AS | Ankit Sarawagi|Founder, CFOmatrix·July 2026·9 min read | Tax & Compliance |
- Export of services is zero-rated, not exempt. Zero-rated means no output GST but you keep your input credit; exempt would mean losing it. The difference is worth real money.
- The LUT is a timing trap. Zero-rating without paying IGST applies only from the date the LUT is in place. Export in April, file the LUT in May, and April becomes GST-liable. File the LUT at the start of the financial year, before your first invoice.
- Domestic sales are 18 percent GST. You collect output GST from Indian customers and set input credit against it.
- Protect your input credit. Collect vendor GST numbers on every purchase invoice, or you forfeit the credit, which is a straight cash loss. A full exporter can claim a full refund of input GST.
- OIDAR matters for overseas B2C. Selling to non-business consumers abroad follows different place-of-supply and registration rules than a clean B2B export.
| 0% GST on export of services (with a valid LUT) | 18% GST on domestic SaaS sales in India | Full Input-GST refund a 100% exporter can claim |
Export of Services: Zero-Rated, Not Exempt
When an Indian SaaS company sells to a customer outside India and is paid in foreign currency, that supply is an export of services. Under GST an export of services is a zero-rated supply, which sounds the same as “exempt” but is very different, and the difference is cash in your account.
- No GST charged to the customer
- You keep input tax credit on purchases
- Full exporter can claim a refund of that credit
- No GST charged to the customer
- You lose input tax credit
- Input GST becomes a sunk cost
To qualify as an export of services, the usual conditions must hold: the supplier is in India, the recipient is outside India, the place of supply is outside India, payment comes in convertible foreign exchange, and the two are not merely establishments of the same person. Get this right and you have two routes to zero rating, covered next. For where GST sits in the wider founder picture, see the SaaS finance pillar guide.
The LUT: Two Routes to Zero-Rating, One Trap
Zero-rated does not mean “do nothing”. You have to choose how you export: on a Letter of Undertaking, or by paying IGST and claiming it back.
Here is the trap that catches founders every year. The LUT-based zero rating applies only from the date the LUT is in place. If your first export invoice goes out in April but you file the LUT in May, those April exports were made without a valid LUT, so IGST is payable on them.
Export in April but file the LUT in May and your April exports carry GST, because the zero-rating runs only from the LUT date. Put “file LUT” as the first task of every financial year, ahead of your first export invoice. The cost of forgetting is real IGST outflow and a refund you then have to chase.
Input Tax Credit: The Silent Cash Leak
Your SaaS company pays GST on plenty of things: cloud hosting, software subscriptions, professional fees, office costs. That GST is input tax credit, and because your exports are zero-rated (not exempt), you get to keep it. Where the money leaks is on the paperwork.
No domestic output GST to set the credit against, so the accumulated input GST is claimed back as a cash refund from the government.
Input GST is set off against the 18 percent output GST you collect from Indian customers; you pay only the net difference.
Mixed revenue? You do both: set off input credit against domestic output, and claim a refund on the export share.
The leak is simple and brutal: if a vendor’s invoice does not carry their GST number and your correct GSTIN, and does not show up in the GST system against you, that input credit is forfeited. It is not deferred, it is gone, and it is a straight cash loss. Collect vendor GST numbers on every purchase invoice as a standing rule, from your cloud provider down to small vendors.
“The input credit leak is the one nobody notices until it adds up. Every purchase invoice must have the vendor’s GST number, or you simply lose the credit. For a full exporter that credit is a refund you are entitled to, so forfeiting it is real cash walking out of the door.”
Ankit Sarawagi, from working across SaaS and AI SaaS startupsNo vendor GST number on a purchase invoice means no input tax credit, which is pure cash lost. Make “capture the vendor GSTIN” a hard rule at the point of purchase, and reconcile your credit to the GST system every month, not once a year at refund time.
Export or Domestic: The Decision
Every SaaS invoice you raise falls into one of two GST buckets. The decision is worth internalising because it drives whether you charge tax, how you recover input credit, and what you file.
