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Import of Services under GST

If you’ve ever hired a freelancer from abroad, bought software from a foreign company, or used cloud services like Google Ads or AWS, then guess what? You’ve imported a service. Under GST (Goods and Services Tax) in India, such transactions are considered import of services, and yes, they come with tax implications.

In this article, we will going to discuss what import of services under GST means, how it’s taxed, who pays the tax, and what you should be aware of to stay compliant.

What is Import of Services under GST?

Import of services simply means receiving services from a supplier who is located outside India, while the recipient is in India.

As per GST law, it considered as supply even if the service is received without consideration (like from a related party or a branch office outside India), provided it is for business purposes.

To find any transaction as an "import of service," it must fulfill these 3 conditions:

• The supplier of service is located outside India.
• The recipient of service is located in India.
• The service is received in India.

Examples of Imported Services

Here are some common examples of imported services:

• Buying a software subscription from Adobe or Microsoft.
• Using advertising services from Google or Meta (Facebook).
• Hiring a web developer or content writer from another country.
• Paying for cloud services like AWS or Dropbox.

All these fall under import of services under GST.

How GST Applies on Import of Services

In India, the Reverse Charge Mechanism (RCM) applies to most of the imported services. That means you, the recipient, must pay GST on behalf of the foreign service provider.

Here’s how it works:

Transaction	GST Applicability	Who Pays GST?
Import of service for business	GST applies	Recipient (under RCM)
Import of service for personal use	GST usually does not apply	No GST required

Note: If the imported service is used for business, you can claim input tax credit (ITC), subject to eligibility.

GST Rate on Imported Services

The GST rate on imported services is the same as it would be for that service if it were provided by an Indian supplier. This usually ranges from 18% to 28%, depending on the nature of the service.

For example:

• Digital services like software subscriptions = 18% GST
• Online ad services (like Google Ads) = 18% GST

You’ll also need to determine if IGST (Integrated GST) is applicable. Since the supplier is located outside India, it is treated as inter-state supply, and IGST must be paid.

How to Pay GST on Import of Services

If you’ve received an imported service, you need to:

• Calculate the value of the service (usually in INR).
• Apply the correct GST rate (usually 18% IGST).
• Pay IGST under Reverse Charge in GSTR-3B return.
• Report the details in GSTR-1 if applicable.
• Claim input tax credit (ITC) in the same return, if eligible.

No separate invoice from the foreign service provider is required. You just need to maintain proper records and documentation (like contracts, payment details, and emails).

GST Registration Requirement

If you are not registered under GST but you import services for business use, you must get registered. That’s because reverse charge applies only to registered persons, and the tax liability comes onto you.

However, if you import services for personal use, GST registration is not mandatory.

Import of Services by Individuals: Is GST Applicable?

This is a very common doubt. Let’s understand:

• If you're a registered business, and you import a service (even a small subscription), you need to pay GST under RCM.
• If you're an individual using the service personally (like Netflix, Zoom, or Photoshop for hobbies), GST is generally not applicable to you.

But some big companies like Google, Apple, or Microsoft already charge GST upfront when billing Indian customers. In such cases, they comply with a special rule under GST called OIDAR (Online Information and Database Access or Retrieval services), which we’ll cover below.

What is OIDAR Service?

OIDAR refers to online services delivered over the internet — things like e-books, online courses, streaming, software, etc.

If the service provider is from outside India and provides digital services to:

• Unregistered individuals, then the foreign company itself must pay GST in India.
• Registered businesses, then the business must pay GST under RCM.

For example:

A YouTuber in India buying a tool like TubeBuddy = Import of OIDAR = GST may apply depending on registration.

Input Tax Credit (ITC) on Imported Services

The best part about paying GST under reverse charge? You can claim ITC if the service is used for business purposes.

So if you're a business owner:

• You pay IGST under RCM.
• You claim the same amount as ITC.
• Final tax outflow = Zero, provided the ITC is eligible.

But make sure to file your returns properly, or else you may lose the credit.

Key Compliance Points

• Always self-invoice for imported services under RCM.
• Pay IGST via cash ledger (not ITC).
• Keep all agreements and foreign invoices as proof.
• File GSTR-3B and GSTR-1 regularly.
• Mention "Import of services" in relevant sections.

FAQs on Import of Services under GST

What is the definition of import of services under GST?

It means any service received from a foreign supplier by a person in India for use in India.

Is GST applicable on import of services?

Yes, usually IGST is applicable under Reverse Charge Mechanism for business use.

Can I claim ITC on GST paid for imported services?

Yes, if the service is used for business and you are eligible for ITC.

Do I need GST registration for importing services?

Yes, if the service is for business. No, if it's for personal use.

What is the GST rate on imported services?

The same rate as applicable to that service in India — most commonly 18% IGST.

What if a foreign company already charges GST?

Then it's likely an OIDAR service, and they are registered in India to collect and pay GST.

Are freelancers or small businesses liable to pay GST on imported tools?

Yes, if they are registered and using the tools for business, GST under RCM applies.

Final Thoughts

Understanding import of services under GST is crucial, especially in today’s digital world where cross-border services are common. Whether you’re a freelancer, startup, or big business, knowing your tax responsibilities helps you avoid penalties and make the most of input tax credits.

If you frequently use foreign services, consult a tax professional to ensure full compliance. And always maintain proper documentation — it saves you during audits.

For more GST guides, tools, and tax tips, check out our latest blog posts on GST returns, RCM rules, and input tax credit claims.