How Does the Definition of Export of Services Differ Under FEMA and GST?

Author:: Manoj Sharma
Verified by:: Editorial team
Published:: 8 Oct 2026
Last modified:: 8 Oct 2026

Short answer

FEMA defines export of services broadly as the provision of services from India to any person outside India. The IGST Act sets a stricter five-part test covering supplier location, recipient location, place of supply, mode of payment and related establishments. A service can be an export under FEMA and still fail the GST test, so exporters should check both.

Key facts
Applies to	Governed by	Deadline	Penalty	Last verified
Any person in India who supplies services to a client outside India, including freelancers, consultants, agencies and IT companies	FEMA 1999 section 2(l) and FEMA (Export and Import of Goods and Services) Regulations, 2026 for foreign exchange; IGST Act 2017 sections 2(6), 8, 13 and 16 for GST	FEMA: EDF within 30 days from the end of the invoice month and realisation within 9 months of invoice. GST: payment by 15 days after one year from invoice, or the FEMA period if later, for supplies under LUT	FEMA: up to three times the sum involved under section 13(1). GST: if a supply fails the export test it is taxed as an ordinary taxable supply, and an LUT supply left unpaid attracts tax with interest	8 Oct 2026

What does export of services mean under FEMA and under GST?

Under FEMA, export of services means providing services from India to any person outside India. Under GST, export of services means a supply that meets all five conditions in section 2(6) of the IGST Act. The two laws serve different purposes, so their tests differ.

FEMA: "Export" includes the "provision of services from India to any person outside India" (FEMA section 2(l)). The 2026 export regulations do not define the phrase again and adopt the meanings in the Act (Regulation 2(2)).
FEMA service: A "service" under FEMA does not include a service rendered free of charge or under a contract of personal service (FEMA section 2(zb)). For the 2026 regulations, services also include software (Regulation 2(1)).
GST: Export of services is the supply of a service when the supplier is located in India, the recipient is located outside India, the place of supply is outside India, payment is received in convertible foreign exchange or in Indian rupees wherever RBI permits, and the two parties are not merely establishments of a distinct person (IGST Act section 2(6)).
Why it matters: A supply that meets the GST test is a zero-rated supply (IGST Act section 16(1)). The FEMA test decides whether you must declare the export and realise the money in India (FEMA sections 7(3) and 8).

In short, FEMA asks whether a service went from India to someone abroad, and GST asks whether that supply passes five specific conditions. For the GST side in more depth, see GST on export of services. For the FEMA side, see FEMA rules for exports.

Which common export situations pass the FEMA definition but fail the GST definition of export of services?

The FEMA and GST definitions of export of services mostly agree for a plain service sold to a foreign client and paid in foreign currency. They part ways when the place of supply is in India, when payment does not reach India in an allowed form, or when the parties are branches of one entity.

Which common export situations pass the FEMA definition but fail the GST definition of export of services?
Situation	Export under FEMA?	Export under GST?	Why	Best for
Indian freelancer designs a website for a US company and is paid in US dollars	Yes	Yes, if all five conditions are met	Default place of supply is the recipient's location (IGST section 13(2))	Most freelancers and agencies
Services on goods the foreign client sends to India for testing or repair	Yes, the client is outside India	Often no	Place of supply is where the service is actually performed for goods made physically available (IGST section 13(3)(a)), subject to the repair proviso	Testing labs and repair shops
Interior design for a property located in India owned by a foreign client	Yes, the client is outside India	No	Place of supply is where the immovable property is located (IGST section 13(4))	Architects and designers
Event management for a conference held in India for a foreign organiser	Yes, the client is outside India	No	Place of supply is where the event is actually held (IGST section 13(5))	Event and conference firms
Indian branch of a foreign company serving its own head office abroad	Yes, the head office is outside India	No	Treated as establishments of distinct persons (Circular 161/17/2021-GST, para 4.3)	Branch and liaison set-ups
Indian subsidiary serving its foreign parent company	Yes	Yes, if the other four conditions are met	Separately incorporated companies are separate persons (Circular 161/17/2021-GST, para 5.2)	Captive service centres
Service exporter paid in Indian rupees through a Special Rupee Vostro Account	Yes, rupee settlement is allowed with 12 months to realise	Yes, payment counts as permitted by RBI	Regulation 5(1); Circular 202/14/2023-GST, para 4	Exporters invoicing in INR

How do you check whether a service export meets both the FEMA and GST definitions?

