GST on SaaS Subscription Purchased from Foreign Vendor: RCM, Place-of-Supply and ITC Workflow
By Ravi Sisodia · Reviewed by CA Divyanshu Sengar · Updated 5 October 2026
2-minute summary
- A SaaS subscription purchased by an Indian registered business from a foreign vendor can constitute an import of services where the supplier is outside India, the recipient is in India and the place of supply is in India. Imported services are treated as inter-State supplies under the IGST framework.
- Reverse-charge liability should be tested under section 5 of the IGST Act and Notification 10/2017-Integrated Tax (Rate), as amended. For a registered business recipient, the tax is generally paid in cash under RCM and corresponding ITC is separately tested under the normal eligibility conditions.
- Do not confuse business SaaS with the special OIDAR collection model for non-taxable online recipients. The recipient's registration/status and the nature of the supply determine who pays and how the transaction is reported.
Current position
Control and evidence map
| # | Control / evidence requirement | |
|---|---|---|
| 1 | Identify the contracting entity and GSTIN that actually receives/uses the SaaS service. | |
| 2 | Confirm supplier location, recipient location and place of supply under the IGST Act. | |
| 3 | Test RCM liability under the current notification and book IGST through the reverse-charge ledger rather than treating the foreign invoice as tax-inclusive. | |
| 4 | Claim ITC only after satisfying section 16 and other restrictions, with the RCM tax payment and business-use evidence retained. | |
| 5 | Reconcile vendor invoice, foreign remittance, withholding/FEMA review where relevant, RCM tax, ITC and expense allocation across branches/GSTINs. | |
Worked example
An Indian company buys a USD 12,000 annual cloud-software licence from a US vendor for its Indian finance team. The company should test import of services and place of supply, discharge any applicable IGST under RCM, and separately evaluate ITC eligibility. The vendor's foreign invoice having no Indian GST does not mean the Indian recipient has no GST obligation.
Common mistakes
- Treating absence of GST on the foreign invoice as absence of Indian GST liability.
- Using the consumer OIDAR model for a registered B2B recipient without analysing the actual rule.
- Claiming ITC before or without the required RCM tax payment and eligibility evidence.
- Ignoring which GSTIN/establishment actually receives the SaaS service when multiple Indian registrations use the licence.
Frequently asked questions
Who pays GST on foreign SaaS bought by a registered Indian business?
Test the import-of-services and reverse-charge framework under the IGST Act and current notification; commonly the registered recipient has the RCM obligation.
Can RCM IGST be claimed as ITC?
Potentially, subject to payment of tax and the normal ITC eligibility/restriction rules.
Is every SaaS purchase OIDAR?
Do not jump to that label. The OIDAR provisions have specific definitions and special rules; B2B import analysis must start with recipient status and the IGST framework.
Official sources
- Central Board of Indirect Taxes and Customs - Integrated Goods and Services Tax Act, 2017 (IGST Act, 2017; current consolidated framework)
- Central Board of Indirect Taxes and Customs - Notification No. 10/2017-Integrated Tax (Rate) - reverse charge categories (10/2017-Integrated Tax (Rate); 2017-06-28)
- Central Board of Indirect Taxes and Customs - Central Goods and Services Tax Act, 2017 (CGST Act, 2017; current consolidated framework)
Disclaimer
Educational and professional reference only; confirm the current law, rates and the facts of your case before relying on this page.