GST on Import of Services — IGST Applicability, Reverse Charge and OIDAR

When an Indian business imports services from a foreign supplier — whether it is Google Ads, Amazon Web Services, Microsoft Azure, Zoom subscriptions or any other foreign service — GST implications arise under the Integrated Goods and Services Tax (IGST) Act. Here is the complete guide to GST on import of services in India.

What is Import of Services for GST?

Under the IGST Act, "import of services" means supply of any service where:

• The supplier is located outside India
• The recipient is located in India
• The place of supply is in India

If all three conditions are met, the service qualifies as import of services and IGST at the applicable rate is payable on it.

Reverse Charge on Import of Services

GST on import of services is paid by the recipient (the Indian business) under the Reverse Charge Mechanism (RCM). The foreign supplier does not collect or remit Indian GST. The Indian business that pays for the service must:

• Self-assess and pay IGST on the value of service at the applicable GST rate (typically 18%)
• Report this in GSTR-3B (Table 3.1(d) — Inward supplies liable to reverse charge)
• Claim ITC for the IGST paid under RCM (if the imported service is used for business) in the same month or in any subsequent return (before September of next year)

Common Imported Services and Their GST

• Google Ads, Facebook Ads (Meta), LinkedIn Ads: 18% IGST on RCM basis — Indian business must pay and claim ITC
• AWS, Microsoft Azure, Google Cloud: 18% IGST under RCM
• Zoom, Microsoft Teams, Salesforce (SaaS subscriptions): 18% IGST under RCM
• Freelancer payments to foreign individuals: If the service is import of service, 18% IGST applies under RCM

OIDAR — Special Rules for Digital Services

Online Information and Database Access Retrieval (OIDAR) services are digital services delivered entirely over the internet — streaming platforms, online gaming, e-books, cloud services, digital advertising, etc. For B2C OIDAR services supplied to Indian consumers (non-registered individuals), the foreign supplier is required to register in India and pay GST directly (no RCM for consumers since they cannot self-assess). Major platforms like Netflix, Spotify and gaming companies have complied with Indian OIDAR GST rules.

Key Points for Businesses

• Even unregistered businesses must pay RCM on imported services (if it makes them liable to register — if aggregate imports exceed ₹20 lakh)
• No ITC is available for RCM on imports used for personal consumption
• Payments to foreign service providers should be routed through banking channels — RBI's AD category banks process these transactions
• Form 15CA/15CB may be required for certain foreign remittances as per Income Tax rules

Conclusion

GST on import of services catches many businesses off guard — especially with the rapid growth in usage of foreign digital platforms. Correct RCM compliance ensures you don't face demands with interest during GST audits. SPOTON provides GST advisory and compliance for businesses with foreign service imports across Kerala. Contact us for expert guidance.