You check a service export against both definitions by first confirming that the service goes from India to a person outside India for FEMA, then testing each of the five GST conditions in order. Place of supply and the form of payment are the two conditions that most often fail.

Confirm the FEMA test. The service must be provided from India to a person outside India, for a charge, and outside a contract of personal service (FEMA sections 2(l) and 2(zb)). If it passes, FEMA declaration and realisation duties apply.
Check where you, the supplier, are located. Under GST this is your registered place of business, a fixed establishment, or your usual place of residence if you have neither (IGST section 2(15)).
Check where the recipient is located, using the establishment that receives the service or, if none, the recipient's usual place of residence (IGST section 2(14)).
Work out the place of supply under section 13. Start with the default rule (location of the recipient) and then check whether a specific rule for goods, immovable property, events, transport or banking applies instead (IGST section 13). See what is place of supply.
Check how you will be paid. GST needs payment in convertible foreign exchange or in Indian rupees wherever RBI permits (IGST section 2(6)(iv)). FEMA needs the payment to come through an authorised bank or authorised person (Manner of Receipt and Payment Regulations, Regulation 3(2)).
Check the relationship. If the recipient is your own branch, agency or representative office abroad, the supply is between establishments of distinct persons and is not an export for GST (IGST section 8, Explanations 1 and 2).
If all five GST conditions hold, invoice the supply as zero-rated. You can supply under a Letter of Undertaking without paying IGST and claim a refund of unused input tax credit (IGST section 16(3)), or pay IGST and claim a refund where the Government has notified that option (IGST section 16(4)). See LUT filing on the GST portal.
Whatever the GST outcome, file the EDF with your AD bank within 30 days from the end of the invoice month and realise payment within the FEMA period (Regulations 3(2) and 5). See EDF form for exports.

How does the place of supply rule change the GST definition of export of services?

The place of supply rule is the GST condition with no FEMA equivalent. Under section 13(2) of the IGST Act the default place of supply is the location of the recipient, so most remote services to foreign clients pass (IGST section 13(2)). Specific rules override that default.

If the recipient's location is not available in the ordinary course of business, the place of supply becomes the supplier's location, which fails the export test (proviso to section 13(2)).
Services on goods that the recipient must make physically available, and services that need the recipient's physical presence, are placed where performed (section 13(3)).
Services linked to immovable property are placed where the property is located, and event services where the event is held (sections 13(4) and 13(5)).
Where these services are performed at more than one location including one in India, the place of supply is the location in India (section 13(6)).
Banking and financial services to account holders, and short-term hire of means of transport, are placed at the supplier's location (section 13(8)).

How did the Finance Act, 2026 change the place of supply for intermediary services?

Section 157 of the Finance Act, 2026 omitted clause (b) of section 13(8) of the IGST Act, which had placed intermediary services at the supplier's location (IGST section 13, footnote 3). Once that omission is in force, intermediary services fall under the default rule.

An intermediary is a broker, agent or other person who arranges or facilitates a supply between two or more persons, and excludes a person supplying on its own account (IGST section 2(13)).
CBIC explains that an intermediary arrangement needs at least three parties, and that sub-contracting for the main service is not intermediary service (Circular 159/15/2021-GST, paras 3.1 and 3.5).
With clause (b) gone, an Indian agent arranging supplies for a foreign principal can qualify as an exporter of services if all five conditions in section 2(6) are met.
The CBIC text records the Finance Act as dated 30 March 2026 but does not show the date from which the omission applies. Confirm the effective date with a tax adviser before treating intermediary invoices as zero-rated.

How do FEMA and GST treat payment for export of services received in Indian rupees?

