Tax rate by region India

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The information provided on this page is intended for general informative purposes only. It should not be interpreted as tax advice, nor is it meant to be. For advice on your particular tax responsibilities, consult with an experienced tax expert. PayPro Global does not assume any responsibility for any action taken or not taken based on the information presented here.

GST Implications for SaaS Businesses in India

Businesses in India offering Software as a Service (SaaS) are subject to the Goods and Services Tax (GST) at a standard rate of 18%. This tax applies to the supply of digital services, including SaaS, to customers located in India. The GST was implemented in 2017 and replaced the earlier Value-Added Tax (VAT) regime, simplifying taxation and improving compliance. It is crucial for SaaS businesses to understand and comply with relevant GST regulations to avoid penalties and ensure smooth operations.

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India

India implemented the Goods and Services Tax (GST) in 2017 to streamline taxation and improve compliance.

Official government link: Goods and Services Tax Council

18.00%

E-products and services VAT/Sales tax rate

18.00%

Reduced tax rate

Reduced tax rate product categories

No specific reduced tax rates for digital goods and services in India

Exempted product categories

There are no specific exemptions for digital goods and services in India

Reverse charge mechanism for B2B sales

Yes

Tax ID validation required

Yes

When do you have to register

Business must register before commencement of taxable activies

Online registration possible

Yes

Local representative needed

Yes

Registration procedure

Companies must complete a single registration using Form GST REG-10.

It typically takes about 5 to 10 working days to obtain a GST Certificate.

E-merchants have the option to appoint a tax agent to handle all GST obligations on their behalf.

List of digital and electronic services liable for tax

Website supply, web-hosting, distance maintenance of programs and equipment;
Supply of software and updating thereof;
Supply of images, text, and information and making available databases;
Supply of music, films, and games, including games of chance and gambling games, and of political, cultural, artistic, sporting, scientific, and entertainment broadcasts and events;
Distance education.

Penalties

Failure to obtain registration may result in a penalty of INR 20,000 (approximately 240 USD).

Failure to pay taxes, incomplete tax payments, inaccurate refunds, or improper use of input tax credit may lead to a penalty of INR 20,000 (approximately 240 USD) or 10% of the tax due, whichever is higher. Additionally, late submission of periodic returns incurs a daily penalty, capped at a maximum of INR 10,000.

Registration threshold

No threshold, non-resident companies must register for VAT

Filing interval

Monthly

Filing deadline

By the 20th of the succeeding the month for which the return is filed

E-invoicing requirements

Yes

Record keeping

Business must keep income tax records and GST records for at least 6 years

How-To Guides: India SaaS VAT

Step: 1 Threshold

Effective December 1, 2016, India requires non-resident vendors of digital services (including online platforms) to consumers (B2C) in India to register for and collect service tax, regardless of the sales amount. These rules were continued under the new GST regime effective July 1, 2017.

 

On August 19, 2023, India published the Central Goods and Services Tax (Amendment) Act, 2023 and the Integrated Goods and Services Tax (Amendment) Act, 2023, which among other things, clarifies the GST treatment applicable to online gaming. The acts clarify that “online money gaming” platforms located outside India are subject to GST and are required to register for GST under the simplified registration mechanism for Online Information Database Access and Retrieval (OIDAR) services provider. While the effective date is subject to a government notification, these amendments are proposed to become effective from October 1, 2023.

• B2C: NIL. Registration is mandatory from the first rupee of sales to a non-taxable recipient in India.
• B2B: Not required for foreign suppliers; the Indian buyer handles tax.

Step: 2 Business Registration

Foreign OIDAR providers must use the Simplified Registration Scheme. No physical office is required, but you must appoint an authorized signatory/representative in India.

Step: 3 TIN/VAT Number

GSTIN (15-digit) issued by the Central Board of Indirect Taxes and Customs (CBIC) via the Principal Commissioner of Central Tax, Bengaluru West.

Step: 1 Standard VAT Rate

In India, the standard VAT rate is 18% (Standard GST rate for OIDAR/SaaS under SAC 9983).

Step: 2 VAT Formula

To calculate your tax amounts, use the following formula:

 

Tax Amount = Net Price x 18%

Step: 3 Reverse Charge (B2B)

Yes. For B2B sales (where the buyer has a GSTIN), the Reverse Charge Mechanism (RCM) applies. The foreign supplier does not charge GST; the Indian business buyer pays it directly to the government.

Step: 1 Selling B2C

Supplier must charge 18% GST at the time of sale. You are responsible for identifying the customer’s location (via IP, billing address, or SIM card).

Step: 2 Selling B2B

Do not charge GST. The invoice must state that tax is payable on a Reverse Charge basis by the recipient.

Step: 3 Invoice Requirements

Invoices must contain:

 

• Supplier Name & Address
• GSTIN (for B2C sales)
• Sequential Invoice Number
• Date of Issue
• Recipient Name & Address
• Description of Service (SAC 9983)
• Value of Service
• Tax Rate (18%) & Amount (for B2C)
• Currency (INR or foreign with conversion rate)

Step: 1 Filing Interval

Taxes should be filed monthly.

Step: 2 Filing Deadline

The filing deadline is the 20th of the following month (for Form GSTR-5A).

Step: 3 Submission

Taxed should be filed via the GST Common Portal (www.gst.gov.in). Payments are made via net banking or international wire (as permitted).

Step: 4 Record Keeping

Tax records need to be kepts for a minimum of 6 years from the end of the relevant financial year. 

PayPro Global Solution: Simplified Registration & Fiscal Representation

Navigating India’s VAT registration and fiscal representation can be daunting. PayPro Global acts as your Merchant of Record, handling these complexities, including VAT registration and fiscal representation where needed, so you can focus on your business.

Learn more about our MoR services.

FAQ

Overwhelmed by SaaS sales tax compliance?

Our team of SaaS tax experts is here to help. Contact us today for a free consultation.

 

 

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