Getting paid by US clients is great — until GST questions appear. "Do I charge GST on dollars I receive?" "What's the foreign exchange GST rate?" This guide answers the common questions Indian freelancers ask about GST on foreign exchange and international payments.
Disclaimer: This is general information, not tax advice. Confirm with a chartered accountant.
Is Freelance Income from Abroad "Export of Services"?
Yes. Providing services to a client outside India is treated as export of services under the IGST Act. Export of services is zero-rated — meaning no GST is charged to the client, and you don't pay output GST.
Do You Need to Charge GST to Your US Client?
No. Since it's a zero-rated export, you do not add GST to your invoice to a US client. You simply invoice in USD (or INR) without GST.
LUT (Letter of Undertaking): Why It Matters
To export services without paying IGST upfront, most freelancers file an LUT with the GST department each financial year. With a valid LUT:
- You export without paying IGST
- You don't need to post a bond
- Your invoices stay GST-free for foreign clients
Without an LUT, you'd have to pay IGST and claim a refund — slower and more paperwork.
What About GST on Foreign Exchange (the Conversion)?
Here's the part that confuses people: RBI-authorised money changers and banks pay GST on their currency conversion services (currently 18% on the margin/markup they earn). This is a tax on the service provider (the bank), not a tax you pay separately on receiving dollars.
In practice, when you receive USD and it's converted to INR by your bank, the bank's conversion margin already reflects its costs — you don't file a separate GST return for the FX itself.
Reverse Charge Mechanism (RCM)
Some cross-border services (e.g., certain imports of services) attract GST under RCM, payable by the recipient. For typical freelance export of services, RCM generally doesn't apply because you're the supplier, not the importer. But if you import services (e.g., buy a SaaS tool from abroad), RCM may apply to you as the recipient.
Practical Compliance Checklist
- Register for GST if your aggregate turnover exceeds ₹20 lakh (₹10 lakh for some states) — many freelancers register voluntarily to file LUTs.
- File LUT at the start of each financial year.
- Issue GST-free invoices to foreign clients marked "Export of services under LUT."
- Keep records — contracts, invoices, and payment proofs (bank/FIRC or equivalent).
- File returns (GSTR-1, GSTR-3B) on time.
How Pym Helps with Documentation
Every transfer through Pym generates a clear record — amount, USD/INR rate, recipient, and transaction ID — making it easy to show proof of foreign inflow during GST filings. Receive USD via your virtual account and convert to INR at a better rate than banks.
Bottom Line
Export of services is zero-rated — you generally don't charge or pay GST on dollars from US clients, provided you file an LUT and keep records. Open a free Pym account to receive USD cleanly and keep clean payment trails.