GST for Remote Software Developers: Registration, Export Benefits & LUT Filing

Under GST, the services of remote software developers working with foreign clients can be classified as “zero-rated.”

The benefit is that the GST rate on export of services becomes 0% if you file a Letter of Undertaking (LUT). GST registration is mandatory once your revenue in one financial year is more than Rs. 20 lakh.

Do remote developers need to register for GST?

The answer depends on your annual revenue. If it exceeds 20 lakhs, you need to get a GST registration. It is not dependent on whether your clients are in India or abroad.

The Rs. 20 Lakh threshold rule

If your total revenue from software development services crosses Rs. 20 lakh in a financial year, GST registration is mandatory. This condition applies in all “normal category states.”

In special category states (Manipur, Mizoram, Nagaland, Tripura and other northeastern states), the limit for this condition is Rs. 10 lakh.

This rule applies regardless of your mix of domestic and Indian clients.

A common misconception is: "I don't charge GST to my foreign clients, so I don't need to register."

This is wrong. The Rs. 20 lakh threshold is about your total turnover, not whether you collect GST from your clients. A developer billing $25,000 per year (roughly Rs. 21 lakh) to a single US startup crosses the threshold and must register. Even if the GST you will be required to pay is zero.

Below Rs. 20 lakh: registration is not compulsory.

Here’s the summary of what we have discussed till now:

There is one more condition, which might force you to get GST registered. It is applicable even if your revenue does not cross 20 LPA.

The SaaS subscription trap: Why your tooling might force registration

Here is a situation most Indian developers don't know about.

When you subscribe to a foreign SaaS platform that does not carry an Indian GSTIN on its invoice, you are importing a service under Section 2(11) of the IGST Act. The Indian GST law shifts the tax liability to you (the buyer). This is the Reverse Charge Mechanism (RCM) under Section 5(3) of the IGST Act.

The RCM rate on imported services is 18% IGST. You pay this to the government yourself.

The key problem: Irrespective of the turnover, to pay GST under RCM, you will have to register under GST.

This condition is applicable if you are using software for your business or profession and the foreign company is not charging GST on its invoice. B2B import to be exact.

Developer tools that might trigger RCM

Here are a few softwares that you might be using for business purpose:

If none of these invoices show an Indian GSTIN, each subscription is an import of service. The developer must register for GST and pay 18% IGST under RCM.

The silver lining: The IGST you pay under RCM is eligible for Input Tax Credit (ITC) if used for business purposes. You pay the 18% IGST today, and you claim it back in your GST filing. The net cash cost is zero but only after you get the credit.

Issue with this silver lining: If you are providing the services to foreign clients, you will have to manually apply for a GST refund. The GST credit sitting in your online ledger will not automatically be transferred to your bank account. GST refund process required filing out a complex form, has a lot of declarations and takes a long time. As the process is manual, your refund can be rejected even if you do everything correctly.

How export of services works: Zero-rated supply explained

For your supply to qualify as export of services, all five conditions under Section 2(6) of the IGST Act must be met:

1. You are located in India. You are a developer sitting in Bengaluru, Pune, or Chennai or any other part of India
2. Your client is located outside India. A US startup, a UK e-commerce company, a German SaaS firm…you get the idea
3. The place of supply is outside India. The service is consumed by the foreign client
4. Payment arrives in convertible foreign exchange or in INR through an RBI-permitted route. USD via wire transfer, Wise, Payoneer, or Stripe is great. INR through an RBI-approved Special Vostro Account is also okay
5. You and your client are not establishments of the same distinct person. This means that you and your client should not have the same PAN or be part of a single corporate group structure. This is rare

All five conditions must be satisfied. If even one fails, you will lose zero-rated supply status and will have to pay 18% GST.

The Indian Subsidiary trap for condition 5

Condition 5 can be tricky for developers contracting with foreign multinationals.

If a US company has an Indian subsidiary and your contract is signed with the Indian subsidiary (not the US parent), your supply is a domestic transaction. You will have to charge 18% GST.

The zero-rated benefit disappears. If you forget to charge the 18% GST, you will have to pay it out of your own pocket (YIKES). If you delay depositing this GST, an interest of 1.5% per month will also be applicable.

The contracting entity is important. Before invoicing, confirm whether your agreement is with the foreign parent company or its Indian arm.

