GST on Import of Services

When a business in India buys a service from abroad, no one charges it GST. The foreign supplier is outside the Indian system, customs does not see a service, and the bank remits the fee net of nothing. The tax is still due, and the buyer pays it. Typical cases are a cloud subscription, a foreign law firm’s opinion, a group company’s management charge, or a foreign subcontractor working on an export contract. The difficulties are knowing when a foreign charge is an import at all, valuing it in rupees, fixing the month, and dealing with services from a foreign parent for which nothing is billed.

This guide covers the definition and the levy, the place of supply test, related-party imports without consideration, online services from foreign suppliers, valuation and the exchange rate, and the self-invoice, payment and credit. The general mechanics of reverse charge are in Reverse Charge for Businesses.

When a service is imported

Section 2(11) of the IGST Act defines “import of services” as the supply of any service where:

• the supplier of service is located outside India
• the recipient of service is located in India
• the place of supply of service is in India

“Location” has a defined meaning. The location of the recipient is the registered place of business, a fixed establishment, the establishment most directly concerned, or, failing these, the usual place of residence (section 2(14)). Where the work is done physically does not decide it.

Three provisions then bring the import into tax:

• Section 7(1)(b) of the CGST Act makes “import of services for a consideration whether or not in the course or furtherance of business” a supply. An individual importing a service for personal use is making a supply. Whether tax is then payable depends on the exemptions below.
• Schedule I, item 4, read with section 7(1)©, makes a supply even without consideration of the import of services “by a person from a related person or from any of his other establishments outside India, in the course or furtherance of business”.
• Section 7(4) of the IGST Act provides that “supply of services imported into the territory of India shall be treated to be a supply of services in the course of inter-State trade or commerce”. The tax is always IGST, never CGST and SGST, even when the recipient and the place of supply are in one State.

Who pays, and the exemptions

Section 5(3) of the IGST Act allows reverse charge to be notified. 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 other than non-taxable online recipient”. The recipient, “any person located in the taxable territory other than non-taxable online recipient”, pays the IGST. A recipient that is not yet registered must register under section 24(iii), whatever its turnover, because it is a person “required to pay tax under reverse charge”.

Entry 10 of Notification No. 9/2017-Integrated Tax (Rate) exempts services received from a provider in a non-taxable territory by:

• the Central or a State Government, a Union territory, a local authority, a governmental authority, or an individual, for any purpose other than commerce, industry, business or profession
• an entity registered under the Income-tax Act for charitable activities
• a person located in a non-taxable territory

As issued, online information and database access or retrieval services received by the first two classes were excluded from the exemption. Those services are dealt with by section 14 of the IGST Act, below.

Place of supply decides whether it is an import

The third limb, place of supply in India, is fixed by section 13 of the IGST Act, which applies whenever either party is outside India. The default in section 13(2) is the location of the recipient, so a foreign service to an Indian business is normally an import. The special rules can move it either way (Place of Supply):

• Services on goods made physically available, and services needing the recipient’s presence: where actually performed (section 13(3)). Repair of an Indian company’s machine in Germany is performed outside India, so it is not an import.
• Immovable property: where the property is located (section 13(4)). A foreign architect designing a factory in Pune is supplying an import.
• Events: where the event is held (section 13(5)).
• Hiring of transport up to a month, and banking services to account holders: the supplier’s location (section 13(8)), so these are not imports.
• Transport of goods: section 13(9), which placed it at the destination, was omitted from 1 October 2023. It now follows the default rule.

Ocean freight: no longer a separate levy

Until 30 September 2023, entry 10 of Notification No. 10/2017-Integrated Tax (Rate) made an Indian importer pay IGST on ocean freight paid by the foreign seller under a CIF contract. In Union of India v Mohit Minerals Pvt Ltd (Supreme Court, 19 May 2022), the Court held that levy invalid. The importer already paid IGST on the CIF value of the goods. That value included freight and insurance as part of a composite supply. A separate levy on “the ‘service’ aspect” was held to be “in violation of the principle of ‘composite supply’” in section 8 of the CGST Act. Entry 10 was omitted from 1 October 2023 (Notification No. 13/2023-Integrated Tax (Rate)).

Demands for the earlier years have continued. In Sunrise Timply Company Pvt Ltd v Union of India (Calcutta High Court, 19 January 2026), an order confirming tax on freight for July 2017 to March 2018 was set aside. The officer had treated the judgment as applying only from the 2023 amendment. The Court held that a judgment declaring the law “applies retrospectively unless it is expressly made prospective”.

Freight paid by the Indian importer itself, on an FOB purchase, is a different case. The importer then contracts for the shipping service directly. The judgment concerned CIF imports.

Related parties and own establishments abroad

Schedule I item 4 reaches services that a foreign parent, group company or the importer’s own foreign branch provides without charge. Examples are management oversight, shared IT systems, and staff seconded to India. Explanation 1 to section 8 of the IGST Act treats an establishment in India and one outside India as establishments of distinct persons. So a foreign head office and its Indian branch can supply each other.

Circular No. 210/04/2024-GST settles the value where the Indian recipient is entitled to full credit. Rule 28 values supplies between related or distinct persons at open market value. Its second proviso says that where “the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value”. The circular applies this to imports from a related person abroad:

• the value in the self-invoice raised by the Indian entity “may be deemed as open market value”
• where no invoice is raised for a service from the foreign affiliate, “the value of such services may be deemed to be declared as Nil”

The relief depends on full credit. A bank or insurer that reverses credit under rule 38 or 42 has to value the import under rule 28 itself: open market value, then like kind and quality, then cost or residual methods.