Both FEMA and GST accept rupee payment for export of services only through routes RBI allows. FEMA lets exports to most countries be settled in rupees or any foreign currency (Regulation 3(2)(I)). GST accepts Indian rupees wherever permitted by RBI, wording added with effect from 1 February 2019 (IGST section 2(6), footnote 1).

CBIC has clarified that export proceeds paid in rupees from a Special Rupee Vostro Account meet condition (iv) of section 2(6) (Circular 202/14/2023-GST). See Special Rupee Vostro accounts.
Under FEMA, exports invoiced or settled in rupees get 12 months to realise instead of nine (first proviso to Regulation 5(1)).
For Nepal and Bhutan, FEMA trade receipts are in rupees, with foreign currency allowed for some exports to Nepal (Regulation 3(2)(I)(a)(i)). A 2017 CBIC circular said services to Nepal or Bhutan count as exports only if paid in convertible foreign exchange (Circular 8/8/2017-GST, para k). That circular predates the 2019 amendment, so check the current position with a tax adviser.

What are the differences between the FEMA and GST definitions of export of services, condition by condition?

The FEMA and GST definitions of export of services differ on five points: who must be outside India, where the service is treated as supplied, what payment counts, how branches are treated, and what the consequence of qualifying is. The table compares each point.

What are the differences between the FEMA and GST definitions of export of services, condition by condition?
Point	FEMA	GST (IGST Act)	Best for
Legal source	"Export" in section 2(l) of FEMA, applied by the 2026 regulations	"Export of services" in section 2(6)	Knowing which law you are reading
Recipient	Any person outside India; FEMA residence rules decide who is resident	Recipient located outside India, judged by its establishment or usual residence (section 2(14))	Clients with offices in several countries
Place of supply	No separate test	Must be outside India under section 13	Services tied to goods, property or events in India
Payment	Through an AD bank or authorised person, in rupees or foreign currency as the receipt regulations allow	Convertible foreign exchange, or Indian rupees wherever permitted by RBI	Rupee invoicing and Vostro settlement
Branches and offices	An office or branch outside India of an Indian resident is itself a person resident in India (section 2(v)(iv))	Supplies to your own establishment abroad are not exports (condition (v))	Companies with overseas branches
Declaration	EDF within 30 days from the end of the invoice month (Regulation 3(2))	Reported as a zero-rated supply in GST returns	Monthly compliance planning
Payment deadline	Nine months from invoice, 12 months if invoiced or settled in rupees, extendable by the AD bank	Under LUT, tax is due if payment is not received by 15 days after one year or the FEMA period, whichever is later (Rule 96A(1)(b))	Slow-paying clients
Benefit if it qualifies	None; it sets duties to declare and realise	Zero-rated supply with input tax credit and refund options (section 16)	Exporters with large input costs

What happens if a service is treated as an export under FEMA but fails the GST definition of export of services?

If a service fails the GST definition of export of services, it is taxed like any other supply of services, even though FEMA duties to declare and realise still apply. The supplier may owe GST, with interest, on invoices raised without tax.

GST due: A supply that fails any of the five conditions in section 2(6) is not zero-rated, so the normal tax applies based on the place of supply.
LUT breach: For supplies made under LUT, unpaid invoices bring tax plus interest under section 50 if payment does not arrive within the Rule 96A(1)(b) period.
FEMA still applies: Failing the GST test does not remove FEMA duties. An exporter of services must still declare payment particulars (section 7(3)) and file the EDF (Regulation 3(2)).
FEMA penalty: A FEMA contravention can attract a penalty of up to three times the sum involved, or up to ₹2 lakh where not quantifiable, after adjudication (section 13(1)).
Outsourcing: Where part of a contract is performed by a supplier abroad and paid directly by the client, CBIC treats the full contract value as export only if IGST is paid on the import portion and RBI allows part of the money to stay abroad (Circular 78/52/2018-GST).

Test each contract against the five GST conditions before you raise the invoice, and charge GST where a condition fails. If you have already issued invoices without tax that do not qualify, speak to a GST practitioner about paying the tax with interest. Keep your AD bank informed on the FEMA side, and ask it for an extension before the realisation period ends. See export realisation period.