- Export of services, zero-rated
- Invoice at 0% GST under an LUT
- Keep input credit, claim refund
- Paid in foreign exchange
- Normal taxable supply
- Charge 18% GST
- Set off input credit against output
- Pay the net to the government
So yes, you do charge GST to Indian customers, at 18 percent, and you use your input credit as a set-off there rather than as a refund. The moment you have both domestic and export revenue, your finance function needs to split the two cleanly so the refund claim and the set-off do not get tangled.
OIDAR: When You Sell to Overseas Consumers
Most SaaS is delivered automatically over the internet with minimal human intervention, which makes it an OIDAR service (Online Information and Database Access or Retrieval). For a straightforward B2B export the ordinary export rules apply and OIDAR barely changes your life. It starts to matter when you sell to non-business consumers abroad (B2C).
Selling to a business outside India follows the standard export of services route: zero-rated, invoice under LUT, input credit preserved. OIDAR labelling does not disturb this.
Selling automated digital services to individual consumers abroad brings place-of-supply and registration nuances that differ from a clean B2B export. Check your specific position before you scale a self-serve consumer motion.
In the AI SaaS companies I have worked with, most revenue is B2B and exported, so the LUT and input-credit discipline covers the bulk of the GST risk. The OIDAR consumer question only becomes live if you open a self-serve product to individuals overseas, and that is the point to get specific advice rather than assume the B2B export logic carries over.
Frequently Asked Questions
Is SaaS exported from India taxable under GST?
Software sold to customers outside India is generally an export of services and a zero-rated supply, provided the conditions are met (payment in convertible foreign exchange, recipient outside India, the two entities not mere establishments of each other). Zero-rated means no GST on the supply but you keep input tax credit. The catch is timing: zero-rating on an LUT basis applies only from the date the LUT is in place, so file the LUT at the start of the financial year before your first export invoice.
What is an LUT under GST?
An LUT (Letter of Undertaking) is a declaration filed on the GST portal in Form GST RFD-11 in which an exporter undertakes to export services without paying IGST. It lets you invoice overseas customers at zero GST without blocking cash in tax. An LUT is valid for one financial year and must be filed afresh each year. The alternative is to pay IGST on the export and claim it back as a refund, which ties up cash meanwhile.
What happens if I file the LUT late?
Zero-rating without payment of tax applies only from the date the LUT is in place. Export in April but file the LUT in May, and the April exports are treated as made without a valid LUT, so IGST becomes payable on them. In practice you pay the IGST and claim it back as a refund, or carry an exposure that surfaces in diligence. File the LUT at the very start of the financial year, before the first export invoice.
Can I claim input tax credit as a SaaS exporter?
Yes. An export of services is zero-rated, not exempt, so you retain input tax credit on GST charged by vendors (cloud, software, professional fees). A full exporter has no output GST to set it against, so it can claim a full refund of accumulated input GST. The condition: every purchase invoice must carry the vendor’s GST number and your correct GSTIN, or the credit is forfeited and becomes a cash loss.
What is OIDAR?
OIDAR (Online Information and Database Access or Retrieval) covers automated digital services delivered over the internet with minimal human intervention, which most SaaS is. For an Indian company selling to businesses abroad, the normal export of services rules apply. OIDAR mainly matters for the reverse case and for supplies to overseas non-business consumers (B2C), where place-of-supply and registration rules can differ from a straightforward B2B export.
Do I charge GST to Indian customers?
Yes. A domestic SaaS sale to an Indian customer is a normal taxable supply and attracts 18 percent GST. You collect that output GST and set your input tax credit against it, paying only the net to the government. So a company with both domestic and export revenue uses its input credit two ways: set off against domestic output GST, and refund on the export share.
This is general educational information for founders, current to mid-2026, drawing on the author’s experience across SaaS and AI SaaS startups, and is not legal, tax or investment advice. GST provisions on export of services, LUT, input tax credit and OIDAR change and turn on specific facts; verify the current position or consult a GST professional before acting on a particular matter.
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AS | Founder, CFOmatrix | Finance Strategy & Equity Compliance CFOmatrix is a knowledge platform focused on how finance actually works inside growing companies. This guide draws on hands-on experience across SaaS and AI SaaS startups, from GST and export refunds to metrics, per-customer margin, structure and the finance function. |