Indian Subsidiary Exporting Services to a US Parent: GST, LUT and Refunds

Prepared by AU Corporate's CA-led advisory team · Published 14 October 2026 · General information; confirm the current GST rules and refund process before filing.

An Indian subsidiary may provide software development, engineering, research, customer support or other services to its US parent and invoice the parent from India. For GST purposes, however, a foreign customer does not automatically make the transaction an export of services. The company should test the statutory conditions, document what it actually supplies, and choose the appropriate GST and refund process before the first invoice.

1. Check the export-of-services conditions

Under section 2(6) of the Integrated Goods and Services Tax Act, an export of services must meet all the statutory conditions. In practical terms, the company should document:

• The Indian entity is the supplier of the service.
• The recipient is located outside India.
• The place of supply is outside India under the applicable place-of-supply rules.
• Payment is received in convertible foreign exchange or in Indian rupees where permitted by the Reserve Bank of India.
• The supplier and recipient are not merely establishments of the same person for this purpose.

Review the current law and the facts together. A contract naming the US parent as customer is useful evidence, but it does not replace the place-of-supply analysis or establish that every service in the contract qualifies.

The official IGST Act text published by CBIC sets out the export-of-services definition and zero-rated supply framework. Refer to the current enacted provisions and amendments when applying the rules.

2. Confirm the service model and place of supply

Describe the work the Indian subsidiary performs, who receives and uses the output, and whether it supplies services on its own account or arranges supplies between other parties. Services classified as intermediary services may be subject to a different place-of-supply rule, so do not classify sales support, customer introductions, procurement coordination or contract negotiation solely by the label in the agreement.

For a software or engineering delivery model, retain statements of work, project plans, deliverables, timesheets or other work evidence, acceptance records and correspondence that show the actual service. If the company performs multiple types of work, assess each material service line rather than applying one GST conclusion to every invoice.

3. Separate legal entities and related-party arrangements

An Indian subsidiary and its US parent are ordinarily separate legal persons, but the actual legal structure and transaction must be confirmed. The GST legislation contains specific rules for establishments of the same person and also treats certain supplies between related persons as supplies even where no consideration is charged. Do not assume that the export conditions are met—or that a service is outside GST—without checking the parties and arrangement.

Keep an intercompany services agreement that explains the scope, pricing, deliverables, invoicing currency, payment terms and responsibility for expenses. Related-party pricing also needs separate transfer-pricing analysis under the applicable income-tax rules. GST export classification and transfer pricing are connected operationally, but one analysis does not replace the other.

4. Understand zero-rating and the LUT route

Qualifying exports are zero-rated supplies. For eligible registered suppliers, one commonly used route is to furnish a valid Letter of Undertaking (LUT) and make the supply without payment of integrated GST, then claim a refund of eligible unutilised input tax credit in accordance with the prescribed procedure. The law also provides a tax-payment-and-refund route in applicable circumstances; confirm the route currently available and suitable for the supplier.

An LUT is not a substitute for meeting the export conditions. Maintain the filed LUT, invoice references, contract, service evidence, receipt records, return data and refund workings. Check the GST portal and current rules for the relevant financial year, including eligibility, filing steps, time limits and any restrictions on input tax credit.

5. Invoice, foreign receipt and reconciliation records

Build a repeatable file for each export customer and reporting period. The documents should tell a consistent story across the contract, invoice, books, GST returns, bank records and refund claim.

• Signed intercompany agreement and current statement of work.
• Export invoice with the required particulars and correct treatment under the selected route.
• Evidence of work performed, deliverables and recipient acceptance.
• Bank advice and foreign inward remittance or other permitted receipt evidence.
• Filed LUT, GST returns, input-credit reconciliation and refund application support, where relevant.
• Reconciliation of invoices, credit notes, receipts, currency conversion and outstanding balances.

Where payment is delayed, netted, adjusted against expenses or settled through a group account, review the facts against the applicable GST and foreign-exchange requirements before treating the receipt condition as satisfied.

6. Common mistakes to avoid

• Assuming that every invoice to a US customer is automatically an export.
• Ignoring place-of-supply rules or the possibility of intermediary classification.
• Using an expired or missing LUT when making supplies without payment of IGST.
• Claiming input tax credit without checking eligibility, restrictions and supporting documents.
• Allowing the agreement, invoices, bank receipts and GST returns to describe different services or amounts.
• Treating GST classification as a substitute for transfer-pricing, withholding-tax or FEMA review.

For the wider operating context, see our guides to software development services to a US parent, GST compliance for a US-owned Indian subsidiary and intercompany expense reimbursements.

Frequently asked questions

This guide is general information, not tax or legal advice. Export status, input-credit eligibility and refunds depend on the service, contracts, actual conduct, receipts and rules applicable to the relevant period.