Export of Services: The Five Conditions in Section 2(6)

Export of Services explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

Five conditions, all cumulative. A supply that satisfies four of them is a domestic supply, taxed in the ordinary way.

Section 2(6) of the IGST Act defines "export of services" as the supply of any service where — (i) the supplier of service is located in India; (ii) the recipient of service is located outside India; (iii) the place of supply of service is outside India; (iv) the payment for such service has been received by the supplier in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India; and (v) the supplier and recipient are not merely establishments of a distinct person in accordance with Explanation 1 in section 8.

The five, and what each requires

Condition (iii): where most supplies fail

Place of supply outside India is determined by s.13 — and eleven of its sub-sections can put the place of supply in India regardless of the recipient being abroad.

The ones that most often defeat an export:

Section 13(3)(a) — services on goods made physically available by the recipient: where performed. So repairs, testing and processing carried out in India for a foreign customer are not exports, unless the temporary import proviso applies. Section 13(3) →

Section 13(4) — services relating to immovable property in India: where the property is. And unlike s.12(3), there is no proviso pulling it back.

Section 13(5) — admission to or organisation of an event held in India.

Section 13(6) — performance at more than one location including in India: the place of supply is India, whatever proportion was performed abroad.

Section 13(8)(a) and (c) — banking to account holders, and short hire of means of transport: the supplier's location, which for an Indian supplier is India.

Section 13(11) — services on board during passenger transport: the first scheduled point of departure.

So the first test on any claimed export of services is: which sub-section of s.13 applies? Only if the answer is s.13(2) — or one of the sub-sections that lands outside India on the facts — does condition (iii) hold.

And one large category moved recently. Section 13(8)(b) — intermediary services — was omitted by the Finance Act, 2026, w.e.f. 30.03.2026, so intermediary services now fall to s.13(2) and can satisfy condition (iii). For periods before that date, they could not. Intermediary services omitted →

Condition (iv): payment, and the evidence

"Received by the supplier in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India."

Two limbs. Convertible foreign exchange, or Indian rupees where the RBI permits — the latter accommodating arrangements such as the rupee-denominated settlement mechanisms the RBI has permitted.

The evidence: the bank's realisation certificate or equivalent record, matched to the invoices.

And realisation matters beyond the definition. Rule 96B provides for recovery where export proceeds are not realised within the period allowed under the Foreign Exchange Management Act, 1999, including any extension permitted by the RBI — so a refund taken on an export whose proceeds never arrive is recoverable. Rule 96B →

The practical control is a realisation tracker matching each export invoice to its realisation, with the FEMA period diarised and RBI extensions recorded — because the refund and the realisation are separate processes that have to be reconciled.

Condition (v): the distinct-person bar

"The supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8."

Explanation 1 to s.8 of the IGST Act treats an establishment in India and any establishment outside India as establishments of distinct persons — so a supply between them fails condition (v).

What it catches:

• an Indian branch supplying services to its foreign head office;
• an Indian project office supplying to the overseas parent's other establishment;
• any arrangement where the Indian and foreign sides are the same legal person.

What it does not catch:

• an Indian subsidiary supplying to its foreign parent — they are separate legal persons, not establishments of one person;
• an Indian company supplying to a foreign group company under common ownership.

So the test is legal identity, not economic relationship. A subsidiary can export to its parent; a branch cannot export to its own head office.

The recurring difficulty is where an Indian entity provides services to a foreign group company that itself has a fixed establishment in India. If the service is received by that Indian fixed establishment, condition (ii) fails as well — the recipient is not located outside India. Establishments of distinct persons →

What follows once all five hold

The supply is zero-rated under s.16(1)(a) of the IGST Act, and s.16(3) gives two routes:

Under a LUT, without payment of tax — claiming a refund of unutilised input tax credit computed under Rule 89(4). The LUT must be furnished before the export, and Rule 96A applies a fifteen-day consequence where the goods are not exported or payment not received within the prescribed period. Rule 96A → Rule 89(4) →

With payment of IGST, claiming a refund of the tax paid. For services, this is claimed as an ordinary refund under s.54; for goods, Rule 96 treats the shipping bill as the application. Rule 96 →

And the Finance Act, 2026 lifted the ₹1,000 floor in s.54(14) for export-with-payment refunds — effective from a date to be notified. Provisional refund →

Key takeaways

• All five conditions in s.2(6) must hold; four is not enough.
• Condition (iii) — place of supply outside India — is where most claimed exports fail, because eleven sub-sections of s.13 can put it in India.
• Section 13(4) has no proviso returning property services to the recipient, unlike s.12(3).
• Intermediary services can satisfy condition (iii) only from 30.03.2026.
• Condition (iv) needs convertible foreign exchange or RBI-permitted rupees, with Rule 96B recovering where proceeds are not realised.
• Condition (v) defeats a branch to head office supply, but not a subsidiary to parent supply.

Read next

• Section 13(2): The Default Cross-Border Rule
• Establishments of Distinct Persons and the Export Bar
• Rule 96A: LUT and the Fifteen-Day Consequence
• Rule 96B: Recovery Where Export Proceeds Are Not Realised

Disclaimer: Positions stated as on 5 September 2026, based on the IGST Act and the CGST Act and Rules as amended to 31 March 2026 (ICAI Bare Law, 12th edition). RBI permissions for rupee settlement operate separately and should be checked against the current position.