GST for SaaS and IT Services: Place of Supply & Cross-Border Billing Explained
- PRITI SIRDESHMUKH
- Jan 20
- 9 min read
GST treatment for SaaS and IT services in India hinges on place of supply rules, not just the nature of the service. Most SaaS and IT services attract 18% GST, but the actual tax impact depends on whether the transaction is domestic, interstate, or cross-border. With recent expansions in OIDAR definitions, even automated digital tools now fall squarely within GST compliance. Errors in identifying the place of supply can lead to wrong tax payments, blocked input tax credit, or denial of export benefits. Accurate classification has become critical for startups, global SaaS providers, and IT service exporters to ensure correct GST filing and avoid compliance issues while operating across borders.
Table of Contents
GST Applicability on SaaS and IT Services in India
SaaS and IT services in India fall under the GST framework as supply of services and are generally taxed at 18%. The tax rate remains uniform, but the nature of GST charged—CGST with SGST or IGST—depends entirely on the place of supply. Software delivered through cloud platforms, subscription-based tools, remote IT support, and digital infrastructure services are all covered. The key challenge is not the rate, but identifying whether the supply is intra-state, inter-state, or qualifies as an export. This distinction directly impacts compliance, credit eligibility, and refund claims.
Classification of SaaS as OIDAR Services Under GST
SaaS offerings are commonly classified as Online Information and Database Access or Retrieval services. Following the 2023 amendments, the earlier requirement of minimal human intervention was removed, expanding the OIDAR scope. Automated tools such as CRM systems, accounting software, cloud storage, analytics dashboards, and productivity platforms now fall squarely within OIDAR. This change increased compliance obligations, especially for foreign SaaS providers supplying services to Indian users. Both domestic and cross-border SaaS providers must now carefully assess OIDAR applicability before structuring invoices and tax treatment.
Place of Supply Rules for SaaS and IT Services
Place of supply determines which GST applies and whether a transaction qualifies for export benefits. For SaaS and IT services, the rules focus primarily on the recipient’s location rather than the server or platform location. Correct identification ensures accurate tax payment and protects eligibility for input tax credit or zero-rated treatment. Errors at this stage often cascade into mismatches across GST returns, refund delays, and audit exposure.
Place of Supply for B2B SaaS and IT Transactions
In business-to-business transactions, the place of supply is generally the registered location of the recipient. If the recipient is registered under GST in India, IGST applies when the supplier and recipient are in different states. This structure allows seamless input tax credit flow. For SaaS companies serving Indian businesses across states, this rule simplifies compliance as long as GSTIN details are correctly captured and validated on invoices.
Place of Supply for B2C SaaS and Digital Services
For business-to-consumer supplies, the place of supply becomes more complex. It is usually determined based on supplier records such as billing address, IP address, bank location, or mobile country code. If the consumer is located in India, GST at 18% applies. For foreign OIDAR suppliers catering to unregistered Indian users, GST registration in India becomes mandatory, along with tax collection and reporting obligations.
GST Treatment of Cross-Border SaaS and IT Services
Cross-border SaaS transactions can result in either IGST liability or zero-rated supply depending on the direction of service. Services received from foreign SaaS providers by registered Indian entities are typically taxed under reverse charge. For unregistered Indian users, the foreign supplier bears the GST liability. Outbound SaaS services supplied from India to foreign clients may qualify as exports if conditions are met, offering significant tax efficiency when structured correctly.
When SaaS and IT Services Qualify as Export of Services
A SaaS or IT service qualifies as export when the supplier is located in India, the recipient is located outside India, payment is received in convertible foreign exchange, and the supplier and recipient are not merely establishments of the same entity. Additionally, the place of supply must be outside India. Meeting all conditions is critical, as partial compliance can convert an intended export into a taxable domestic supply.