Outsourcing on an export contract. Circular No. 78/52/2018-GST deals with an Indian exporter that has part of its contract performed by a foreign subcontractor directly for the foreign client. The part performed abroad is “import of services by the exporter” and attracts IGST on reverse charge, with credit. The full contract value can still count as an export where the IGST on the subcontracted part is paid and the RBI allows that part of the consideration to be retained abroad (Export of Services).

Online services from a foreign supplier

Online information and database access or retrieval (OIDAR) services include cloud services, software downloads, online advertising and digital content. Section 2(16) of the IGST Act defines a “non-taxable online recipient” as “any unregistered person receiving online information and database access or retrieval services located in taxable territory”. The split is:

• To an unregistered recipient in India, the foreign supplier pays the tax under section 14 of the IGST Act, registering through the simplified scheme and filing GSTR-5A (Returns for Non-Residents and OIDAR Suppliers).
• To a registered person, the recipient pays under entry 1 of Notification No. 10/2017-Integrated Tax (Rate), like any other import. The foreign supplier does not charge GST, and a business that gave its GSTIN pays the tax itself.

A foreign platform’s invoice that does show GST, because the supplier treated the customer as unregistered, does not discharge the recipient’s reverse charge liability. That situation needs correcting with the supplier.

When the tax falls due

Under section 13(3) of the CGST Act, applied by section 20 of the IGST Act, the time of supply is the earlier of:

• the date of payment, meaning the earlier of the entry in the recipient’s books and the debit to its bank account
• the day after sixty days from the date of the supplier’s invoice

Clause ©, the date of the recipient’s own invoice, also applies where the recipient must issue the invoice. The second proviso has a special rule for associated enterprises: “where the supplier of service is located outside India, the time of supply shall be the date of entry in the books of account of the recipient of supply or the date of payment, whichever is earlier”. A group charge booked as a provision at the year end therefore falls due on the booking date, not when it is paid.

Value, and the exchange rate

Value is the transaction value under section 15 (Value of Supply). Any tax withheld abroad and borne by the Indian recipient, for example under a grossed-up contract, is part of the price.

Rule 34(2) sets the exchange rate for services as “the applicable rate of exchange determined as per the generally accepted accounting principles for the date of time of supply”. It is not the customs rate, which rule 34(1) applies to goods, and not the rate on the date of remittance where that is a different day. The rupee value is fixed once the time of supply is fixed.

The self-invoice, payment and credit

• Self-invoice. The foreign supplier is “not registered”, so the recipient issues an invoice under section 31(3)(f). Circular No. 210/04/2024-GST, para 3.6, says this expressly for related-party imports. Under rule 47A, it must be issued within thirty days of receipt of the service.
• Payment voucher, under section 31(3)(g), when the supplier is paid.
• Payment in cash. Reverse charge tax is not “output tax” (section 2(82) of the CGST Act), so it cannot be paid from the credit ledger. It goes in table 3.1(d) of GSTR-3B.
• Credit. It is claimed in table 4(A)(2), “import of services”, in the same return, and checked against the RCM Liability/ITC Statement (Reporting Credit in GSTR-3B Table 4). Imports of services do not appear in GSTR-2B, so the whole figure is entered by the taxpayer. For the section 16(4) time limit, Circular No. 211/05/2024-GST takes the year of the self-invoice.

What to have ready

Item	Where it comes from
Foreign vendor ledger and remittance records (Form 15CA/15CB data)	Books; bank
Contracts, to fix the place of supply and identify related parties	Legal files
Inter-company agreements, cost allocations and secondment arrangements	Group finance
Exchange rate used in the books for each time of supply	Books (accounting policy)
Self-invoices and payment vouchers	Books
Whether full credit is available (for Circular No. 210)	Rule 42 and 43 working
RCM Liability/ITC Statement closing balance	Portal

Consequences, and what can be put right

• Import not identified. Tax is recovered with interest under section 50, usually after an audit compares foreign remittances with table 3.1(d). Where the recipient has full credit, the cost is mostly interest. Credit on the late payment is available, and Circular No. 211/05/2024-GST ties its time limit to the year of the self-invoice. A self-invoice issued late can also attract a penalty under section 122.
• Related-party services not invoiced. Where full credit is available, Circular No. 210/04/2024-GST treats the value as nil. Where it is not, the open market value has to be worked out and paid.
• Paid as CGST and SGST. An import is inter-State under section 7(4). Tax paid under the wrong head is dealt with under section 77 (Tax Paid Under the Wrong Head).

The procedure in order

1. List every payment, accrual and group allocation to a party located outside India.
2. Test each against section 13: is the place of supply in India?
3. Check the exemptions in Notification No. 9/2017-Integrated Tax (Rate), and whether an online service went to a registered or an unregistered recipient.
4. Fix the time of supply, including the associated-enterprise rule, and convert at the GAAP rate on that date.
5. Value related-party imports under rule 28, using Circular No. 210 where full credit is available.
6. Issue the self-invoice within thirty days, and a payment voucher when paying.
7. Pay the IGST in cash in table 3.1(d), and take the credit in table 4(A)(2) of the same return.

The next guide turns the transaction round: services supplied from India to a recipient abroad, and the five conditions for export.