GST on foreign SaaS and cloud tools: a guide for Indian startups

If your company is GST-registered and a foreign vendor bills you without Indian GST, you pay 18% IGST yourself under "reverse charge" and report it in GSTR-3B. In most cases you can claim the same amount back as input tax credit, so the net cost is usually nil, but you still pay the tax in cash first.

Imported services and OIDAR in plain words

When a vendor outside India sells you a service and you use it in India, GST law treats it as an import of services. Most SaaS, AI and cloud tools that bill you in dollars from abroad fall here.

OIDAR means "online information and database access or retrieval" services. It covers services delivered over the internet with little human involvement, such as cloud hosting, SaaS and online software. Since 1 October 2023 the law no longer requires the service to be "essentially automated". For buyers, what matters most is whether you are GST-registered:

Registered business: you pay the GST under reverse charge (explained below).
Not registered: the law calls you a "non-taxable online recipient". For OIDAR services, the foreign vendor is meant to register in India and charge you 18% IGST itself. You cannot claim this back.

Reverse charge at 18% IGST

Normally the seller collects GST. Under the reverse charge mechanism (RCM), the buyer pays it to the government instead. Section 5(3) of the IGST Act, with entry 1 of Notification 10/2017-Integrated Tax (Rate), puts this duty on any Indian recipient of a service from abroad, except a non-taxable online recipient.

So if you are GST-registered and the vendor's invoice shows no Indian GST, you owe IGST yourself. The rate for software, SaaS and cloud services is 18%. It stayed at 18% after the GST rate changes of 22 September 2025. It is always IGST, never CGST plus SGST, because the supplier is outside India.

How to pay it in GSTR-3B

Table 3.1(d) "Inward supplies (liable to reverse charge)": enter the rupee value of the imported service and the 18% IGST. You enter this yourself. It does not come from any vendor filing.
Pay in cash. Reverse charge tax must be paid from your electronic cash ledger. You cannot use existing input tax credit to pay it.
Table 4(A)(2) "Import of services": claim the same IGST as input tax credit (ITC), if you are eligible. Not 4(A)(3), which is for other reverse charge purchases.

The GST portal keeps an "RCM Liability/ITC Statement" that compares what you paid in 3.1(d) with what you claimed in 4(A)(2) and 4(A)(3). If you claim more credit than you paid, it can block filing. For the credit rules, see input tax credit on dollar invoices.

Time of supply: which month to report

For reverse charge on services, section 13(3) of the CGST Act sets the time of supply as the earlier of:

the date of payment (the date in your books or the date your bank account is debited, whichever is earlier), or
the day after 60 days from the vendor's invoice date.

For card-paid tools, the payment date usually comes first, so report the tax in the month you paid. If you pay a year upfront, the whole year's tax falls in that month. Paying from an overseas group company or parent has a different rule; ask your CA.

Which exchange rate to use

Rule 34(2) of the CGST Rules says that for services you convert at the rate set by generally accepted accounting principles, on the date of the time of supply. In practice, many companies use the FBIL reference rate (which replaced the RBI reference rate in 2018) or their bank's rate for that date. Pick one method, write it down and use it every time.

Convert the dollar amount on the vendor's invoice. Do not use the rupee amount on your card statement. That figure includes your bank's markup and the GST on that markup.

When the vendor charges Indian GST itself

Billed by an Indian company with a regular GSTIN. Some large vendors bill Indian customers through an Indian entity. That is a normal domestic purchase. There is no reverse charge. You claim ITC from GSTR-2B like any Indian invoice.
Foreign vendor registered only under the simplified OIDAR scheme. That registration is meant for sales to unregistered buyers. If you are registered, the tax is normally yours to pay under RCM. Add your GSTIN and company name in the vendor's billing settings so they stop adding GST. GST charged this way usually does not reach your GSTR-2B, so claiming it as credit is doubtful. Talk to the vendor and your CA before you treat it as paid.

Common mistakes

Not paying RCM at all because "the vendor is foreign".
Claiming credit in 4(A)(3) instead of 4(A)(2), or claiming credit without paying the tax in 3.1(d).
Trying to pay reverse charge tax with input tax credit instead of cash.
Using the card statement amount instead of the invoice value.
Paying with a founder's personal card, leaving an invoice that does not name the company.
Not issuing a self-invoice and payment voucher. Most CAs treat both as required. See the ITC guide.
Reporting late. Late reverse charge tax attracts interest.

If your cards keep getting declined by these vendors, read how to pay OpenRouter and Neon from India.

One bill instead of many

Filvon Billing gives you 1 account, 1 bill and 1 GST invoice in rupees for your dev tools. You top up a wallet by UPI or NEFT, and the fee is 6% on what you spend. Get early access.

Sources

General information, not tax or legal advice. Check with your CA before filing.