Updated for FY 2026-27 (AY 2027-28).

Billing a foreign client in dollars: the LUT, the FIRC and the books, in order

You have won a client in the US or Singapore, you are about to raise your first invoice in USD, and three questions arrive at once: do you charge GST, what is this LUT everyone mentions, and what do you do when the bank credits a different rupee amount than the invoice said. This is the order in which to do things, with the entries and the numbers.

Step 1: Check that your service actually qualifies as an export

Zero-rating is not automatic because the client is abroad. Under the IGST Act a supply of services counts as an export only when all of these hold together: 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 in rupees where the RBI permits it), and the supplier and recipient are not merely two establishments of the same person.

Two of those trip people up regularly. First, the place of supply — for most professional, software and consulting work it follows the recipient's location, but there are specific categories (intermediary services, services relating to immovable property, certain performance-based services) where it does not. If you are arranging or facilitating a supply between two other parties, get the intermediary question settled with your CA before you raise the first invoice, not after a notice arrives.

Second, "recipient outside India" means the contracting entity, not the person you speak to. If the Indian subsidiary signs the contract and pays in rupees, that is a domestic supply with GST at the normal rate, whatever the parent company's address says.

Step 2: File the LUT before the first invoice of the year

A zero-rated supply can be made in one of two ways. Either you pay IGST on the export and claim a refund of that IGST later, or you file a Letter of Undertaking on the GST portal and export without paying tax. For a services exporter the LUT is almost always the better route — no money leaves your bank account and comes back months later.

The LUT is filed on the GST portal under Services, and it applies for a financial year, so it has to be refiled at the start of each year. Do it in the first week of April rather than the week you raise an invoice. Confirm the current form reference and validity with your CA, since the portal wording changes from time to time.

One consequence worth noting: if your receipts are below the ₹20 lakh services registration threshold you may not be obliged to register for GST at all, but without registration you cannot file an LUT, cannot show exports in GSTR-1 and cannot claim a refund of input tax credit. Many small exporters register voluntarily for exactly this reason. Work it out on your own numbers before deciding.

Step 3: Raising the USD invoice

Your export invoice carries the same particulars as a domestic tax invoice, plus a few of its own. Keep a single continuous invoice series — do not start a parallel numbering for export invoices unless your CA asks you to.

On the face of the invoice, show:

• the client's full legal name and overseas address, and their tax registration if they have one
• "Supply meant for export of services under Letter of Undertaking without payment of integrated tax"
• the amount in USD, the exchange rate used, and the rupee equivalent
• your GSTIN, the SAC code for the service, and place of supply as the client's country
• your bank details including SWIFT, and the purpose code your bank has told you to use
• "GST: nil (zero-rated export)" rather than leaving the tax row blank

Pick one exchange-rate policy and apply it all year — the rate your bank quotes on the invoice date, or the RBI reference rate for that date. Write the policy into your accounting notes. Mixing the invoice-date rate on some bills and the receipt-date rate on others is what makes a reconciliation take a whole afternoon.

Step 4: The journal entries, including the bit nobody books

Take an invoice of USD 10,000 raised on a day when your documented rate is ₹88.40, so ₹8,84,000.

The money lands three weeks later. The bank converts at ₹89.10, giving ₹8,91,000, and deducts ₹2,800 towards remittance and correspondent charges, so the credit in your statement is ₹8,88,200.

Two habits follow from this. Never write off the ₹2,800 against income by booking the invoice at the net figure — your GSTR-1 value and your books will then disagree by exactly the bank charges, every month. And at 31 March, restate any unpaid foreign-currency debtor at the closing rate, with the difference going to the same forex gain or loss account. That unrealised difference is a real item in your profit and loss, and a lender or an auditor will look for it.

Step 5: FIRC, FIRA and the evidence file

Receipt in convertible foreign exchange is a condition of export, so you need proof of it. Your bank issues a Foreign Inward Remittance Certificate or Advice (FIRC/FIRA) against each inward payment, and closes the entry in the EDPMS system that tracks export receipts. If you collect through a payment platform rather than a direct wire, ask that platform for its foreign inward remittance advice — most of them issue one on request.

Keep, per invoice, a folder containing: the signed contract or purchase order, the invoice, the FIRC/FIRA, the bank statement line, and the e-mail in which the client approved the work. Name files by invoice number. When a GST refund application is examined, this is precisely the set that gets asked for, and assembling it eighteen months later from memory is miserable.

Export proceeds also have a realisation timeline under FEMA, and a GST condition on receiving payment within a prescribed period for LUT exports. Both have specific limits — check the current ones with your CA and diarise them per invoice, because an unrealised invoice can turn a zero-rated supply into a taxable one.

Step 6: Where exports sit in GSTR-1 and GSTR-3B, and the ITC refund

In GSTR-1, export invoices go in the exports table with "without payment of tax" selected and the LUT details given. In GSTR-3B they appear under zero-rated outward supplies, not under nil-rated or exempt — those are three different rows and they are not interchangeable.

