Can a GST composition taxpayer export services?

The composition scheme is the simplified GST option for small businesses: a flat percentage of turnover, short returns and no input tax credit. Some freelancers, tutors and small agencies opt for it when they first register. The question is whether they can also bill a client abroad.¹

The short answer is no. This guide explains why, what happens if a composition taxpayer does export, and which route usually suits a small exporter instead. The law is stated as of 28 October 2026.¹³

What is the GST composition scheme?

The GST composition scheme under section 10 of the Central Goods and Services Tax (CGST) Act lets an eligible registered person pay tax at a fixed rate on turnover instead of tax on each supply.¹ There are two versions:

The table is based on section 10 of the CGST Act and rule 7 of the CGST Rules, both as consolidated by CBIC.¹² Rule 7 states the central tax rate; the State GST law levies its own share.

• No tax collection: under section 10(4), a composition taxpayer cannot collect tax from customers.¹
• No input tax credit: under the same section, a composition taxpayer cannot claim input tax credit.¹

The scheme suits suppliers whose customers are all in the same State.

Why can a GST composition taxpayer not export services?

A GST composition taxpayer cannot export services because the scheme excludes anyone making inter-State outward supplies, and every export is an inter-State supply.¹³

• Section 10(2)(c): the CGST Act bars persons making inter-State outward supplies of goods or services from the section 10(1) scheme.¹
• Section 10(2A)(b): the CGST Act bars persons "engaged in making any inter-State outward supplies of goods or services" from the services scheme.¹
• Section 7(5)(a): the Integrated Goods and Services Tax (IGST) Act treats a supply where the supplier is in India and the place of supply is outside India as an inter-State supply.³
• Section 7(5)(b): the IGST Act also makes supplies to a Special Economic Zone (SEZ) unit or developer inter-State, so the same bar applies to SEZ clients.³

For example, a UX designer in Indore under section 10(2A) who invoices a client in Toronto breaches section 10(2A)(b) with that invoice, even if it is the only foreign invoice of the year.¹³

Who can combine small-business GST treatment with exports of services?

Small exporters of services can combine light GST treatment with exports by staying unregistered under the threshold or by registering normally and filing an LUT; the composition scheme is not one of the routes.¹⁴⁵

An unregistered supplier charges no GST on any invoice, but also cannot claim input tax credit.⁴

• Home tutor: a home tutor in Lucknow teaching only Indian students online under section 10(2A) can stay in composition. If she starts teaching students in Dubai on her own account, she needs to leave the scheme first.¹
• Video studio: a two-person video editing studio with ₹14 lakh of annual billing, all to US clients, can stay unregistered under the threshold.⁴
• Marketing consultant: a marketing consultant with Indian and UK clients and ₹40 lakh turnover usually registers normally, charges GST to Indian clients and exports to the UK client under an LUT.⁵⁶

See how to file an LUT.

How do you move from GST composition to normal registration before exporting?

You move from GST composition to normal registration by filing FORM GST CMP-04 on the GST portal before the date you want to leave the scheme, under rule 6(3) of the CGST Rules, and then filing an LUT before your first export invoice.²⁶

1. Decide the switch date: ideally before the first foreign invoice.
2. File FORM GST CMP-04: enter that date on the form.²
3. Start normal compliance: from the switch date, issue tax invoices and file regular returns.²
4. File the LUT: file FORM GST RFD-11 for the financial year.⁶
5. Issue the export invoice: add the rule 46 endorsement.² See the export invoice format.

Rules on transition, such as claiming credit on stock or services on hand when leaving composition, depend on your facts. Confirm the timing and paperwork with a chartered accountant, especially if a foreign invoice has already been raised while in the scheme.

What forms, deadlines and rates apply when a composition taxpayer starts exporting?

A composition taxpayer who starts exporting files FORM GST CMP-04, moves to normal tax from the day a condition is breached, and files an LUT to export without IGST.²⁶

Note the withdrawal deadline on the day you agree work with a foreign client.

What happens if a GST composition taxpayer exports anyway?

If a GST composition taxpayer exports anyway, the composition option stops applying from the day the condition is breached.² Rule 6(2) of the CGST Rules makes the person liable to pay tax under the normal provisions from that day, requires tax invoices for every taxable supply after that, and requires an intimation of withdrawal in FORM GST CMP-04 within seven days.²

• Penalty: section 10(5) says that if the proper officer has reason to believe a person paid composition tax despite not being eligible, the person is liable to the tax due and a penalty, determined under section 73 or section 74.¹
• Lost zero-rating benefit: because a composition taxpayer cannot claim input tax credit, it cannot use the zero-rating benefit of section 16 of the IGST Act, under which an exporter supplies without IGST and still recovers credit on its costs.¹⁵

Leaving the scheme before the first foreign invoice avoids both problems.

How is GST calculated before and after a composition taxpayer starts exporting?

Before the switch, GST is calculated as a fixed rate on turnover; after the switch, an export under an LUT carries no IGST and the exporter can claim input tax credit on costs.²⁵⁶

For example, say a tutor under section 10(2A) has ₹10,00,000 of turnover in a year from students in her own State. Rule 7 sets central tax at 3 per cent, so central tax is ₹10,00,000 × 3% = ₹30,000, with the State share levied under State law.² After she leaves the scheme and files an LUT, an invoice to a student abroad is a zero-rated supply: she charges no IGST on it and can claim input tax credit on her own costs, subject to the usual conditions.⁵⁶

The exact rate on her Indian invoices after the switch depends on the service, so check the rate with a chartered accountant.

What are the common mistakes with the GST composition scheme and exports?

The common mistakes with the GST composition scheme and exports come from treating one foreign invoice as harmless.¹²³

• One invoice is enough: a single export breaches section 10(2A)(b).¹³
• Forgetting SEZ clients: supplies to an SEZ unit or developer are inter-State too.³
• Missing the seven days: FORM GST CMP-04 is due within seven days of ceasing to meet a condition.²
• Skipping the LUT: a registered exporter files FORM GST RFD-11 for each financial year to supply without IGST.⁶
• Registering when not required: suppliers of only inter-State taxable services up to ₹20 lakh turnover are exempt from registration.⁴

Check your scheme before you agree work with a client abroad.