Do you pay GST under reverse charge on foreign SaaS tools and services?

Indian service exporters buy a lot from abroad: design and video tools, cloud hosting, project management software, stock libraries, advertising, and work from foreign subcontractors. Under GST, many of these purchases are an "import of services", and the tax is often paid by you, the buyer. This is the reverse charge mechanism (RCM).¹²

This guide explains when reverse charge applies to imported software and services, when the foreign supplier charges GST instead, and how a registered freelancer, consultant or agency pays and recovers the tax. The rules are stated as of 28 October 2026.¹

What is reverse charge on imported services and SaaS tools?

Reverse charge on imported services means the buyer in India pays the IGST on a service bought from a supplier outside India. Section 5(3) of the IGST Act lets the government notify supplies taxed on reverse charge, and entry 1 of Notification No. 10/2017-Integrated Tax (Rate) covers "any service supplied by any person who is located in a non-taxable territory" to "any person located in the taxable territory other than non-taxable online recipient".²³

• Import of services: a supply where the supplier is located outside India, the recipient is located in India, and the place of supply is in India, under section 2(11) of the Integrated Goods and Services Tax (IGST) Act, 2017.¹
• Tax type: section 7(4) treats every import of services as an inter-State supply, so the tax is IGST.⁸
• Place of supply: for most services bought from abroad, section 13(2) puts the place of supply at the location of the recipient. For example, if your business in Pune buys a subscription, the place of supply is Pune.⁴ For online information and database access or retrieval (OIDAR) services, section 13(12) also uses the location of the recipient.⁴

The registered recipient pays IGST on the value of the service, at the rate that applies to that service.²³

Who pays GST under reverse charge on foreign services?

A buyer located in India pays GST under reverse charge on a service from a supplier located outside India, unless the buyer is a "non-taxable online recipient", in which case the foreign OIDAR supplier pays.¹³⁵

The table follows section 2(16), section 14, entry 1 of Notification 10/2017-Integrated Tax (Rate) and entry 10 of Notification 9/2017-Integrated Tax (Rate).¹³⁵⁶

For example, a registered exporter pays reverse charge on a video editor's subscription to an editing suite billed by a US company, a digital marketing agency's payments to a foreign subcontractor for copywriting or ad operations, a SaaS startup's cloud hosting invoice from a foreign entity, and a consultant's annual fee to a foreign research database.²³

When does the foreign supplier charge GST instead of reverse charge?

The foreign supplier is liable when it supplies OIDAR services to a non-taxable online recipient. Section 14 of the IGST Act makes the supplier located outside India the person liable to pay IGST on those supplies, and requires it to register.⁵

• Definition: section 2(16) defines a non-taxable online recipient as any unregistered person receiving OIDAR services in India.¹
• TDS-only registration: a person registered only to deduct tax at source under section 24(vi) of the CGST Act also counts as unregistered for this purpose.¹
• Business use: since 1 October 2023, the definition no longer depends on whether the service is used for business, so an unregistered freelancer buying a software subscription for work is a non-taxable online recipient.¹

Note: A registered person is not a non-taxable online recipient. If you are registered, the liability on a foreign software purchase sits with you under reverse charge.¹³

See OIDAR services under GST for what counts as OIDAR.

What if an unregistered business imports a non-OIDAR service?

An unregistered business that imports a non-OIDAR service is not excluded from entry 1 of Notification 10/2017-Integrated Tax (Rate), because the only excluded recipient is a non-taxable online recipient, and that term covers OIDAR services only.¹³ Section 24(iii) of the CGST Act requires persons liable to pay tax under reverse charge to register, regardless of turnover.⁷

• Non-business exemption: entry 10 of Notification 9/2017-Integrated Tax (Rate) exempts services received from a supplier outside India by an individual for any purpose other than commerce, industry, business or profession, and by certain government and charitable bodies.⁶
• OIDAR carve-out: the same entry says the exemption does not apply to OIDAR services received by those persons.⁶
• Occasional imports: how small, unregistered freelancers should handle occasional imported services, such as a one-off payment to a foreign subcontractor, is not addressed in a specific CBIC circular we could find.³⁷

Confirm your position with a chartered accountant before assuming either answer.

How does a registered exporter pay reverse charge IGST?

A registered person pays reverse charge IGST in cash and records the transaction in its own books.⁷

1. Self-invoice: section 31(3)(f) of the CGST Act requires a registered person liable under reverse charge to issue an invoice for services received from an unregistered supplier, and section 31(3)(g) requires a payment voucher when paying the supplier.⁷
2. Report: report the liability in your monthly or quarterly return as an inward supply liable to reverse charge.
3. Pay in cash: section 49(4) of the CGST Act allows the electronic credit ledger to be used only for output tax, and section 2(18) of the IGST Act excludes tax payable on reverse charge from output tax.¹⁷
4. Claim the credit: the IGST paid becomes input tax that you can claim, subject to the normal input tax credit conditions.¹

For an exporter supplying under a Letter of Undertaking (LUT), the credit often accumulates. It can be claimed as a refund of unutilised input tax credit on zero-rated supplies. See refund of ITC on zero-rated supplies.

Which documents and rules apply to reverse charge on imported services?

The documents for reverse charge are the foreign supplier's invoice, proof of payment in foreign currency, your self-invoice and payment voucher, and the return in which you reported the liability.⁷

For refund claims, the department checks that the credit relates to your zero-rated supplies, so tag each imported service to the work it supports.

What happens if you get reverse charge on imported services wrong?

If you get reverse charge wrong, the IGST may go unpaid, or the credit you rely on to recover it may be lost, turning a cash-flow item into a cost.¹⁷

• Paying from credit: the credit ledger cannot pay reverse charge tax, which is excluded from output tax.¹⁷
• Not registering: a person liable under reverse charge must register regardless of turnover.⁷
• Assuming the supplier pays: a registered buyer is not a non-taxable online recipient, so the supplier's section 14 liability does not cover the purchase.¹³

The facts that decide the answer are whether you are registered, whether the service is OIDAR, and where the service is received.

How is reverse charge IGST worked out, and is reverse charge a real cost for an exporter?

Reverse charge IGST is the rate that applies to the service multiplied by the value of the service, and for a registered exporter it is usually a cash-flow cost, because the tax is paid in cash and then recovered as credit or refund.¹²³⁷ Reverse charge becomes a real cost when credit is blocked, when the service is not used for business, or when a refund claim is not filed.

• Registered designer: for example, a freelance UI designer registered under GST pays IGST under reverse charge on a yearly design tool subscription, then uses the credit against IGST on a domestic invoice or claims it as a refund.¹
• Unregistered tutor: for example, a tutoring business that is not registered and pays for a foreign video conferencing tool is charged GST by the foreign provider, if that provider is registered under section 14, and has no credit to claim.⁵

The rate depends on the service bought, so check it for each imported service.

What are the common mistakes with reverse charge on imported SaaS tools?

The common mistakes are assuming the foreign supplier has handled GST, paying reverse charge from the credit ledger, and forgetting to claim the credit back.¹³⁷

• Supplier GST on a registered purchase: a registered buyer owes the IGST under reverse charge.¹³
• Credit ledger payments: reverse charge IGST is paid in cash.¹⁷
• No self-invoice: missing the self-invoice and payment voucher required by section 31(3)(f) and (g).⁷
• Untagged imports: not tagging each imported service to the zero-rated work it supports, which weakens a refund claim.

If any of these is unclear, confirm with a chartered accountant, or use the export of services checker for your own outward invoices.