Due dates are the usual ones: GSTR-1 by the 11th and GSTR-3B by the 20th of the following month, or quarterly under QRMP if your turnover is up to ₹5 crore.

Because exports under LUT are zero-rated and not exempt, the input tax credit on your costs stays available. A services exporter typically accumulates credit on software subscriptions, rent, professional fees and internet, with no output liability to set it against. That accumulated credit can be claimed as a refund of unutilised ITC. Two practical points: the credit must actually appear in your GSTR-2B before you touch it, and the refund is computed on a formula linking export turnover to total turnover, so keeping any domestic billing cleanly separated in your books makes the working straightforward. Our GST accounting guide covers the GSTR-1 and 3B mechanics in more detail.

Step 7: Income tax on export receipts — a worked example

Export income is ordinary business or professional income. There is no special exemption for it, and a foreign client will not deduct Indian TDS, so the entire tax burden falls on you through advance tax.

Take a software consultant with receipts of ₹60,00,000 in FY 2026-27, all by bank transfer, so the cash-receipts condition for presumptive taxation is satisfied. Under section 44ADA, professional income is taken at 50% of receipts, provided receipts do not exceed ₹75 lakh — here, ₹30,00,000.

Under the new regime, on total income of ₹30,00,000:

Tax ₹4,80,000, plus 4% cess ₹19,200, total ₹4,99,200. No surcharge, since income is below ₹50 lakh.

Under the old regime with 80C ₹1,50,000, 80CCD(1B) ₹50,000 and 80D ₹25,000, taxable income is ₹27,75,000: ₹12,500 + ₹1,00,000 + ₹5,32,500 = ₹6,45,000, plus cess ₹25,800, total ₹6,70,800. The new regime is cheaper by ₹1,71,600 here, which is the usual result for a professional with no home-loan interest.

On advance tax: a 44ADA assessee pays 100% by 15 March, so ₹4,99,200 by 15 March 2027. A consultant maintaining regular books instead follows the normal instalments — 15% by 15 June, 45% by 15 September, 75% by 15 December, 100% by 15 March — with interest under 234B and 234C on any shortfall. The non-audit ITR due date is 31 July. If your receipts cross the ₹75 lakh presumptive ceiling, or you want to claim actual expenses because they exceed 50%, the tax audit threshold and book-keeping obligations change; work that through with your CA before the year ends rather than in July.

Doing this in FlipAccounts

Create the client as a customer with USD as the currency, and raise the invoice from the Invoices screen — the rupee equivalent is recorded at the rate you enter, and the receivable stays in USD until it is settled. When the remittance arrives, import the bank statement in Bank reconciliation from PDF, CSV or Excel and match it to the invoice; the difference between the invoice rupee value and the credited amount is booked as exchange gain or loss, and the bank charges are posted separately. The GST summary builds your GSTR-1 and 3B figures with zero-rated exports shown in their own row, and the statements pack gives you the P&L, balance sheet and general ledger with the export income and forex lines visible. Personal tax computation compares the new and old regimes on the same numbers, which is the ₹4,99,200 versus ₹6,70,800 comparison above. Core accounting is free, with no card.

What to do this week

1. Check whether your LUT for the current financial year has been filed on the GST portal; if not, file it before the next export invoice goes out.
2. Open one folder per export invoice and put the contract, invoice, FIRC/FIRA and bank statement line into it — start with the three most recent invoices and work backwards.
3. Run your last three months of foreign receipts against the invoices and book the exchange differences and bank charges separately, instead of leaving the debtor balances half-cleared.

Frequently asked questions

Do I have to register for GST if I only export services?

The registration threshold of ₹20 lakh for services applies to you as it does to anyone else, and lower limits apply in special-category states. But without registration you cannot file an LUT or claim a refund of input tax credit, so exporters close to the threshold often register voluntarily. Weigh the credit you are losing against the compliance load, and confirm the position for your state with your CA.

What happens if I forget the LUT and raise an invoice without GST?

That is an export without payment of tax where no undertaking was on file, and the department can treat the supply as taxable. The practical fix is to file the LUT immediately and discuss with your CA whether the earlier invoices can be covered or whether IGST needs to be paid and refunded. Do not simply reissue the invoices with a later date.

Will my foreign client deduct withholding tax, and can I claim it?

Some countries require the payer to withhold tax on payments to a non-resident, and the rate depends on the tax treaty between India and that country and on whether you have given a tax residency certificate. If tax is withheld, you may be able to claim foreign tax credit in your Indian return against the same income. The rates and the form involved vary by country — check with your CA.

Which exchange rate should I use — invoice date or receipt date?

Book the invoice at the rate on the invoice date and keep the receivable in USD. The receipt date rate then produces a real exchange gain or loss, which is correct, because that gain or loss actually happened. Restate unpaid foreign debtors at the closing rate on 31 March. Use one documented source for the rate all year rather than switching between your bank's rate and a website.

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