More people in India now work for companies abroad: as remote employees, as contractors through platforms, or as independent consultants paid in dollars, pounds or euros. The GST answer depends almost entirely on one question: are you an employee or are you supplying services? This guide works through both, then covers registration, the LUT, invoices and payment proof.
Step 1: employee or consultant?
| Employee of the foreign company | Consultant / contractor / freelancer | |
|---|---|---|
| Contract | Employment contract: salary, leave, employer controls how and when you work | Service or consultancy agreement: fees per hour, project or month, you control how the work is done |
| You receive | Salary | Professional fees against your invoices |
| GST | Not applicable: Schedule III of the CGST Act treats services by an employee to the employer in the course of employment as neither goods nor services | A supply of services; usually an export, which is zero-rated |
| Income tax head | Salary | Business or profession |
| Typical return | ITR-1 or ITR-2 | ITR-3, or ITR-4 under the presumptive scheme |
The label in the contract is not decisive; the substance is. A "contractor agreement" that fixes your hours, gives you paid leave and makes you part of the company's team looks like employment, and the reverse is also true. If you are hired through an employer of record in India, your employer is that Indian company: you are its employee, paid salary with Indian TDS, and GST does not apply to you.
Step 2: if you are a consultant, is it an export of services?
Under section 2(6) of the IGST Act, a supply of services is an export only if all five conditions are met:
- You, the supplier, are located in India
- The recipient is located outside India
- The place of supply is outside India
- You receive payment in convertible foreign exchange, or in Indian rupees where the RBI permits
- You and the recipient are not merely establishments of the same person, such as your own branch abroad
For most consulting, software, design, writing, marketing and similar services, the place of supply is the location of the recipient under the general rule in section 13(2). If your client is a company abroad, it is outside India and the condition is met. Exceptions apply to services tied to a physical place or goods in India, such as work on goods physically made available to you in India or services related to immovable property in India; those are taxed in India.
The intermediary change from 30 March 2026. Until then, section 13(8)(b) treated intermediary services, such as a broker or agent arranging supplies between a foreign company and its customers, as supplied in India, so they could not be exports. The Finance Act, 2026 omitted that clause with effect from 30 March 2026. Intermediary services supplied from that date now follow the general rule and can be exports if the other conditions are met. Disputes for earlier periods are still being argued, so keep records of what you did and when.
Step 3: do you need GST registration?
A supplier of services needs to register once aggregate turnover crosses ₹20 lakh in a financial year (₹10 lakh in Manipur, Mizoram, Nagaland and Tripura). Aggregate turnover includes exports, even though they are zero-rated, so a consultant billing USD 30,000 a year is likely to be over the limit.
Inter-state supply of services does not by itself force registration below the limit (Notification 10/2017-Integrated Tax), and exports are treated as inter-state supplies for this purpose, so a consultant below ₹20 lakh can stay unregistered. Once registered, you must file returns every month or quarter, even when every invoice is an export. See GST registration limit 2026.
Step 4: file a LUT and invoice correctly
- LUT (Form GST RFD-11): file it on the GST portal before you issue export invoices, once every financial year. With an LUT you charge no IGST; without one you pay IGST and claim it back as a refund. See LUT filing and GST LUT for exporters.
- Invoice: issue a tax invoice in the foreign currency or INR, with the client's overseas address, and the endorsement that the supply is meant for export under LUT without payment of integrated tax.
- Returns: report export invoices in GSTR-1 and GSTR-3B as zero-rated supplies.
- Payment proof: keep the bank's foreign inward remittance advice (FIRA/FIRC) or e-BRC for each payment, matched to the invoice.
- Time limit: under the LUT you undertake to pay the tax with interest if payment in convertible foreign exchange is not received within one year of the invoice, or the longer period allowed under FEMA.
Input tax credit on your laptop, software subscriptions, co-working rent and similar business costs is not lost: you can claim a refund of the unused credit on zero-rated supplies in Form GST RFD-01.
Income tax, briefly
- Remote employee: salary for work done in India is taxable in India. A foreign employer often deducts no Indian TDS, so you usually owe advance tax on the salary; see our advance tax interest calculator. If tax is also deducted abroad, claim foreign tax credit with the required form before filing.
- Consultant: fees are business or professional income. A specified profession, such as technical consultancy, can declare 50% of receipts under the presumptive scheme up to ₹50 lakh (₹75 lakh where cash receipts are within 5%); otherwise keep books. File ITR-3 or ITR-4 and pay advance tax. See ITR for freelancers.
- Compare regimes and estimate the tax with our income tax calculator.
Talk to Regikart
We check whether your arrangement is employment or a supply of services, register you for GST when you cross the limit, file the LUT, set up export invoices and file the returns, and handle your income tax return and advance tax. See GST registration from ₹999 and LUT filing, or call or WhatsApp +91 70444 94804.
Frequently asked questions
Do I pay GST on salary from a foreign company?
No. If you are genuinely employed by the foreign company, services by an employee to the employer are outside GST under Schedule III of the CGST Act. Income tax applies to the salary.
Is GST applicable for a freelancer or consultant working for a foreign client?
It is a supply of services, but usually an export of services, which is zero-rated. With a LUT you charge no GST. Registration is needed only once aggregate turnover, including exports, crosses ₹20 lakh.
What are the conditions for export of services?
You are in India, the recipient is outside India, the place of supply is outside India, payment is received in convertible foreign exchange (or INR where the RBI permits), and you and the recipient are not merely establishments of the same person.
Are intermediary services exports now?
From 30 March 2026 the Finance Act, 2026 omitted section 13(8)(b) of the IGST Act, so intermediary services follow the general rule: the place of supply is the recipient's location. With a recipient abroad and the other conditions met, they can be exports. Earlier periods remain under the old rule.
Do I need a LUT if I am not registered for GST?
No. A LUT is filed by registered persons. Below the ₹20 lakh limit you can stay unregistered and issue invoices without GST.
Does payment through PayPal, Wise or Payoneer count?
What matters is that the payment is received in convertible foreign exchange into India and you can prove it. Keep the inward remittance advice or e-BRC from your bank or payment provider for each invoice.
About the author
Regikart CA Team
Chartered Accountants at Regikart. Want to discuss this in the context of your business?
