GST on Freelance Income from Foreign Clients: Why "LUT Filing" Confuses Even Experienced Freelancers

Billing foreign clients and assuming GST doesn't apply? That's only true if you've actually filed a LUT. Here's what really determines whether your export income is tax-free. We keep running into this with freelancers and consultants across Kolkata: they're billing clients in the US, UK, or Europe, and somewhere along the way they've picked up the idea that "export of services means no GST, simple as that." It's not quite that simple. The missing piece is something called a Letter of Undertaking, or LUT, and without it, that assumption can come back to bite you.

Sneha Das

7/29/20263 min read

Why "export of services" doesn't automatically mean GST-free?

Under GST law, export of services falls under what's called a zero-rated supply. People hear "zero-rated" and assume it means GST just doesn't apply. It doesn't work that way. Zero-rated means GST applies at 0%, but only once you've met certain conditions laid out under the IGST Act. Miss those conditions, and the standard GST rate can kick in instead and it's you, not your foreign client, who ends up owing it.

Your two options here

Filing a LUT :
This is filed once a year through Form GST RFD-11, and it's what lets you invoice foreign clients without charging GST and without having to pay it upfront and chase a refund later. If you're regularly billing overseas clients, this is the route you want.

Paying IGST and claiming it back :
If you don't have a LUT in place, technically you're supposed to pay IGST on the invoice first, then apply for a refund afterward. It works, but it ties up your cash and comes with a fair bit of paperwork most freelancers would rather skip.

Where we see freelancers slip up?

A few patterns come up again and again:

Assuming foreign clients mean automatic exemption, without ever actually registering or filing a LUT.
Filing the LUT once, then forgetting it needs to be renewed every single financial year an expired LUT leaves your invoices unprotected.
Not keeping Foreign Inward Remittance Certificates (FIRC) or bank realization proof on hand, which you need to actually prove the money came in as foreign exchange.
Lumping domestic and foreign invoices together under one GSTIN instead of classifying them properly in returns.

About that ₹20 lakh threshold

Here's where a lot of freelancers get tripped up. They assume that because their turnover from foreign clients is below ₹20 lakh, they don't need to register for GST at all. In reality, if you want to invoice under a LUT, you need an active GSTIN to file Form RFD-11 in the first place the threshold doesn't exempt you from that requirement. Plenty of freelancers below the threshold register voluntarily anyway, partly to unlock this zero-rated status, and partly to claim input tax credit on things like software subscriptions or equipment.

What to keep on hand in case anyone ever asks?

If your export income ever gets a closer look, you'll want:

Invoices that clearly state "Supply meant for export under LUT without payment of IGST," with the right SAC codes and RBI reference rates used for conversion.
FIRC, TRF, or bank statements showing exactly when the foreign payment landed.
Your LUT's ARN acknowledgment, downloaded from the GST portal for the current year.

A simple timeline to work around

Before March 31 — get your LUT filed for the upcoming financial year so there's no gap in coverage from day one.
Every month — file GSTR-1 (with export invoices under Table 6A) and GSTR-3B on schedule.
Ongoing — make sure foreign exchange actually lands within the timelines FEMA requires.

Frequently asked questions (FAQs)

Q1. Do I need to file a LUT every year, or just once?
A. Every year, without exception. Once it expires, you're no longer covered for zero-rated invoicing until you file a fresh one.

Q2. What if I've already invoiced a client without a valid LUT?
A. You'd likely owe IGST on that invoice, and then have to go through the refund process to get it back which is exactly why filing the LUT ahead of time saves so much hassle.

Q3. My foreign income is under ₹20 lakh do I still need to register for GST?
A. Yes, in practice. Claiming zero-rated export status through a LUT requires an active GST registration, regardless of how much you're earning.

Q4. I missed the March 31 deadline can I still file a LUT late?
A. It's best filed before the new financial year starts, but if you've missed it, file it as soon as possible before raising any more export invoices.

Q5. Which exchange rate should I use when reporting export invoices?
A. Use the reference rate published by the RBI on the date you issue the invoice.

Conclusion

If you're freelancing or consulting for overseas clients from Kolkata, check three things today: do you have an active GSTIN, is your LUT filed for this financial year, and are you actually holding onto FIRC or bank realization proof for every payment. Skip any one of these, and what should've been a zero-tax export can turn into a liability you never saw coming.

Let Filing4u simplify this entirely for you. Our team handles your GST registration, LUT filing and renewal, and monthly return compliance, so your foreign invoices stay fully protected while you focus on your clients and your craft.