Which laws, RBI rules and CBIC circulars define export of services?

FEMA section 2(l) and RBI's Export and Import of Goods and Services Regulations, 2026 set the foreign exchange meaning of export of services. Sections 2(6), 8, 13 and 16 of the IGST Act set the GST meaning, and CBIC circulars explain how officers apply it.

Which laws, RBI rules and CBIC circulars define export of services?
Circular or regulation	Clause	Date	Plain meaning	Best for
Foreign Exchange Management Act, 1999	Sections 2(l), 2(zb), 7(3), 13(1)	29 December 1999, as amended	Defines export to include services from India to a person outside India; duty to declare; penalties	The FEMA starting point
FEMA (Export and Import of Goods and Services) Regulations, 2026, FEMA 23(R)/2026-RB	Regulations 2, 3(2), 5	In force 1 October 2026	Software counts as a service; EDF for services; 9 or 12 months to realise	Service exporters from 1 October 2026
A.P. (DIR Series) Circular No. 20, RBI/2025-26/194	Paras 4 and 7	16 January 2026; in force 1 October 2026	Supersedes the Master Direction on Export of Goods and Services	Checking which RBI rules apply now
Manner of Receipt and Payment Regulations, 2023, FEMA 14(R)/2023-RB	Regulation 3(2)(I)	20 December 2023, amended 10 February 2025	Trade receipts in rupees or foreign currency through an authorised bank or person	Choosing the currency of payment
IGST Act, 2017	Sections 2(6), 2(13), 2(14), 2(15)	2017; rupee wording from 1 February 2019	Five-part GST test for export of services	The GST starting point
IGST Act, section 13	Sections 13(2) to 13(13); 13(8)(b) omitted	Finance Act, 2026 dated 30 March 2026	Place of supply rules for cross-border services	Agents, labs, event and property services
CBIC Circular 161/17/2021-GST	Paras 4 and 5	20 September 2021	Branch to head office is not export; Indian subsidiary to foreign parent can be	Group companies
CBIC Circular 202/14/2023-GST	Para 4	27 October 2023	Rupee payment through a Special Rupee Vostro Account meets condition (iv)	INR-settled service exports

What are the common mistakes exporters make with the FEMA and GST definitions of export of services?

One test: Assuming that a foreign client and a foreign currency payment are enough for zero rating, without checking the GST place of supply rules.
Old intermediary rule: Not reviewing intermediary invoices after the Finance Act, 2026 omitted section 13(8)(b), which had placed intermediary services at the supplier's location. Confirm the date from which the omission applies.
Rupee myths: Believing that any rupee receipt fails the GST test. Rupees count where RBI permits them, such as Special Rupee Vostro Account settlement.
Branch billing: Treating services by an Indian branch to its own foreign head office as exports, which Circular 161/17/2021-GST says they are not.
Skipping FEMA: Not filing an EDF because a service failed the GST test or because GST was paid. The FEMA declaration duty is separate.
Missing location: Not recording the client's address and establishment. If the recipient's location is unavailable, the place of supply defaults to the supplier's location.

How did we verify this?

Every rule, deadline and form on this page is linked to its official source, checked on the dates below.

