittance Statement (FIRS/FIRA) or NOC confirming cross-border realization under RBI guidelines.
Can SaaS export consideration be realized in Indian Rupees (INR)?
Only where specifically permitted by the Reserve Bank of India, such as under the Special Rupee Vostro Account (SRVA) framework. Regular domestic INR transfers from international clients do not qualify as exports.
Does having an overseas customer automatically make a transaction an export?
No. If the Indian entity acts as an intermediary facilitating supplies between third parties, or if the services are physically performed in India under Section 13(3), the transaction is deemed an intra-state or inter-state domestic supply.
What if the overseas client is a foreign branch of the Indian company?
Under Section 2(6)(v) and Section 8 Explanation 1 of the IGST Act, supplies between distinct establishments of the same entity do not qualify as export of services, even if payment is received in foreign currency.
What is the difference between exporting under LUT versus exporting on payment of IGST?
Export under LUT incurs 0% tax upfront, allowing subsequent refund of accumulated input ITC. Export on payment of IGST requires paying 18% tax from credit/cash ledgers, followed by an IGST refund from the department.