consolidated SaaS billing SaaS auditson Indian company, you're almost certainly paying for 15 to 40 SaaS subscriptions across your teams. Some are billed in INR by Indian vendors. A good chunk are billed in USD or EUR by foreign vendors who've never heard of the GST portal. And your accountant, if you have one, is probably handling the foreign invoices the same way they handle a hotel bill from Singapore — filing it away and hoping for the best.
TDS on foreign SaaS payments are not registered under Indian GST, you are the one legally required to self-assess and pay 18% IGST under the Reverse Charge Mechanism — and most companies aren't doing it. The penalty isn't just the missed tax payment; it's disallowed ITC, interest on the underpaid amount, and the kind of scrutiny notice that derails a quarter.
This guide covers everything a finance head, CFO, or ops lead at an Indian company needs to know about GST on SaaS subscriptions heading into 2026: the rate structure, OIDAR rules, RCM mechanics, ITC eligibility, e-invoicing thresholds, and a vendor checklist you can actually use. We're not going to give you a textbook summary of the GST Act. We're going to tell you what's going wrong in practice and how to fix it.
Why SaaS GST Is More Complicated Than Your Accountant Thinks
The confusion starts with classification. SaaS isn't a simple "service" bucket — it sits across goods, services, and a special OIDAR category depending on who's selling, where they're based, and how the service is delivered. Get the classification wrong and every downstream step — the invoice format, the place of supply, the ITC eligibility — is built on a faulty foundation.
Microsoft 365 vs Google Workspace Indiaes incorrectly right now. They're either ignoring the RCM obligation entirely or they're attempting to offset the RCM liability against their existing ITC credit balance, which is not permitted. RCM must be paid in cash from the electronic cash ledger, not netted off against credits you've accumulated from Indian vendors.
The average Indian mid-market company has at least 6 foreign SaaS tools generating an RCM liability it hasn't reported — and that liability compounds with interest every month it stays unfiled.
The typical cost of getting this wrong combines three things: disallowed ITC on invoices that don't meet Section 16 conditions, interest at 18% per annum on unpaid RCM going back to the month of non-reporting, and scrutiny notices triggered by mismatches in GSTR-2B. None of these are theoretical risks — we see them in the books of companies that come to us after the fact.
The Basic GST Rate Structure for SaaS in India
SaaS subscriptions are classified under SAC codes 998313 and 998314 — covering information technology software and related services. The applicable GST rate is 18%, and there's no reduced rate for software subscriptions in general use.
It's worth distinguishing SaaS subscriptions from perpetual software licences. A perpetual licence (where you pay once and own the right to use a software version forever) has historically been treated differently — sometimes as goods. SaaS subscriptions, where you're paying monthly or annually for access that lapses if you stop paying, are unambiguously a service. That distinction matters because the place of supply rules, and therefore the IGST vs CGST/SGST split, differ between goods and services.
On place of supply: for B2B software service transactions, the place of supply is the registered location of the recipient. So a Bengaluru company buying a Zoho subscription gets an invoice showing Karnataka as the place of supply, with CGST and SGST split. A Delhi company buying the exact same Zoho plan gets IGST on an inter-state supply — unless Zoho's billing entity is also in Delhi, in which case it may split as CGST/SGST again. Multi-state companies with GST registrations in several states need to make sure each subscription invoice references the correct GSTIN for the state where the tool is actually consumed. Getting this wrong doesn't just affect ITC — it can trigger place-of-supply mismatches that the department picks up during assessment.
Action: Audit your last 3 months of SaaS invoices. For each Indian vendor, confirm the place of supply matches the GSTIN of the entity being billed. Mismatches are the single most common defect we find in SaaS invoice audits.
Key takeaway: SaaS attracts 18% GST under SAC 998313/998314, and the place of supply on every invoice must match the GSTIN of the actual recipient entity — errors here cascade into ITC mismatches.
