Many Indian companies buy cloud hosting, collaboration suites, design tools, and CRM software from overseas vendors using corporate credit cards. These foreign vendors rarely carry an Indian GST registration or charge Indian GST on business-to-business (B2B) invoices. Businesses often overlook the statutory requirement to self-assess GST, wrongly assuming that overseas card payments carry no local tax liability.
Statutory basis for reverse charge on SaaS imports
Under Section 2(11) of the IGST Act 2017, an import of services occurs when three conditions are satisfied: the supplier is located outside India, the recipient is located in India, and the place of supply is in India. When an Indian business subscribes to software hosted abroad for its commercial operations, all three tests are met.
Under Section 5(3) of the IGST Act 2017, the government notifies categories of supplies where integrated tax is payable on a reverse charge basis by the recipient. Specifically, Entry 1 of Notification No. 10/2017-Integrated Tax (Rate) mandates that any service supplied by any person located in a non-taxable territory to any person other than a non-taxable online recipient (NTOR) attracts reverse charge. A GST-registered Indian enterprise is not an NTOR, which places the complete liability to pay IGST directly onto the Indian recipient.
Common mistake: Believing that credit card receipts from foreign entities are exempt from GST. If your business purchases software from a vendor outside India, you must generate a self-invoice and pay integrated tax under reverse charge, even if the overseas invoice states zero tax.
How OIDAR rules differ for B2B versus B2C recipients
Software subscriptions, cloud services, and digital downloads fall under Online Information Database Access and Retrieval (OIDAR) services defined under Section 2(17) of the IGST Act 2017. The statutory mechanism for collecting GST on OIDAR services splits based on the registration status of the Indian recipient:
| Recipient category | Classification | Tax payment mechanism | Who pays GST to the government |
|---|---|---|---|
| Unregistered individual or government entity | Non-taxable online recipient (NTOR) | Forward charge under simplified OIDAR registration | The foreign supplier registers in India and pays IGST |
| GST-registered Indian business entity | Taxable business recipient | Reverse charge under Section 5(3) of the IGST Act | The Indian business recipient pays IGST in cash |
When you provide your 15-digit GSTIN to a foreign SaaS platform, the supplier recognizes the transaction as B2B and removes foreign local taxes without charging Indian GST. You take on the statutory obligation to account for IGST under reverse charge in your monthly returns.
Cash ledger rule and ITC eligibility in the same month
A strict statutory rule governs the payment of reverse charge liability. Under Section 49(4) read with Section 2(82) of the CGST Act 2017, electronic credit ledger balances may only be used to pay output tax on outward supplies. Tax payable under reverse charge is not output tax in relation to the recipient. Therefore, as clarified in the GSTN manual for Form GSTR-3B Table 6.1, reverse charge liability must be paid strictly through the electronic cash ledger.
Once you pay the IGST liability in cash, that tax qualifies as input tax under Section 2(62) of the CGST Act 2017. Under general credit entitlement rules, if the software is used in the course or furtherance of business and is not blocked under Section 17(5), you can avail the entire amount as input tax credit in the same tax period.
Reporting SaaS RCM in Form GSTR-3B
Because the overseas supplier is not registered in India, this transaction will not appear in your auto-drafted GSTR-2B. You must report both the liability and the credit manually in Form GSTR-3B across two distinct tables as described in the official GSTN GSTR-3B Table 4 guide:
- Discharge tax liability: Enter the taxable purchase value and the calculated IGST amount in Table 3.1(d) titled "Inward supplies liable to reverse charge". Pay this liability using your electronic cash ledger at the time of filing.
- Claim input tax credit: Enter the paid IGST amount in Table 4(A)(2) titled "Import of services". Do not mix import of services into Table 4(A)(3) for domestic reverse charge or Table 4(A)(5) for all other ITC.
For more details on handling domestic reverse charge and comparing statements, review our detailed guide on RCM invoices in GSTR-2B Table 4 matching.
Worked example: annual cloud subscription
Consider an Indian software consultancy firm, TechSolutions LLP, registered in Karnataka. On 10 October 2026, the firm pays an annual subscription of USD 2,000 for foreign project management SaaS software via corporate credit card. The authorized bank statement records the transaction at an applicable exchange rate yielding an Indian rupee value of ₹1,60,000.
The service is an import of service attracting 18% IGST under reverse charge pursuant to Notification No. 10/2017-Integrated Tax (Rate).
| Step and description | Statutory provision | Computation details | Rupee amount |
|---|---|---|---|
| Invoice conversion value in books | Rule 34 CGST Rules | USD 2,000 converted via bank debit | ₹1,60,000 |
| RCM liability (18% IGST) | Section 5(3) IGST Act | ₹1,60,000 × 18% | ₹28,800 |
| Cash ledger debit in GSTR-3B | Table 3.1(d) & Section 49(4) | Paid strictly through cash challan | ₹28,800 |
| ITC availed in GSTR-3B | Table 4(A)(2) & Section 2(62) | Availing credit in the same tax period | ₹28,800 |
| Net tax cash outflow after ITC utilization | Section 49 CGST Act | ₹28,800 paid in cash offset against outward tax | ₹0 net impact |
The firm generates a self-invoice for ₹1,60,000 plus ₹28,800 IGST in its accounting records. During October 2026 return filing, TechSolutions LLP enters ₹1,60,000 taxable value and ₹28,800 IGST in Table 3.1(d), deposits ₹28,800 via PMT-06 cash challan to satisfy Table 6.1, and enters ₹28,800 in Table 4(A)(2) as eligible ITC to set off against outward liabilities.
Frequently asked questions
Does a foreign SaaS subscription appear in GSTR-2B?
No. Foreign software vendors are unregistered suppliers located outside India. They do not file GSTR-1, so import of service transactions never auto-populate in your GSTR-2B. You must compute the liability from your accounting ledgers, issue a self-invoice under Section 31(3)(f), and enter the details manually in GSTR-3B.
Can you pay RCM on foreign software subscriptions using ITC balances?
No. Under Section 49(4) read with Section 2(82) of the CGST Act, electronic credit ledger balances can only offset output tax on outward supplies. Reverse charge liability is not output tax in this context, so it must be paid strictly through the electronic cash ledger.
Can you claim ITC for RCM paid on foreign software in the same month?
Yes. Once you discharge the integrated tax liability through the electronic cash ledger for that tax period, the paid tax qualifies as input tax under Section 2(62) of the CGST Act. You can report and avail it as eligible credit under Table 4(A)(2) of the same Form GSTR-3B.
Check your domestic RCM and purchase register matches
While foreign software imports require manual ledger reconciliation, your domestic vendor purchases and local RCM records must match your monthly GSTR-2B accurately. Reconcile purchase registers against GSTR-2B in seconds with zero data leaving your machine. Your GSTR-2B and purchase register files are read in your browser and never uploaded to any server.
Last checked: 25 October 2026. Sources: CBIC Tax Information Portal (IGST Act), GSTN GSTR-3B User Manual.