GST on Import of Services – Complete Guide to RCM, GST Rules & Compliance

What is Import of Services Under GST?

Import of services under GST is defined under Section 2(11) of the IGST Act. It means a supply of services where:

• The supplier of service is located outside India,
• The recipient is located in India, and
• The place of supply is in India.

For example, if an Indian startup subscribes to Slack (a US‑based company), the supply of SaaS services by Slack to the Indian startup is an import of service. The Indian startup must pay GST under Reverse Charge Mechanism. DisyTax helps businesses identify their import of service transactions and comply with RCM. Start with our GST basic terms to build a foundation.

Conditions for Import of Services Under GST

For a transaction to be treated as import of services, three conditions must be satisfied simultaneously:

• Supplier is outside India: The entity providing the service is located abroad.
• Recipient is in India: The person receiving the service is located in India.
• Place of supply is in India: As per the place of supply rules, the service is deemed to be consumed in India.

Example: An Indian company hires a US‑based consultant to provide business strategy advice. The consultant is in the US (outside India), the company is in India, and the place of supply (where the service is consumed) is India. All three conditions are met – it is an import of service.

Is GST Applicable on Import of Services?

Yes, GST is applicable on import of services. Under the Reverse Charge Mechanism (RCM), the Indian recipient is liable to pay GST on the imported service at the applicable rate. The foreign supplier does not charge any GST on their invoice. The Indian recipient must self‑invoice, calculate the GST (typically 18%), and pay it to the government. This GST can then be claimed as input tax credit (ITC) if the service is used for business purposes. The legal basis is Section 5(3) of the IGST Act read with Notification No. 10/2017 – Integrated Tax (Rate).

Reverse Charge Mechanism (RCM) on Import of Services

RCM means the liability to pay GST is shifted from the supplier to the recipient. For import of services, the foreign supplier cannot be registered in India, so the government cannot collect GST from them. Therefore, the law makes the Indian recipient liable to pay the tax. The recipient must:

• Issue a self‑invoice for the imported service.
• Calculate GST at the applicable rate (18% for most services).
• Pay the GST through the electronic cash ledger by the 20th of the next month.
• Report the RCM liability in GSTR‑3B.
• Claim ITC on the GST paid, if eligible.

Example: An Indian agency subscribes to SEMrush (a US SaaS tool). SEMrush does not charge GST. The agency raises a self‑invoice for ₹10,000, calculates ₹1,800 GST (18%), pays it, and claims ₹1,800 as ITC. The net cash outflow is zero (subject to ITC availability).

Who is Liable to Pay GST on Imported Services?

The Indian recipient of the service is liable to pay GST under RCM. This applies to all categories of recipients – whether a registered business, a freelancer, or even an individual, depending on the service. However, if the service is for personal use and the recipient is not registered, the enforceability is limited. For businesses, the obligation is clear: any imported service used for business must be self‑invoiced and GST paid under RCM.

GST on Foreign Consultancy Services

When you hire a foreign consultant – business, management, financial, or technical – you are importing a service. You must pay GST at 18% under RCM. The consultant's invoice will not include GST. You need to self‑invoice and pay the tax. For example, if a Mumbai‑based startup pays a London‑based strategy consultant £1,000 (approx. ₹1,00,000), the startup must pay ₹18,000 GST under RCM and can claim it as ITC.

GST on Software and SaaS Services Purchased from Abroad

Subscriptions to SaaS platforms like Notion, Figma, Slack, ClickUp, or any foreign software are imports of service. 18% GST applies under RCM. Many businesses ignore these because the foreign vendor doesn't charge GST. However, GST compliance requires self‑invoicing and payment. The good news is that you can claim full ITC. For a detailed guide on SaaS‑specific GST, see our GST for SaaS business article.

GST on Google, Meta and Foreign Advertising Services

When you run ads on Google Ads or Meta (Facebook/Instagram) and the invoice is from a foreign entity (e.g., Google Asia Pacific, Meta Platforms Ireland), you are importing advertising services. GST at 18% is payable under RCM. However, if Google India or Meta India issues the invoice with GST, it's a domestic supply and no RCM applies. Check the invoice carefully. For the foreign invoice, you must self‑invoice and pay GST, then claim ITC. For more, see GST for digital marketing agencies.

GST on Legal and Professional Services Received from Foreign Entities

Hiring a foreign lawyer, patent agent, or any professional service provider is an import of service. RCM applies. The Indian recipient must pay 18% GST. This is particularly relevant for businesses dealing with international contracts, intellectual property filings, or cross‑border transactions. Self‑invoice and claim ITC.

