GST on Import of Services in 2026: RCM, Place of Supply, ITC & Time of Supply
Direct answer: A service purchased from a supplier outside India is an “import of services” only when the supplier is outside India, the recipient is in India and the place of supply is in India. Where the import is taxable under the IGST framework, the Indian recipient generally pays IGST under reverse charge. The tax rate is the rate applicable to that service classification—there is no single special “import of services rate”.
1. When does a foreign service become an “import of services”?
Section 2(11) of the IGST Act uses a three-part test: (i) supplier outside India, (ii) recipient in India, and (iii) place of supply in India. If all three are satisfied, section 7(4) treats the imported service as an inter-State supply. See the official IGST Act text on CBIC.
This means an overseas invoice is not enough by itself. The place-of-supply analysis must be done before concluding that GST is payable in India.
2. Place of supply: the first control to test
Where either the supplier or recipient is outside India, section 13 of the IGST Act applies. The default rule in section 13(2) places the supply at the recipient’s location, but specific services can follow special rules—for example services connected with goods made physically available, immovable property, events, banking services to account holders, intermediary services and short-term hiring of means of transport.
For many ordinary B2B consulting, software, professional and support services received by an Indian business, the recipient-location rule will commonly point to India. CBIC’s sectoral FAQ also confirms that software purchased by an Indian GST-registered firm from a foreign supplier can attract IGST on reverse charge, and the currency of payment does not change the GST result.
3. Who pays GST under reverse charge?
Notification No. 10/2017–Integrated Tax (Rate), issued under section 5(3) of the IGST Act, notifies specified cross-border services for reverse charge. The notification framework should be checked along with subsequent amendments. See CBIC Notification No. 10/2017–Integrated Tax (Rate).
In the usual taxable import-of-service case, the Indian recipient is the person who discharges IGST under reverse charge. The recipient should not assume that a foreign supplier’s lack of Indian GST registration makes the transaction tax-free.
4. What GST rate applies to imported services?
There is no universal RCM rate merely because the supplier is overseas. The correct rate follows the classification and rate applicable to the underlying service. Many common business, professional and IT services fall at 18%, but exemptions and different rate entries exist. The correct process is: classify the service first, then apply the current IGST rate/exemption notification, and only then compute the reverse-charge liability.
5. Time of supply under RCM: when does the tax become payable?
For services taxable under reverse charge, section 13(3) of the CGST Act generally fixes the time of supply at the earlier of the payment date or the day immediately following 60 days from the supplier’s invoice/document. If this cannot be determined, the recipient’s book-entry date applies. For associated enterprises where the supplier is outside India, a special rule uses the earlier of the recipient’s book entry or payment. See the official CGST Act text.
This makes invoice-date ageing and payment-date controls important. Waiting until the month of actual remittance can be wrong where the 60-day trigger occurs earlier.
6. Can the Indian recipient claim ITC of IGST paid under RCM?
A registered person may generally claim input tax credit when the imported service is used or intended to be used in the course or furtherance of business, subject to section 16 conditions, blocked-credit rules and other restrictions. The reverse-charge payment and the ITC claim should be supported by the foreign invoice/agreement, tax working, payment evidence and return reconciliation.
Section 16 is available in the CBIC CGST Act. The accounting team should also keep the reverse-charge cash payment and the corresponding eligible ITC clearly mapped in the GST working papers.
7. Import without consideration: related parties need special attention
A common error is to conclude that no GST issue exists because no invoice or payment was made. Schedule I to the CGST Act can treat an import of services from a related person or another establishment outside India, in the course or furtherance of business, as a supply even without consideration.
This is particularly relevant for multinational groups receiving management support, technology access, regional finance, HR, legal, marketing or other shared services from overseas group entities.
8. Worked example: overseas software subscription
Assume an Ahmedabad company purchases a USD-denominated enterprise software subscription from a US supplier. The supplier is outside India, the company is in India and—assuming the applicable section 13 place-of-supply rule points to the Indian recipient—the transaction qualifies as an import of services. The company should classify the software/service, determine the applicable IGST rate, identify the RCM time of supply, pay the IGST under reverse charge and then evaluate ITC eligibility.
The USD payment itself does not make the supply an export or an exempt transaction. Conversely, paying the supplier in INR would not remove the reverse-charge liability if the statutory import conditions are met.
9. Practical 10-point RCM checklist for finance teams
Identify every overseas vendor and foreign related-party service arrangement.
Document the exact service description rather than relying on the vendor’s invoice label.
Apply the section 13 place-of-supply rule and record why the place is inside or outside India.
Check the latest reverse-charge notification and amendments.
Determine the service classification and applicable IGST rate; do not default mechanically to 18%.
Track invoice date, payment date and the 60-day RCM trigger.
Review related-party services even where no consideration is charged.
Pay the RCM liability through the appropriate GST payment workflow and reconcile it to GSTR-3B.
Test ITC eligibility separately under section 16 and blocked-credit provisions.
Retain the agreement, invoice, FEMA/bank remittance documents, tax working, RCM payment proof and ITC reconciliation in one audit file.
10. GST and income-tax/FEMA analysis should not be merged
The GST conclusion does not automatically answer the income-tax withholding or FEMA question. A payment may require separate examination for royalty/fees for technical services, DTAA relief, Form 145/146 reporting, remittance purpose code and banking documentation.
For the broader cross-border payment analysis, see our related guide: Foreign Service Payments from India in 2026: FTS, DTAA, TDS & GST RCM.
For import remittance reporting under the new income-tax forms, see Form 15CA/15CB for Import Payments in 2026: When Form 145 Is Not Required.
FAQs
Is GST always payable on every service purchased from outside India?
No. The transaction must first satisfy the statutory import-of-services test, including place of supply in India, and any applicable exemption must be checked.
Is the GST rate on all imported services 18%?
No. The rate depends on the underlying service classification and current rate/exemption notifications. Eighteen per cent is common for many professional and IT services, but it is not a blanket import-services rate.
Can RCM IGST be claimed as ITC?
Generally yes where the recipient is eligible under section 16, the service is used in business and no blocked-credit or other restriction applies. Eligibility should be documented separately from the RCM payment computation.
Does paying a foreign supplier in INR avoid GST?
No. CBIC’s sectoral guidance confirms that currency does not decide whether a service is imported. Supplier location, recipient location and place of supply are the relevant statutory tests.
What if the overseas service is received from a group company without charge?
Schedule I can deem certain related-party or establishment-to-establishment imports to be supplies even without consideration, so a separate GST review is required.
Primary references
Integrated Goods and Services Tax Act, 2017 — sections 2(11), 7 and 13 (CBIC).
Notification No. 10/2017–Integrated Tax (Rate), dated 28 June 2017, as amended.
Central Goods and Services Tax Act, 2017 — sections 13 and 16 and Schedule I (CBIC).
CBIC Sectoral FAQs on IT/ITES and reverse charge.
Need a cross-border GST review?
PGT & Associates assists businesses with import-of-services classification, GST reverse-charge reviews, GSTR-3B reconciliation and coordinated income-tax/FEMA analysis for overseas payments. For material or recurring foreign-service payments, a transaction-level review before remittance can prevent interest, ITC and documentation disputes.
Disclaimer: This article is for general professional information and reflects the legal framework and official guidance checked as of 24 August 2026. GST treatment depends on the facts, service classification, place of supply, exemptions and subsequent amendments. Obtain transaction-specific advice before acting.
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