GST Compliance for Software and SaaS Businesses

Software and SaaS companies face unique GST challenges, such as OIDAR classification, export zero-rating, and cross-border RCM. Proper compliance unlocks Input Tax Credit refunds and avoids penalties.

GST Compliance Experts helps tech businesses navigate these complexities seamlessly. Visit gstcomplianceexperts. in for specialised GST solutions tailored for digital service providers.

GST Classification for SaaS

SaaS services fall under SAC code 9983 (IT services), attracting 18% GST on domestic supplies. Key sub-codes include 998313 (IT infrastructure), 998314 (IT solutions), and 998316 (IT system management).

Online Information Database Access or Retrieval (OIDAR) refers to automated internet-delivered services with minimal human intervention, typical of SaaS platforms.

Registration Thresholds

SaaS providers must register if aggregate turnover exceeds ₹20 lakh (₹10 lakh in special states). Export-oriented firms register to claim ITC refunds despite zero-rated supplies.

Foreign SaaS serving Indian B2C customers requires Indian GST registration regardless of turnover. B2B uses the Reverse Charge Mechanism (RCM) by the Indian recipient.

Place of Supply Rules

For SaaS, the place of supply follows the recipient location:

• Domestic: CGST+SGST if same state; IGST if interstate
• Export: Zero-rated if the recipient is outside India, payment in convertible foreign exchange

Incorrect place of supply leads to the wrong tax type and ITC blocks.

Exports and Zero-Rating

Software/SaaS exports qualify as zero-rated supplies under LUT (Letter of Undertaking) without paying IGST upfront. Pay IGST and claim a refund, or supply under LUT.

Export invoices must mention “Supply meant for export” and include the recipient’s foreign address/bank details. No GST is charged on such invoices.

Input Tax Credit Rules

SaaS firms claim ITC on cloud hosting (AWS/Azure), office expenses, marketing services, and software licenses. Blocked credits apply to exempt supplies or personal use.

Export firms refund unutilized ITC accumulated from domestic inputs. Quarterly refund applications via the GST portal.

Invoicing and E-Invoicing

Issue GST-compliant invoices with SAC code, tax rate, place of supply, and GSTIN. E-invoicing mandatory for B2B if turnover > ₹5 crore (rising thresholds).

Foreign B2B invoices show “RCM applicable” – no GST charged by the provider.

Filing Requirements

Timely filing prevents notices and ensures refund processing.

Reverse Charge Mechanism (RCM)

Indian SaaS firms pay RCM on imported services (foreign SaaS subscriptions) at 18% IGST. Self-invoice via GST portal and claim ITC if eligible.

Compliance Checklist for SaaS

• Verify SAC 9983 classification for all services
• Confirm export status with payment proofs
• File LUT annually for zero-rated supplies
• Reconcile GSTR-1 exports with bank statements
• Track RCM payments on foreign subscriptions
• Generate e-invoices for qualifying B2B supplies
• Apply for ITC refunds quarterly
• Maintain client location proofs for the place of supply

Common Pitfalls and Solutions

Expert Support for Tech Firms

GST Compliance Experts specialises in software/SaaS compliance, from registration to refund claims. Visit gstcomplianceexperts. in for audit-proof setups, return filing, and RCM management.

We handle OIDAR complexities, export documentation, and portal filings so tech teams focus on product development.