पाठशाला Pathshala · नियम Niyam, Law and compliance · Lesson 18 · Build

Software exports: SOFTEX, LUT and zero-rated GST

A rupee of software export revenue answers to two rulebooks. The Reserve Bank wants it declared and brought home. GST wants it zero-rated and will refund the tax on your costs, if the papers line up.

Pathshala, The Founder Library · 11 October 2026 · 6 min read

A close view of a server rack with rows of hardware and indicator lights. — Photograph: panumas nikhomkhai · Pexels

A Bengaluru SaaS company bills American customers ₹40 lakh a month and pays ₹3 lakh a month of GST on its cloud, office and software costs. It charges its customers no GST, because exports are zero-rated, and it never claims the input tax back, because nobody told it how. After a year ₹36 lakh of its own cash sits in the GST ledger, and its bank is asking about export invoices with no SOFTEX form attached.

An Indian company that sells software or IT services abroad works under two sets of rules on every invoice. Foreign exchange rules want the export declared and the money brought home on time. GST wants the supply recognised as zero-rated and will refund the tax paid on inputs, if the documents line up. This lesson walks both tracks with the Reserve Bank’s and the CBIC’s own rules, read on 10 October 2026, and turns them into one monthly close.

Two rulebooks, one invoice

The Software Technology Parks of India scheme dates from 1994, when the government set up single-window clearance for software and electronic hardware exporters. Its descendants are the paperwork every software exporter still files: the SOFTEX form on the foreign exchange side, certified by STPI or a special economic zone, and the zero-rating machinery on the GST side.

The two tracks share one document, the invoice, and one event, the money arriving. Get those right and the rest is filing. Get them wrong, with invoices raised late or receipts not matched to invoices, and both tracks stall at once.

SOFTEX: declaring the export

Software exported in non-physical form, over a data link rather than on a disk, is declared on a SOFTEX form. Under paragraph B.5 of the Reserve Bank’s Master Direction on Export of Goods and Services, updated to 17 July 2026, the exporter submits the form to the designated official of the Government of India at STPI, an export processing zone, a free trade zone or a special economic zone for valuation and certification, not later than thirty days from the date of the invoice. The forms are filed as a statement, in a common format for single and bulk declarations, and the statement must include every invoice, including those below US$25,000.

Fibre optic patch cables plugged into a blue patch panel in a data centre. — No shipping bill crosses a border here. The SOFTEX statement, filed within thirty days of the invoice, takes its place. Photograph: Brett Sayles · Pexels

The invoice timing is set by the same paragraph. On a long-duration contract the exporter raises invoices at least once a month or at the milestones in the contract, and the last invoice within fifteen days of completing the contract. On a one-shot contract the invoice is raised within fifteen days of transmitting the software. For a SaaS company billing monthly subscriptions that means one bulk statement a month; for a services company billing on milestones, one per milestone. The certified copy comes back to the exporter and is the evidence its bank needs.

Services that none of the prescribed forms fit can be exported without any declaration, under paragraph B.7, but the exporter must still realise and repatriate the money. Which side of that line a particular product falls on is a question to settle once with the bank and the chartered accountant and then write down.

Realising the money

The value of an export must be realised and repatriated within nine months from the date of export, under paragraph A.2 of the same direction, for every exporter including units in STPI and special economic zones, until the Reserve Bank says otherwise. A customer who pays in ninety days is comfortably inside it. A customer who disputes an invoice for a year is not, and the company must ask its bank for an extension before the nine months run out rather than after. An invoice for software transmitted on 15 January has to be paid by mid-October; the conversation with a slow-paying customer should start in July, not in September.

An aerial view of Bengaluru at dusk with lit buildings under an orange sky. — Nine months from export is the outer limit for the money to come home. Match every receipt to its invoice on the day it lands. Photograph: Umar Andrabi · Pexels

Banks report export transactions to the Reserve Bank’s Export Data Processing and Monitoring System, so an unpaid invoice is not invisible. The useful discipline is to match every receipt to the invoice it pays, on the day it arrives, and to keep the bank’s realisation certificate or foreign inward remittance certificate for each. That certificate is also the document the GST refund needs, which is the hinge between the two tracks.

GST: zero-rated, not exempt

Under section 16 of the IGST Act an export of services is a zero-rated supply, and a registered person making one is eligible to claim a refund. Zero-rated is not the same as exempt. An exempt supply carries no tax and loses the credit on its inputs; a zero-rated supply carries no tax and keeps the credit, which the exporter can then get back in cash. For a software company whose inputs carry GST, cloud, rent, laptops, professional fees, that difference is the whole point.

One condition matters more than the rest for services. The CBIC treats realisation of the consideration in convertible foreign exchange, or in Indian rupees where the Reserve Bank permits it, as a condition for a supply to count as an export of services. An invoice that is never paid is not an export for GST either, so the nine-month discipline above protects the GST position too.

The letter of undertaking

A zero-rated supply can be made in two ways: pay the integrated tax on the export and claim it back, or export without paying tax and claim back the unutilised input tax credit. The second needs a bond or a letter of undertaking furnished to the tax authority before the export, as the CBIC’s refund circular describes. For a startup the letter of undertaking is the practical choice: no tax leaves the company on each invoice, and only the credit on inputs waits for the refund.

Treat the undertaking as part of the financial year’s opening, not as a one-off. Furnish it before the first export invoice of the year, keep the acknowledgement with the year’s GST papers, and write its reference on the export invoice template so that the customer-facing document and the tax position agree. An export invoice raised without tax and without an undertaking on file is the kind of mismatch that turns a routine refund into a notice.

Getting the refund

The refund of unutilised credit on exports made under an undertaking is claimed on Form GST RFD-01, a fully electronic process since 26 September 2019. The claim carries Statement 3, listing the export invoices with their realisation certificates, and Statement 3A, plus a statement of the inward invoices on which the credit rests. The officer should issue an acknowledgement or a deficiency memo within fifteen days. Ninety per cent of the claim can be refunded provisionally, and the circular directs that final orders issue so that the money is disbursed within about sixty days. A claim must be filed within two years of the relevant date the Act defines, so a company that has never claimed should start with its oldest eligible months.

The system is moving toward risk-based processing. The 56th GST Council, in September 2025, recommended extending to inverted duty refunds the risk-based provisional refunds already granted on zero-rated supplies, on the basis of data analysis by the system. A clean filing history is what keeps a claim in the fast lane. Return to the opening example: ₹3 lakh a month of credit claimed monthly, rather than ₹36 lakh claimed after a year, is a working-capital line the company does not have to borrow.

An export is zero-rated only on paper the company keeps. SOFTEX, the realisation certificate and the undertaking are that paper.

The export month-end

In April, before the first export invoice of the year, furnish the letter of undertaking and update the invoice template. Every month, within the first week: raise the month’s export invoices, file the bulk SOFTEX statement for the previous month’s invoices well inside thirty days, and match every receipt that arrived to its invoice with the bank certificate. Every month or quarter, file the refund claim for the period with Statement 3 built from the same match. At each month-end, list every export invoice older than six months and unpaid, and write to the bank about an extension for any that will cross nine months. Once a year, read the export direction’s update notes and the latest CBIC refund circulars. The whole close is a day’s work when the invoices and receipts are matched as they happen, and a month’s work when they are not.

Nothing here is legal or tax advice; confirm the current rule with a chartered accountant or lawyer before acting.