Zero-Rated Supplies and GST Refund Options for SaaS Providers
Exports of SaaS and IT services are zero-rated, allowing providers to either supply services under a Letter of Undertaking without paying IGST or pay IGST upfront and claim a refund later. Both options require accurate documentation and timely filings. Refund eligibility is closely scrutinized, and mismatches between GST returns and income disclosures often lead to delays or rejections.
Intermediary Services Risk in SaaS and IT Billing Models
SaaS businesses operating through marketplaces, resellers, or facilitation models face intermediary classification risk. If a service is deemed intermediary in nature, export benefits may be denied, and GST may apply domestically even when the end client is overseas. Clear contractual positioning, billing structure, and service delivery on own account are essential to avoid unintended tax exposure.
Common Place of Supply Errors Faced by SaaS and IT Companies
Frequent errors include incorrect classification of exports, misuse of LUT, wrong identification of recipient location, and treating intermediary services as exports. Inconsistent reporting between GST returns and income tax filings further compounds issues. These mistakes often surface during audits or refund processing, leading to interest, penalties, or working capital blockage.
How TaxBuddy Handles Place of Supply and Cross-Border Billing
TaxBuddy handles place of supply and cross-border billing by treating GST compliance as a data problem rather than a manual interpretation exercise. Every transaction is analysed at the invoice level instead of being reviewed in bulk at the time of return filing. This allows accurate identification of whether a supply is domestic, interstate, or cross-border, based on recipient location, GST registration status, currency of receipt, and contractual structure. By working at the transaction level, the risk of applying a uniform tax treatment to mixed revenue streams is significantly reduced.
The platform automatically determines the applicable place of supply rules for SaaS and IT services, distinguishing between B2B and B2C transactions and identifying whether IGST, CGST with SGST, or zero-rated treatment applies. For cross-border services, TaxBuddy checks export conditions such as recipient location outside India, receipt of payment in convertible foreign exchange, and absence of related-party establishment conflicts. Transactions that meet all criteria are flagged as export of services, ensuring they are treated correctly from the outset.
Cross-border income is categorised separately within the system to avoid overlap between taxable domestic supplies and zero-rated exports. This segregation helps prevent common errors such as reporting export turnover as taxable supply or missing refund eligibility due to incorrect classification. Where reverse charge mechanisms apply, the system highlights the liability and aligns it with corresponding input tax credit availability, reducing reconciliation issues later.
TaxBuddy also focuses heavily on consistency between GST returns and income tax disclosures. SaaS and IT companies often face scrutiny when export revenue reported under GST does not align with foreign income declared in income tax returns. The platform cross-checks these data points to ensure that turnover, export income, and refund claims remain aligned across filings. This reduces the likelihood of notices, refund delays, or audit queries.
Built-in validation checks further reduce the risk of intermediary misclassification by reviewing billing structure, service description, and recipient relationship. Where a transaction carries characteristics of facilitation rather than service delivery on own account, the system flags it for review before filing. This proactive approach helps businesses avoid losing export benefits due to structural or documentation gaps.
By automating these processes, TaxBuddy enables SaaS and IT businesses to scale operations across states and borders without scaling compliance risk. As transaction volumes grow, the same rules-based framework continues to apply consistently, ensuring accuracy, regulatory alignment, and smoother cash flows through timely credits and refunds.
Conclusion
GST compliance for SaaS and IT services requires more than applying the correct rate. Place of supply accuracy, OIDAR classification, and export validation are central to avoiding tax leakage and compliance risk. Structured digital compliance supported by automation helps businesses stay aligned with evolving GST rules while protecting cash flows. For businesses managing SaaS or IT taxation across states and borders, downloading the TaxBuddy mobile app offers a simplified, secure, and hassle-free compliance experience.
FAQs
Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options?