The Foreign Exchange Management Act, 1999 (text hosted by IFSCA), Sections 2(l), 2(v), 2(zb), 7(3), 8 and 13(1) (checked 8 Oct 2026)
Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, Notification FEMA 23(R)/2026-RB, as amended, Regulations 2(1), 2(2), 3(2), 4 and 5(1) (checked 8 Oct 2026)
RBI A.P. (DIR Series) Circular No. 20, RBI/2025-26/194: Export and Import of Goods and Services, 16 January 2026, Paras 4 and 7 (checked 8 Oct 2026)
Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023, FEMA 14(R)/2023-RB, as amended, Regulation 3(1) and 3(2)(I) (checked 8 Oct 2026)
Integrated Goods and Services Tax Act, 2017: Section 2 (Definitions), Clauses (6), (13), (14), (15) and footnote 1 (checked 8 Oct 2026)
Integrated Goods and Services Tax Act, 2017: Section 8 (Intra-State supply), Explanations 1 and 2 (checked 8 Oct 2026)
Integrated Goods and Services Tax Act, 2017: Section 13 (Place of supply where supplier or recipient is outside India), Sub-sections (2) to (8); footnote 3 on omission of clause (8)(b) by section 157 of the Finance Act, 2026 (checked 8 Oct 2026)
Integrated Goods and Services Tax Act, 2017: Section 16 (Zero rated supply), Sub-sections (1), (3) and (4) (checked 8 Oct 2026)
Central Goods and Services Tax Rules, 2017: Rule 96A, Rule 96A(1)(b) (checked 8 Oct 2026)
CBIC Circular No. 161/17/2021-GST: Clarification relating to export of services, condition (v) of section 2(6) of the IGST Act, 20 September 2021, Paras 4.3, 5.1 and 5.2 (checked 8 Oct 2026)
CBIC Circular No. 159/15/2021-GST: Clarification on doubts related to scope of Intermediary, 20 September 2021, Paras 3.1 to 3.5 (checked 8 Oct 2026)
CBIC Circular No. 78/52/2018-GST: Clarification on export of services under GST, 31 December 2018, Issue 1 and illustration (checked 8 Oct 2026)
CBIC Circular No. 8/8/2017-GST: LUT and bond for exports, 4 October 2017, Para (k), realisation of export proceeds in Indian rupees (checked 8 Oct 2026)
CBIC Circular No. 202/14/2023-GST: Clarification relating to export of services, sub-clause (iv) of section 2(6) of the IGST Act, 27 October 2023 (copy forwarded by the Nagaland Taxes Department), Paras 3 and 4 (checked 8 Oct 2026)

Frequently asked questions

Is a freelancer's remote service to a foreign client an export of services under both FEMA and GST?

Usually yes. Under FEMA it is a service from India to a person outside India. Under GST the default place of supply is the client's location, so it passes if the client is located abroad and you are paid in convertible foreign exchange or permitted rupees. Check that no special place of supply rule applies to your service.

Does payment in Indian rupees disqualify a service from being an export of services under GST?

No, not when RBI permits the rupee payment. Since 1 February 2019 section 2(6)(iv) of the IGST Act accepts payment in Indian rupees wherever permitted by RBI. CBIC Circular 202/14/2023-GST confirms that rupee proceeds from a Special Rupee Vostro Account qualify. Rupee payments that do not follow an RBI route do not.

Can an Indian subsidiary's services to its foreign parent count as export of services under GST?

Yes. CBIC Circular 161/17/2021-GST says a company incorporated in India and a company incorporated abroad are separate persons, so condition (v) of section 2(6) does not block the supply. The other four conditions must still be met. A mere branch of the foreign company in India cannot export services to its own head office.

Are intermediary services exported from India zero-rated after the Finance Act, 2026?

They can be. The Finance Act, 2026 omitted section 13(8)(b) of the IGST Act, so once that change applies the place of supply of intermediary services is the recipient's location under section 13(2). Confirm the effective date with a tax adviser, and check that the other conditions in section 2(6) are met.

Does a service that fails the GST export of services test still need an EDF under FEMA?

Yes, if FEMA treats it as an export. Regulation 3(2) of the 2026 regulations requires every exporter of services to file an EDF within 30 days from the end of the invoice month. The GST outcome does not change that duty. Ask your AD bank about the format it accepts for the EDF.

How long does a service exporter have to receive payment under FEMA and under GST Rule 96A?

FEMA allows nine months from the invoice date, or 12 months if invoiced or settled in rupees, and the AD bank may extend it. For supplies under LUT, Rule 96A makes tax payable if payment is not received by 15 days after one year from the invoice, or the FEMA period with extensions, whichever is later.

Is software development for a foreign client an export of services under the FEMA 2026 regulations?

Yes. The FEMA export regulations, 2026 say that services include software, and define software to cover programs, databases, designs and similar information supplied other than on a physical medium. Software exporters file the EDF with the AD bank or STPI in the domestic tariff area, or the SEZ Development Commissioner in an SEZ.