What is LUT and how to file it: A step-by-step guide

LUT stands for Letter of Undertaking. It is a declaration (also called an undertaking or an oath) you file with the GST department before raising your first export invoice for the financial year. It is filed using form number RFD-11 on the GST portal ( gst.gov.in ). It cannot be filed before getting a GST registration. Also, if you are not required by law to get GST registration, you are also not required to file LUT.

Without a valid LUT, you must pay 18% IGST on every export invoice and then claim a refund of the GST paid. This process takes months and blocks your working capital.

With a valid LUT, you invoice your foreign client at 0% GST with no upfront payment.

Step-by-step LUT filing process for FY 2026-27

• Step 1: Log in to gst.gov.in using your GST credentials
• Step 2: Go to Services → Returns → Letter of Undertaking (LUT)
• Step 3: Select the financial year (2026-27)
• Step 4: The portal pre-fills your name, GSTIN, and address
• Step 5: Check all three declaration boxes confirming you meet LUT eligibility
• Step 6: Enter witness details: name, address and occupation of two witnesses. As of writing this article, the portal is not allowing spaces or any special characters in the witness details. Only numbers and alphabets allowed
• Step 7: Sign the form using your Digital Signature Certificate (DSC) or Aadhaar-based OTP
• Step 8: Submit. The portal generates an ARN (Application Reference Number) instantly
• Step 9: Download and save the ARN acknowledgment. You need this reference on every export invoice you raise. Rename the file as “arn number.pdf”
• Step 10: Add to your invoice headers: “Export of services under Letter of Undertaking without payment of IGST”. This needs to be displayed on every invoice

LUT validity and renewal

An LUT is valid for one financial year. The FY 2026-27 LUT covers April 1, 2026 to March 31, 2027. You should file the LUT before every new financial year. Filing is free and takes under 15 minutes.

When voluntary registration makes financial sense (ITC break-even analysis)

My opinion: Many developers earning below Rs. 20 lakh wonder whether voluntary GST registration is worth it.

In most of the case, voluntary GST registration is not worth it. You will not have enough Input tax credit to justify the cost of handling GST compliance.

Additionally, if you are working with foreign clients, and you want to get back the GST Input Tax Credit, you will have to apply for a GST refund.

The GST refund process is manual, lengthy, and has a high rejection rate. Also, you CANNOT claim a GST refund of inputs like laptops, mobile phones, furniture, or air conditioners. These products are called capital goods. The law does not allow GST refund on capital goods.

What does compliance cost?

Depends on who you are asking. For service providers like software developers, you can expect to pay anywhere between 25-50k/year for GST compliance. This includes filing GST refunds and complete protection from GST notices.

What returns do you need to file? (Even when everything is zero-rated)

GST registration does not mean you stop at registration. You file returns every quarter (after changing the default period from monthly), even if every single rupee of your income is zero-rated exports with zero GST liability.

The GST filing calendar for developers

The Nil Return mistake

The most expensive mistake GST-registered developers make is skipping returns or filing NIL returns because they have no GST to pay.

The GST department does not care that your output liability is zero. Late fees apply to the filing delay, not the tax amount.

• Late fee for GSTR-1 : Rs. 50 per day
• Late fee for GSTR-3B : Rs. 50 per day

The maximum fees is upto Rs. 10000 for each missed return. This is a lot.

Common mistakes software developers make with GST

1. Not filing LUT before raising export invoices or receiving payments: If LUT is not filed, you pay 18% IGST first and claim refund later. This blocks cash flow
2. Ignoring RCM on foreign SaaS subscriptions: Tools like GitHub, AWS and JetBrains can create RCM liability if the foreign vendor does not charge Indian GST and you are using the tools for business purposes
3. Claiming ITC on personal purchases: ITC is allowed only for business expenses. A laptop used for client work qualifies but personal purchases do not
4. Not filing nil returns: GST returns must be filed even when GST activity is zero. Missing returns leads to late fees
5. Confusing Rs. 20 lakh and Rs. 40 lakh thresholds: The Rs. 40 lakh limit is for goods. Remote developers provide services, so the Rs. 20 lakh limit applies
6. Not keeping e-FIRA records: e-FIRC proves that foreign client payments came from outside India. Keep it invoice-wise for GST export proof