Your Foreign Client Hasn't Paid in Ten Months. Two Clocks Are Running.

Every guide to exporting services under an LUT tells you the same thing: file Form GST RFD-11, put the declaration on the invoice, charge no IGST, renew it each financial year. Done.

Almost none of them mention the second half of the promise you signed.

An LUT is not a form. It is an undertaking — and one clause of that undertaking is about money arriving, not about work leaving. When you export services without paying IGST, you are binding yourself to receive that payment in convertible foreign exchange within a fixed window. Miss it and the zero-rating collapses backwards. You owe the IGST you never charged your client, plus interest running from the original invoice date.

Your client has gone quiet. It's been ten months. Here is exactly what is happening.

Not legal or tax advice. This explains how two separate deadlines interact so you can have an informed conversation with your CA. Dates, extensions and classifications turn on facts specific to your situation, and the FEMA position in particular has changed three times in the last twelve months. Verify before you act.

The short answer

• Under Rule 96A of the CGST Rules, if you export services under an LUT and the payment isn't received in convertible foreign exchange (or in rupees where the RBI permits it), you must pay the IGST plus interest within fifteen days after the expiry of one year from the date of the export invoice.
• Interest runs at 18% per annum under Section 50(1) — and the LUT wording runs it from the invoice date, not from the day the deadline passed.
• The Commissioner has the power to extend that one-year period. This is the lever that matters most, and almost nobody uses it.
• FEMA runs a completely separate clock with a different length, a different authority, and different penalties. Right now that clock is shorter than the GST one.
• On 1 October 2026 the two swap places. The FEMA period becomes longer than the GST period, and the binding constraint flips from your bank to your GST return.
• If the money eventually arrives after you've paid the IGST, you can claim it back — but there is no clean refund category for it, and this is a known sore point.

The GST clock: one year, then fifteen days

Rule 96A is the provision that lets you export without paying IGST in the first place. In exchange for that, it binds you to pay the tax due along with interest under Section 50(1) within fifteen days after the expiry of one year — or such further period as the Commissioner may allow — from the date of issue of the export invoice, where payment for those services hasn't been received in convertible foreign exchange or in Indian rupees where the RBI permits.

Worked through with real dates:

On a ₹4,00,000 export invoice, the IGST at 18% is ₹72,000. If you pay it on 28 March 2027, the interest has been running for roughly 380 days — around ₹13,500 on top. A client who never paid you ₹4,00,000 has cost you approximately ₹85,500 in tax and interest.

That is the part that catches people. This isn't a penalty for late filing. It is the full tax on revenue you never collected, plus interest calculated as though you'd been holding the government's money for a year.

Two things that are commonly misread

"The invoice date, not the completion date." The clock starts on the date of issue of the export invoice. If you completed the work in January and raised the invoice in March, you have until the following March — not the following January. Conversely, invoicing early to look organised starts the clock early.

"Received, not receivable." Section 2(6) of the IGST Act requires that payment for the service has been received in convertible foreign exchange for the supply to be an export at all. An accrual entry in your books is not receipt. A client who has acknowledged the invoice and promised to pay next quarter is not receipt. Money in your bank, converted, with a bank advice against it, is receipt.

The other clock: FEMA, and why it's currently shorter

Here is what almost no freelancer knows: GST is not the only law with a deadline on this invoice.

Under the FEMA export regulations, a service exporter must realise and repatriate export proceeds within a prescribed period running from the date of the invoice. That period is set by the RBI, and it is not the same as the GST one.

It has also moved repeatedly:

The period that applies is the one in force when you raised the invoice, not the one in force when you read this. It does not update retroactively if the RBI moves the goalposts again before your deadline arrives.

Which produces the thing this post exists to point out.

The clocks swap places on 1 October 2026

An invoice raised today, in August 2026:

• FEMA deadline: 9 months → around May 2027
• GST deadline: 12 months → August 2027

FEMA bites first. Your AD bank will flag the outstanding entry before your GST liability crystallises. In practice, the bank chasing you is an early warning system for a GST problem you don't know you have yet.

An invoice raised on 15 October 2026:

• FEMA deadline: 15 months → January 2028
• GST deadline: 12 months → October 2027

GST bites first. And this is the dangerous configuration, because the early warning disappears. Your bank is perfectly relaxed about a fourteen-month-old receivable that FEMA still considers current — while your GST liability has already crystallised, the fifteen-day payment window has already closed, and interest has been accruing since the invoice date.

If you invoice in INR through a Vostro arrangement, the gap is six months wide. FEMA gives you eighteen months. Rule 96A still gives you twelve.

Nobody is going to send you a reminder about this. The two deadlines sit in different statutes, are administered by different authorities, and nothing in the GST portal knows or cares what your AD bank thinks.

What to actually do, by month

Months 0–3: set up so this never becomes a question

• Put the LUT number and the zero-rated declaration on every export invoice. If you're not sure what belongs on the face of the invoice, see what a valid GST tax invoice must include, and our guide to invoicing foreign clients in USD for the five conditions an export has to meet.
• Record the invoice date as the tracked date, not the delivery date.
• Ask for milestone payments rather than net-60 on completion. On a twelve-month clock, payment terms are a compliance variable, not just a cash-flow preference.

