How to Invoice International Clients from India (LUT, FEMA & GST)

Invoicing international clients from India involves more than translating your rate into dollars. You need to navigate LUT bonds, FEMA compliance, zero-rated GST, FIRC certificates, and specific invoice formatting rules. Miss any of these, and you risk delayed payments, blocked bank transfers, or GST complications. This guide is the complete playbook for Indian freelancers invoicing in foreign currency.

Foreign Invoicing Basics

When an Indian freelancer provides services to a client outside India, the transaction is classified as an export of services under GST law. For it to qualify as export, four conditions must be met (Section 2(6) of IGST Act):

1. The supplier (you) is located in India
2. The recipient (client) is located outside India
3. The place of supply is outside India
4. Payment is received in convertible foreign exchange or in Indian Rupees wherever permitted by RBI

If all four conditions are met, the supply is zero-rated — meaning GST rate is 0%. You do not charge any GST to your foreign client. But to actually avail zero-rating without paying IGST upfront, you need an LUT.

The LUT Bond Explained

LUT stands for Letter of Undertaking. It is a declaration filed on the GST portal that allows you to export services without paying IGST. Instead of paying 18% IGST on every export invoice and waiting months for a refund, you simply file the LUT and your exports are zero-rated from day one.

How to file LUT:

1. Log in to the GST portal (gst.gov.in). Go to Services → User Services → Furnish Letter of Undertaking (LUT).
2. Select the financial year (e.g., 2025-26). The LUT is valid for one financial year — April 1 to March 31.
3. Fill in the form: GSTIN, financial year, name of authorised signatory.
4. No bond or bank guarantee is needed (for most taxpayers). The LUT is a simple online declaration.
5. Submit and sign with DSC or EVC. You will receive an LUT ARN (Application Reference Number)— note this down. It goes on every export invoice.

Filing an LUT takes 5 minutes on the GST portal. Not filing it costs you 18% of every export invoice in blocked IGST refund claims. This is the single highest-ROI compliance task for export freelancers.

FEMA Compliance

The Foreign Exchange Management Act (FEMA) governs how foreign currency enters and exits India. As a freelancer receiving payments from abroad, you need to comply with these FEMA requirements:

• Receive payment through banking channels. All foreign remittances must come through your bank (AD — Authorised Dealer bank). Wire transfers, PayPal, Payoneer, and Upwork direct deposit all go through banking channels, so this is usually automatic.
• Purpose code. Your bank reports every inward remittance to RBI with a purpose code. For IT services, the code is P0802 (computer services). For other professional services, it is P0805 (business services). Ensure your bank codes it correctly — wrong purpose codes can trigger RBI queries.
• Realisation period. Under FEMA, export proceeds must be realised (received in India) within 9 months from the date of invoice. If your client delays payment beyond 9 months, you need to report it to RBI through your bank and apply for an extension.
• FIRC (Foreign Inward Remittance Certificate). Your bank should issue a FIRC for each inward remittance (or an e-FIRC for smaller amounts). This is your proof that foreign exchange was received through proper channels. Keep FIRCs — you may need them for GST refund claims, LUT compliance, or bank audit.

Zero-Rated GST for Exports

Zero-rated supply means the GST rate is 0% — but it is not the same as exempt supply. The distinction is important:

As an export freelancer, you can claim refund of the GST paid on your business inputs — laptop, software subscriptions, internet, co-working space, professional development courses. This ITC refund can be significant: 18% of Rs. 1,00,000 in annual business expenses = Rs. 18,000 back in your pocket.

Invoice Format for Foreign Clients

Your export invoice must include specific fields beyond a regular GST invoice:

• Your GSTIN prominently displayed
• Invoice number — sequential, unique per financial year
• Invoice date
• Client name, address, and country — full international address
• SAC code — 998314 (IT consulting), 998313 (IT design), 998399 (other professional services)
• Description of services — specific and detailed
• Currency and amount — in the agreed currency (USD, EUR, GBP)
• Exchange rate — RBI reference rate or agreed rate
• LUT ARN number — your Letter of Undertaking reference
• Declaration: "Supply meant for export of services under LUT without payment of IGST"
• Your bank details — for wire transfer (account number, IFSC, SWIFT code, bank name, branch)
• Payment terms — NET 15, NET 30

Receiving Payment (FIRC)

When your foreign client pays, the money flows through these steps:

1. Client initiates wire transfer from their bank to your Indian bank account using SWIFT code and account details.
2. Correspondent bank (intermediary) processes the transfer. This may add a small fee ($15-30) which reduces the amount received.
3. Your bank (AD bank) receives the foreign currency, converts it to INR at their forex rate (which includes a spread of 0.5-2% from the interbank rate), and credits your account.
4. Bank issues FIRC (or e-FIRC) — this is your proof of legitimate foreign inward remittance. Some banks issue it automatically; others require you to request it.
5. Bank reports to RBI with the correct purpose code (P0802 for IT services).

Alternative payment methods: PayPal, Payoneer, Wise (TransferWise), and Upwork direct deposit all ultimately settle into your Indian bank account. The FEMA compliance is the same regardless of the payment method — the money must enter India through proper banking channels.

FIRC storage: Keep all FIRCs for at least 6 years. You need them for:

• GST export refund claims (if you paid IGST instead of using LUT)
• Proof that export proceeds were realized within 9 months
• Income tax audit trail
• Bank compliance audit