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OIDAR Services: The Rule That Governs Foreign SaaS
OIDAR stands for Online Information and Database Access or Retrieval, defined under Section 2(17) of the IGST Act. It covers services delivered over the internet, automated in nature, with minimal human intervention. That definition covers almost every SaaS tool you're buying from a foreign vendor: AWS, Google Workspace, Microsoft 365, Salesforce, Slack, Figma, Notion, HubSpot, the list goes on.
The OIDAR framework was introduced in 2017 specifically to bring foreign digital service providers into the Indian GST net. The key distinction is whether the foreign vendor has bothered to register for Indian GST or not.
Some large vendors — particularly those with a significant Indian customer base — have obtained Indian GST registration. When they do, they charge GST on the invoice directly (you'll see a GSTIN starting with a state code), and RCM does not apply. You claim ITC normally. The problem is that many mid-tier foreign SaaS vendors have not registered, and when they haven't, the tax obligation shifts entirely to you, the Indian buyer, via the Reverse Charge Mechanism. The invoice you receive from them will show no GST, no GSTIN, and no indication that you owe anything to the Indian government. But you do.
Reverse Charge Mechanism on Foreign SaaS: How It Actually Works
RCM kicks in when you pay a foreign SaaS vendor who is not registered under Indian GST. You become both the buyer and, for tax purposes, the deemed supplier — which means you assess the tax, pay it, and file it yourself.
Here's the step-by-step. Say you're paying USD 500 per month for a Salesforce plan billed by an entity not registered in India. At current rates, that's roughly ₹41,500. Your RCM liability is 18% of that: ₹7,470. You must:
- Generate a self-invoice in your own records (yes, you invoice yourself) referencing the foreign vendor's name, the service, the period, and the amount.
- Pay ₹7,470 in cash from your electronic cash ledger before or at the time of filing GSTR-3B.
- Report this in Table 3.1(d) of GSTR-3B under "Inward supplies liable to reverse charge."
- Claim the same amount as ITC in Table 4(A)(2) of the same GSTR-3B, subject to standard ITC eligibility conditions.
The critical mistake we see repeatedly: companies try to offset the RCM liability against ITC credit sitting in their electronic credit ledger. You cannot do this. RCM liability must be paid in cash, full stop. There's no netting. After you've paid it in cash, you can then claim that amount back as ITC — but the cash payment has to happen first.
Keep your records tight. The department can ask for proof of payment (bank reference for the USD transfer to the foreign vendor), the self-invoice you generated, and the GSTR-3B extract showing the reported liability. Keep these together, indexed by vendor and month.
Watch out: If you've been paying foreign SaaS vendors for 12+ months without reporting RCM, your exposure isn't just the unpaid tax — it's interest at 18% per annum on every month of underpayment. Quantify this before your next GST audit, not during it.
Key takeaway: RCM on foreign SaaS requires a cash payment from your electronic cash ledger — you cannot net it against ITC credits — and the self-invoice you generate is the documentary cornerstone of your compliance trail.
Input Tax Credit on SaaS: What You Can and Cannot Claim
The good news is that most B2B SaaS spending qualifies for ITC. SaaS tools used for business purposes don't fall under the blocked credit list in Section 17(5) of the CGST Act, which targets things like club memberships, personal consumption goods, and motor vehicles. A Figma licence, a project management tool, a CRM — these are business inputs, and ITC is available.
The conditions under Section 16 of the CGST Act are: you must have a valid tax invoice (or self-invoice for RCM), the service must have been received, the tax must have been paid to the government, and you must have filed your return. For vendor invoices, there's also the 180-day payment rule — if you haven't paid the vendor within 180 days of the invoice date, the ITC claimed must be reversed (and can be reclaimed once payment is made).
For foreign SaaS under RCM specifically: once you've paid the ₹7,470 (continuing the earlier example) from your cash ledger and reported it in GSTR-3B, you can claim that exact amount back as ITC in Table 4(A)(2) of the same return. In practice, the cash out and the ITC in often net to zero in the same period — but the cash payment still has to happen.