GST on Cloud Services from AWS, Azure and Google Cloud

Cloud infrastructure services (IaaS, PaaS) from AWS, Microsoft Azure, or Google Cloud are often billed from their Indian entities and include GST – these are domestic supplies. However, if you are billed from a foreign entity (e.g., AWS US), it becomes an import of service, and RCM applies. Always check the billing entity on the invoice. If GST is already charged, no RCM is needed. If not, self‑invoice and pay GST. Claim ITC as usual. Our GST for SaaS business guide covers cloud expenses.

GST on Subscription Services Purchased from Overseas

Any recurring subscription – Netflix (for business), Canva Pro, Adobe Creative Cloud (if billed from abroad), LinkedIn Premium (for business), etc. – is an import of service. The Indian business must pay GST under RCM. For personal subscriptions, individuals are generally not enforcing RCM, but for business use, compliance is required. The 18% GST can be claimed as ITC, so the net cost is the subscription fee itself.

GST Registration Requirements for Import of Services

Any person who is required to pay tax under RCM must register for GST, irrespective of turnover. As per Section 24 of the CGST Act, persons liable to pay tax under reverse charge must compulsorily register. Therefore, if you import services and are liable to pay GST under RCM, you must obtain GST registration. This applies even if your aggregate turnover is below ₹20 lakh. Voluntary registration for ITC purposes is also recommended. Our GST registration threshold limit guide explains all the rules.

Place of Supply Rules for Import of Services

For import of services, the place of supply must be in India. The general rule for B2B services is the location of the recipient. Since the recipient is in India, the place of supply is India. For B2C services, specific rules apply depending on the nature of the service. Most business imports fall under B2B. Understanding the place of supply is crucial because if the place of supply is outside India, it's not an import – it could be an export for the foreign supplier, and RCM may not apply. See our place of supply for services guide.

GST Return Filing for Import of Services

Import of services under RCM must be reported in:

• GSTR‑1: Not directly reported as the supplier is foreign. However, the self‑invoice details can be maintained for records.
• GSTR‑3B: The RCM liability is reported in Table 3.1(d) – "Inward supplies liable to reverse charge". The tax is paid through the cash ledger.
• ITC: The same amount is claimed as ITC in Table 4(A) of GSTR‑3B, subject to eligibility.

Timely filing is essential. Late payment of RCM attracts interest at 18% per annum. Our GST return filing guide is a helpful resource.

Reporting RCM Liability in GSTR‑3B

In GSTR‑3B:

• Go to Table 3.1(d) – enter the taxable value and the GST amount (CGST + SGST or IGST) for the imported service.
• The tax is paid in cash – you cannot use ITC to pay RCM liability. So ensure your cash ledger has sufficient balance before filing.
• In Table 4(A), claim the same amount as ITC (if eligible). This is reported under "Import of services".

The net effect in the return is that the RCM liability and ITC cancel each other out, but the payment must still be made in cash and then credited back as ITC. This can create a temporary cash flow impact.

Input Tax Credit (ITC) on GST Paid Under RCM

Yes, ITC can be claimed on GST paid under RCM for import of services, provided the service is used for business purposes. The GST paid under RCM is first debited from the electronic cash ledger. Once paid, it becomes available as ITC in the electronic credit ledger. In GSTR‑3B, you can claim this ITC in the same month itself. The net cash outflow is effectively zero, but you need to ensure your cash ledger has sufficient balance to pay the RCM liability before filing. The ITC claimed must be supported by the self‑invoice and proof of payment. For all ITC conditions, see our ITC guide.

Documents Required for Import of Services

• Foreign supplier's invoice: Showing the service description and amount (without GST).
• Self‑invoice: Raised by the Indian recipient under RCM, containing GSTIN, service details, and GST amount.
• Proof of payment: Bank statement or payment gateway receipt showing payment to the foreign supplier.
• Contract or agreement: To establish the nature of the service and the location of the supplier.

Maintain these records for at least 72 months as required by GST law.

Common GST Mistakes in Import of Services

GST Compliance Checklist for Importers

• ✅ Identify all foreign service providers you pay during the month.
• ✅ For each, check if the supplier's invoice includes GST. If not, determine if RCM applies.
• ✅ Raise a self‑invoice for each imported service with correct GST calculation.
• ✅ Ensure sufficient balance in the electronic cash ledger to pay RCM liability.
• ✅ Report RCM liability in GSTR‑3B Table 3.1(d).
• ✅ Claim ITC on the same amount in GSTR‑3B Table 4(A).
• ✅ Maintain all self‑invoices, foreign invoices, and payment proofs for 72 months.
• ✅ File GSTR‑1 and GSTR‑3B on time.

Frequently Asked Questions (FAQs) on Import of Services Under GST

📚 Essential GST Resources for Importers