Month 6: the checkpoint nobody schedules

Pull every export invoice older than six months and unrealised. This is the last comfortable moment to have a commercial conversation — a client who is slow is fixable, a client who is gone is not. Under the current 9-month FEMA window, month six is also three months from your bank's deadline.

Months 8–10: escalate on both tracks

With the client: written follow-up, a settlement discount if it moves the money, part payment if full payment won't happen. Any realisation is better than none, because partial realisation reduces the amount on which the GST liability falls.

With your AD bank: the power to extend the FEMA realisation period for sufficient and reasonable cause sits with the AD bank and the RBI, and it survives every one of the amendments above. Ask early, in writing, with the correspondence attached. Banks grant these; they grant them far more readily before the deadline than after.

Month 11: the request most freelancers never make

Rule 96A gives the jurisdictional Commissioner the power to allow a further period beyond one year. This is written into the rule itself, not read into it.

There is also supporting reasoning in Circular No. 37/11/2018-GST, which addressed the parallel situation for goods exported beyond the three-month window. The Board's position there was that exports are zero-rated, and that where the export has genuinely happened, insisting on payment of IGST first and a refund later is the wrong approach — the jurisdictional Commissioner may consider granting an extension on a post-facto basis, on the facts of each case. The circular states that the same principle should be followed for export of services.

So the application exists, it has a stated basis, and the practical experience is that hardly anyone files it. Take your correspondence with the client, the invoice, the LUT, the bank statements showing non-receipt, and any AD bank extension you've already obtained, and apply to your jurisdictional Commissioner before the year expires. An extension requested at month eleven is a different conversation from one requested at month fourteen with a demand notice already issued.

Month 12: if no extension came through

Pay the IGST plus interest within the fifteen-day window. Do not wait for a notice. The interest is running either way, and voluntary payment is a materially better position than a recovery proceeding.

Report it correctly — this is a GST adjustment, not a correction to the original invoice. You cannot go back and edit or delete an issued invoice under GST, and a credit note is not the instrument for a client who simply didn't pay. Your CA will handle the return mechanics; make sure they know the export was genuine and the failure was realisation, because those are different fact patterns.

If the money turns up later

It happens. A client resurfaces, a dispute settles, an administrator pays out eighteen months on.

Once the payment is received in convertible foreign exchange, the supply meets the Section 2(6) condition it previously failed, and the IGST you paid becomes refundable. Practitioners have consistently flagged the same problem here: there is no dedicated refund category for this situation. Claims tend to get filed under "any other," and there have been instances of tax authorities disputing them on the basis that no specific provision covers it. Industry bodies have made representations asking for a clean route; as of now, none exists.

Which is the practical argument for the extension route over the pay-and-reclaim route. Paying the IGST is easy. Getting it back is not.

Two things to preserve if you're in this position:

• The FIRC or e-FIRA for the late payment, with the purpose code, tying the receipt to the specific invoice.
• The original IGST payment challan and the return in which it was declared.

If you're not clear on the remittance paperwork generally, your first foreign payment and the FX paperwork covers what the bank actually produces and what your CA needs from it.

The bad-debt point, said plainly

There is no bad-debt relief for this under GST.

If a domestic client doesn't pay you, you still owe the GST on that invoice. If a foreign client doesn't pay you, you owe the IGST you never charged, plus interest, and you may face FEMA consequences on top. Indian GST does not have a mechanism that lets you write off tax on a receivable that went bad.

That is worth sitting with, because it changes how a freelancer should think about foreign credit risk. A ₹4,00,000 invoice that goes unpaid does not cost you ₹4,00,000. It costs you ₹4,00,000 plus roughly ₹85,500 — and the second number leaves your bank account on a deadline you didn't set.

The defences are all commercial, and they all happen before the work does:

• Advance payments. Fifty percent upfront halves the exposure. Note that GST on advances for services has its own timing rules — advances are taxable on receipt, not on delivery.
• Milestone billing. Four invoices at three-month intervals means four clocks that each start later, rather than one large clock started early.
• Don't invoice ahead of the work. Invoicing on signature rather than on delivery starts a twelve-month clock on a project that might take nine months to finish.
• Know when to stop. Under the FEMA framework, an exporter with proceeds unrealised beyond a year past the due date can be restricted to exporting only against full advance payment or an irrevocable letter of credit. The consequences of one bad client extend past that client.

The part software can actually help with

None of this is difficult to comply with. It is difficult to remember, because the deadline is twelve months after an event that felt finished at the time, sits in a rule nobody reads past the first sentence, and arrives with no notification from anyone.

Mavoin tracks the invoice date on every export invoice you raise under LUT, keeps outstanding amounts visible in INR, and knows which foreign invoices are still unrealised — so a ten-month-old receivable is something you see rather than something you find out about. GST-correct India invoices and multi-currency export invoices, ₹199/month, with a 30-day trial and no card to start.

Start your 30-day trial, or raise a test export invoice with the free export invoice generator — no account needed.

Mavoin is not a Chartered Accountant service. Verify GST specifics with your CA.