Where it gets complicated is partial exemption. If your company has a mix of taxable and GST-exempt revenue (common in financial services, education, or healthcare tech), ITC must be apportioned under Rule 42. You can't claim full ITC on inputs that relate to exempt supplies. This is an annual calculation that many companies skip, and it's a fairly reliable trigger for assessment queries.
In scrutiny, the department will ask for: the vendor's GSTIN (or your self-invoice if foreign), the matching entry in your GSTR-2B, and your payment ledger. If an invoice doesn't appear in GSTR-2B — because the vendor didn't file their GSTR-1 on time — your ITC claim is technically at risk even if the invoice is valid. This is the reconciliation exercise your finance team needs to run monthly, not annually.
If you want to see how a single consolidated GST invoice across your whole SaaS stack simplifies this process, take a look at how our AI CIO handles SaaS procurement and invoicing consolidation.
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E-Invoicing Thresholds in 2026 and What They Mean for SaaS Buyers
E-invoicing is mandatory for GST-registered businesses above the turnover threshold set by the government. As of FY2024–25, that threshold is ₹5 crore annual aggregate turnover, and the direction of travel is clearly toward bringing smaller businesses in. Any SaaS vendor operating at meaningful scale in India almost certainly crosses this threshold and is therefore required to issue IRN-stamped, QR-coded invoices via the Invoice Registration Portal (IRP).
A valid e-invoice from an Indian SaaS vendor must carry: the Invoice Reference Number (IRN), a QR code generated by the IRP, and all the standard GST invoice fields. Without these, ITC claims on those invoices carry audit risk — the department's position is that a non-compliant invoice isn't a valid tax document.
Foreign vendors can never issue Indian e-invoices. They're not registered on the IRP. This is structurally why RCM exists for OIDAR imports — because the foreign invoice will always be a simple PDF, and the Indian compliance obligation needs to sit somewhere. It sits with you.
Action: Before April 2026, email your top 10 Indian SaaS vendors and ask them to confirm: (1) their current GSTIN, (2) whether they're above the ₹5 crore e-invoicing threshold, and (3) that future invoices will carry an IRN and QR code. Get this in writing. It protects your ITC claims in scrutiny.
To verify an e-invoice from an Indian vendor, go to the IRP portal and enter the IRN. If it doesn't resolve, the invoice wasn't legitimately generated — and you shouldn't claim ITC on it until the vendor corrects it.
What to Demand From Every SaaS Vendor for a Clean GST Invoice
Most invoice problems are preventable if you ask the right questions during vendor onboarding — before the first invoice arrives, not after three months of incorrect billing.
A valid GST invoice from an Indian SaaS vendor must include: supplier GSTIN, legal entity name, invoice number and date, your company's GSTIN and billing address, state of place of supply, SAC code, taxable value, and a clear IGST or CGST/SGST breakup. Vendors above the e-invoicing threshold must additionally include the IRN and QR code.
The two most common defects we see in SaaS vendor invoices are missing SAC codes and wrong place of supply. An invoice that shows "Karnataka" as the place of supply when your registered GSTIN is in Maharashtra is not just a formatting issue — it affects whether the tax is IGST or CGST/SGST and can make the ITC unclaimed in the right state.
For foreign vendors, request a certificate of establishment or VAT/sales tax registration number from their home country. This helps your CA confirm whether the vendor has Indian GST registration or not, which determines whether RCM applies. Don't assume — check the invoice for a GSTIN. If it's there, GST has been charged by the vendor. If it's absent, you owe RCM.
One practical note on billing structures: some vendors offer consolidated billing accounts (one invoice for all seats across your company) while others issue per-team or per-seat invoices. Consolidated billing is simpler for ITC tracking but make sure the single invoice references your master GSTIN. Per-seat invoicing across different entity GSTINs can create complexity if you're running multiple entities.
