Foreign client checklist: LUT, invoice endorsement, FIRC and the one-year rule

Managing Foreign Client Compliance: LUT, Invoices, FIRCs and the One-Year Rule

Working with foreign clients brings in foreign exchange, but it also hooks you into strict tax and trade rules. To keep your freelance income clean and legal under the Income-tax Act 2025 and GST frameworks, you need to master four critical requirements.

• File your LUT early: Before raising your first export invoice of the financial year, file Form RFD-11 online on the GST portal to obtain your ARN.
• Invoice with endorsements: Ensure your export invoices state the client’s country, your GSTIN, your LUT ARN, and the mandatory Rule 46 statement.
• Collect your FIRCs: Request Foreign Inward Remittance Certificates or e-FIRCs from your bank for every foreign wire or payout.
• Respect the one-year rule: Rule 96A mandates that foreign exchange must hit your Indian account within one year of the invoice date.

Why the LUT Matters

If your service turnover is under ₹20 lakh, Notification 10/2017-Integrated Tax exempts you from mandatory GST registration. However, without registration and a filed LUT, you cannot export at zero-rated tax. If you export without an LUT, you would be forced to pay IGST on every invoice and chase refunds later. Voluntary registration lets you secure an LUT so your foreign invoices carry 0% GST legally.

Invoices and the One-Year Clock

An export of services must satisfy the five conditions of Section 2(6) of the IGST Act: you must be in India, your client outside India, the place of supply outside India (defaulting to the client’s location under s.13(2)), payment received in convertible forex, and the client cannot be your own overseas branch.

Once your foreign payment arrives, collect your e-FIRC promptly. Under Rule 96A, if payment does not arrive within one year of the invoice date, you must pay IGST plus 18% interest within 15 days, and your LUT facility will be suspended.

For personal cases, please consult a Chartered Accountant to review your specific remittance and export setup.

This explainer was drafted automatically from our verified notes and checked for numeric consistency. For your own facts, talk to a Chartered Accountant.