Guide to GST Taxability and Rates for SaaS in India
Updated 2 months ago
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How GST applies to SaaS
SaaS services in India are taxable under the GST framework as OIDAR (Online Information and Database Access or Retrieval) services. The standard GST rate for SaaS is 18% across all customer segments.
GST rates in India are determined by the type of product or service sold, not by the buyer's location or postal code. This means the rate stays the same whether your customer is in Mumbai or in a northeastern state.
Taxability by customer type
How GST is applied depends on who your customer is and where you are based.
Scenario | Seller Location | Customer Type | Tax Rate | Who Pays |
|---|---|---|---|---|
Foreign to Indian B2B | Outside India | GST-registered Indian business | 0% on invoice (18% IGST via RCM) | Indian buyer pays under Reverse Charge Mechanism |
Foreign to Indian B2C | Outside India | Unregistered Indian consumer | 18% IGST | Foreign seller collects and remits |
Indian intrastate B2B | Same state as buyer | GST-registered Indian business | 18% (9% CGST + 9% SGST) | Seller collects |
Indian intrastate B2C | Same state as buyer | Unregistered Indian consumer | 18% (9% CGST + 9% SGST) | Seller collects |
Indian interstate B2B | Different state from buyer | GST-registered Indian business | 18% IGST | Seller collects |
Indian interstate B2C | Different state from buyer | Unregistered Indian consumer | 18% IGST | Seller collects |
Export (zero-rated) | India | Foreign customer | 0% | No GST charged |
What is the Reverse Charge Mechanism (RCM)?
For B2B cross-border transactions, the normal GST collection process is reversed. Instead of the foreign seller charging GST on the invoice, the Indian buyer is responsible for calculating and paying the 18% IGST directly to the Indian government. This is called the Reverse Charge Mechanism (RCM).
When RCM applies, the foreign seller's invoice should state: "Supply subject to reverse charge under Section 5(3) of the IGST Act, 2017."
The Indian buyer can then claim the GST paid under RCM as an Input Tax Credit (ITC), provided the purchase was used for making taxable business supplies.
B2C: No reverse charge
For B2C sales from a foreign seller to unregistered Indian consumers, there is no reverse charge. The foreign seller must register in India, charge 18% IGST on every invoice, and remit the tax to Indian authorities through monthly GSTR-5A filings.
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