Here's template language worth sending to any new Indian SaaS vendor at onboarding:
"Please ensure all invoices addressed to [Company Name] carry our GSTIN [XXXXXXXXXXXX], with [State] as the place of supply, the applicable SAC code, and a GST breakup by tax type. If your turnover exceeds ₹5 crore, please ensure IRN and QR code are included. We cannot process invoices or claim ITC without these fields."
You can browse our SaaS marketplace to see which vendors we've already vetted for GST-compliant billing — it saves the back-and-forth considerably.
How Easexpense Handles GST Compliance Across Your SaaS Stack
We sit in the payment path. When you procure SaaS through Easexpense, we consolidate your subscriptions and issue you a single GST-clean invoice — one document, correct SAC codes, proper IGST/CGST/SGST split, IRN included, instead of 20 vendor PDFs of varying quality arriving at different email addresses across your company.
For foreign SaaS where RCM applies, our dashboard flags the liability before the bill hits. You see the subscription amount, the INR equivalent, and the calculated 18% RCM amount — so your finance team knows exactly what to provision before the GSTR-3B filing deadline, not after a scramble at month-end.
Renewal intelligence is part of this. We track your renewal dates and surface them early enough for your team to update PO details, verify GSTIN currency, and avoid the GSTR-2B mismatches that happen when a vendor renews automatically and generates an invoice against an outdated billing address or old GSTIN.
The practical outcome: instead of your accountant manually reconciling 25 vendor invoices with GSTR-2B every month, they're reconciling one. The ITC trail is clean. The RCM obligations are visible. And you're not discovering a ₹3 lakh compliance gap six months late.
A Practical GST Compliance Checklist for SaaS-Heavy Indian Companies
Pull this out and give it to whoever owns your monthly GST filing.
Monthly:
- Reconcile every SaaS invoice received against your GSTR-2B. Flag any vendor invoice not appearing in GSTR-2B — chase the vendor to file their GSTR-1 before you claim ITC.
- Identify all foreign SaaS payments made in the month. For each vendor without Indian GST registration, generate a self-invoice and add the 18% IGST to your RCM liability in cash before filing GSTR-3B.
- Verify that place of supply on every Indian vendor invoice matches the GSTIN of the entity being billed.
Quarterly:
- Audit shadow IT — subscriptions purchased by team leads on personal or departmental credit cards that have bypassed your procurement process. These carry no GST invoice, no ITC, and invisible RCM exposure.
- Confirm that new SaaS vendors added during the quarter are set up with correct billing details and GST-compliant invoice templates.
Annually:
- If your company has exempt revenue, calculate and apply Rule 42 ITC apportionment. Reverse the ineligible portion before the annual return.
- Check whether any of your Indian SaaS vendors have crossed the ₹5 crore e-invoicing threshold during the year. Invoices issued after they crossed the threshold without an IRN are non-compliant.
- Review your vendor list against our managed procurement plans — consolidating through a single procurement layer eliminates most of these reconciliation issues at the source.
Red flags that invite scrutiny: ITC claimed without a matching GSTR-2B entry; place-of-supply mismatches between invoice and recipient GSTIN; RCM on foreign SaaS not reported in Table 3.1(d); self-invoices not maintained for foreign vendor payments.
Key takeaway: GST compliance on SaaS isn't a once-a-year audit exercise — it's a monthly reconciliation discipline, and the companies that get it right treat it as a 30-minute monthly checklist, not a quarterly panic.
Frequently asked questions
Is GST applicable on SaaS subscriptions bought from foreign companies in India?