TaxBuddy offers both self-filing and expert-assisted plans to suit different taxpayer needs. The self-filing option is designed for individuals and businesses comfortable handling their filings, supported by AI-driven data extraction from Form 16, AIS, TIS, and GST records. For more complex cases involving multiple income sources, cross-border transactions, or GST-linked reporting, the expert-assisted plan provides end-to-end support by qualified tax professionals who review, correct, and file returns on the taxpayer’s behalf.
Q2. Which is the best site to file ITR?
The Income Tax Department’s e-filing portal is the official platform for filing income tax returns in India. However, many taxpayers prefer platforms like TaxBuddy because they offer guided workflows, automated data checks, and human support. Such platforms reduce common errors, flag inconsistencies early, and simplify filing for those dealing with capital gains, foreign income, or GST-linked disclosures.
Q3. Where to file an income tax return?
Income tax returns can be filed directly on the Income Tax Department’s e-filing portal. Alternatively, authorised platforms like TaxBuddy can be used for a more structured filing experience. These platforms connect securely with the official portal while providing additional layers of validation, reminders, and expert assistance, especially helpful for businesses and professionals.
Q4. Is GST on SaaS always charged at 18%?
Yes, SaaS and IT services are generally taxed at 18% under GST. However, the actual tax impact depends on the place of supply and the nature of the transaction. Domestic supplies attract CGST and SGST or IGST, while exports may qualify as zero-rated supplies. The rate remains the same, but applicability and cash flow impact vary significantly based on classification.
Q5. Are SaaS exports exempt from GST?
SaaS exports are not exempt from GST; they are zero-rated. Zero-rating means GST is technically applicable, but the supplier can claim a refund of input tax credit or export services without paying IGST under a Letter of Undertaking. This distinction is important because zero-rated supplies preserve credit eligibility, while exempt supplies do not.
Q6. What is OIDAR under GST?
OIDAR refers to Online Information and Database Access or Retrieval services. These are services delivered over the internet with automated systems and minimal human involvement. Examples include cloud software, online databases, digital tools, and subscription-based platforms. After recent amendments, most SaaS products fall under OIDAR, increasing compliance obligations for both Indian and foreign service providers.
Q7. Does reverse charge apply on foreign SaaS services?
Reverse charge applies when a registered Indian business receives SaaS or digital services from a foreign supplier. In such cases, the Indian recipient is responsible for paying GST directly to the government and can later claim input tax credit, subject to conditions. For unregistered Indian users, the foreign supplier must register in India and collect GST.
Q8. Is LUT mandatory for SaaS exporters?
A Letter of Undertaking is mandatory if a SaaS exporter chooses to supply services without paying IGST upfront. Filing an LUT allows exporters to avoid blocking funds and later claiming refunds. If an LUT is not filed, the exporter must pay IGST and then apply for a refund, which may take time.
Q9. Can ITC be claimed on SaaS export expenses?
Yes, input tax credit can be claimed on eligible expenses related to SaaS exports. Since exports are zero-rated, accumulated ITC can be refunded, provided proper documentation and accurate return filing are maintained. Errors in place of supply or mismatches between returns can delay or deny refunds.
Q10. What is the biggest GST risk for SaaS companies?
The biggest risks are incorrect place of supply determination and unintended intermediary classification. These errors can convert export income into taxable domestic supplies, block refunds, or attract penalties. SaaS businesses operating across borders must ensure their contracts, billing structure, and service delivery model clearly support export treatment.
Q11. Do foreign SaaS providers need GST registration in India?
Yes, foreign SaaS providers must register under GST when supplying OIDAR services to unregistered Indian customers. This applies even if the provider has no physical presence in India. Registration enables tax collection, reporting, and compliance with Indian GST laws.
Q12. Can TaxBuddy handle both GST and income tax compliance for SaaS businesses?
Yes, TaxBuddy integrates GST and income tax compliance into a single workflow. The platform links GST data with income disclosures, identifies place of supply correctly, flags export eligibility, and reduces mismatches between returns. This integrated approach is particularly useful for SaaS businesses dealing with multi-state operations and cross-border billing.