Yes. When you purchase SaaS from a foreign vendor who is not registered under Indian GST, the transaction typically qualifies as an OIDAR service import under the IGST Act. You are required to self-assess and pay 18% IGST under the Reverse Charge Mechanism by reporting the liability in Table 3.1(d) of your GSTR-3B and paying from your electronic cash ledger. You can then claim that amount back as ITC in Table 4(A)(2) of the same GSTR-3B, subject to standard eligibility conditions under Section 16. The self-invoice you generate is the key supporting document — store it with the bank reference for the foreign payment, indexed by vendor and month.
Can I claim input tax credit on SaaS subscription expenses?
In most B2B cases, yes. SaaS used for business purposes is not blocked under Section 17(5) of the CGST Act, which targets personal consumption items, club memberships, and motor vehicles. You need a valid tax invoice from an Indian vendor, or a self-invoice plus proof of payment for foreign SaaS under RCM. The invoice must appear in your GSTR-2B for ITC to be admissible without scrutiny risk — if it doesn't appear, your vendor hasn't filed their GSTR-1, and you should chase them before claiming. Companies with a mix of taxable and exempt revenue must apportion ITC under Rule 42 and cannot claim the full input on subscriptions that partly relate to exempt outputs.
What is the GST rate on SaaS services in India?
SaaS services are taxed at 18% GST under SAC codes 998313 or 998314, covering software as a service and related IT services. This applies to both Indian vendors billing domestically and to imported software services subject to RCM. There is no reduced rate available for general SaaS use. The specific SAC code should be confirmed on every invoice you receive — a mismatch between the SAC code and the actual nature of the service is one of the most common reasons ITC claims get queried during assessment.
Which foreign SaaS tools attract reverse charge GST in India?
Any foreign SaaS vendor providing services electronically — such as AWS, Google Workspace, Microsoft 365, Salesforce, Slack, Figma, or Notion — that is not separately registered under Indian GST falls under the OIDAR definition and triggers RCM for the Indian buyer. If a foreign vendor has obtained Indian GST registration (some large vendors have done this), they charge GST directly on the invoice and RCM does not apply to that purchase. The simplest check is to look at the invoice for a GSTIN: if it's present and valid, the vendor is charging GST. If it's absent, you owe RCM. Don't assume large vendors have registered — verify each one.
Does e-invoicing apply to SaaS vendors in India?
E-invoicing is mandatory for GST-registered Indian businesses above the applicable annual turnover threshold, which stood at ₹5 crore for FY2024–25 and is expected to be lowered further. If your SaaS vendor crosses this threshold, their invoices must carry an Invoice Reference Number (IRN) and QR code generated via the IRP portal. Without these, ITC claims on those invoices carry audit risk — the department treats a non-compliant invoice as an invalid tax document. Foreign vendors can never issue Indian e-invoices because they're not registered on the IRP, which is precisely why RCM is the prescribed compliance mechanism for imported SaaS.
How do I report RCM on foreign SaaS in GSTR-3B and GSTR-1?
In GSTR-3B, report the RCM liability in Table 3.1(d) under "Inward supplies liable to reverse charge." This amount must be paid in cash from your electronic cash ledger — you cannot use your existing ITC credit balance to offset it. The ITC on that RCM payment is then claimed in Table 4(A)(2) of the same GSTR-3B, so the net cash impact is often zero in the same period, but the cash payment step is mandatory. GSTR-1 does not require reporting of RCM inward supplies — that obligation sits entirely on your GSTR-3B filing and the self-invoice you generate for your own records.
What should a GST-compliant SaaS invoice from an Indian vendor include?
A valid GST invoice must carry the supplier's GSTIN, legal name, invoice number and date, your company's GSTIN and billing address, place of supply (state code), the SAC code (998313 or 998314 for SaaS), a line-item description of the service, the taxable value, and a clear IGST or CGST/SGST breakup showing rate and amount separately. For vendors above the e-invoicing threshold, the IRN and QR code are additionally mandatory. Invoices missing the SAC code, or showing the wrong place of supply, are the two most common defects in SaaS vendor billing — both can cause your ITC claim to be questioned during assessment.