Foreign Software Subscriptions & GST: How Indian Businesses Can Claim ITC

Most Indian businesses now pay for a stack of foreign software: a CRM, an analytics tool, a design tool, cloud hosting. The invoices come from Delaware, Dublin or Singapore, and they carry no Indian GSTIN. I wanted to know how common that is, so I checked the software catalogue we maintain at FindThatSoftware, where every price and billing fact is taken from the vendor's own pages.

What the data shows 

Of 125 software tools in our catalogue that price in a foreign currency, 112 (about 90%) do not issue an Indian GST invoice. Eight do. Five of those eight are Indian companies that simply quote their prices in dollars. Among genuinely foreign vendors, the ones that bill Indian customers through an Indian entity are mostly the large cloud providers. For the remaining five tools we could not confirm either way, so they are left out of the count. 

So for almost every foreign subscription a client pays, there is no vendor GST invoice to claim input tax credit against. That does not mean the credit is lost. It means the route to it is different, and it is the route many clients skip. 

Why there is no invoice 

A foreign vendor supplying software to an Indian business is making an import of services. For a GST-registered recipient, the tax on that import is paid by the recipient under reverse charge, as IGST under Section 5(3) of the IGST Act. The vendor has no obligation to register in India or charge Indian GST to a registered business, so it does not. 

The picture is different for unregistered buyers. Since 1 October 2023, the definition of a non-taxable online recipient covers any unregistered person, whatever the purpose. A foreign vendor selling online services to them is supposed to register in India and charge IGST itself. That is why some large vendors show GST at checkout for individuals but not for companies that enter a GSTIN. 

The three mistakes I keep seeing 

1. No reverse charge paid at all: The subscription is paid by card, booked as an expense, and nothing else happens. The IGST liability on the import still exists. If it surfaces later, it comes with interest. 

2. Reverse charge paid, credit never claimed: The IGST is paid in cash, and then the matching credit is never taken in Table 4(A)(2) of GSTR-3B. Because these self-invoices do not appear in GSTR-2B, nothing prompts anyone to claim them. The client ends up paying 18% on every foreign tool for nothing. 

3. Card forex treated as the whole cost: Indian cards typically add a foreign currency markup of around 3.5% on dollar charges, and the bank charges GST on the conversion as well. That part is a genuine cost. Clients often lump it together with the reverse charge IGST and assume the whole premium is unavoidable. 

What it costs when the credit is skipped 

Across the 116 dollar-billed tools in our catalog with a verified monthly price, the average all-in cost for a GST-registered business that pays reverse charge and claims the credit is about 3.5% above the mid-market rupee conversion. That 3.5% is the card forex markup. For a business that cannot or does not reclaim the GST, the same tools cost about 22% above the mid-market conversion. 

On a tool billed at $250 a month, that is the difference between roughly ₹24,700 and ₹29,200 a month at a ₹95.6 rate. Across a typical startup stack of eight to ten foreign tools, it runs into lakhs a year. 

A quick checklist for foreign software bills 

• Read the invoice for a GSTIN: If the vendor bills through an Indian entity with a GSTIN, this is a normal domestic purchase and the credit flows through GSTR-2B.
• No Indian GSTIN on the invoice: treat it as an import of services under reverse charge.
• Work out the time of supply: Under Section 13(3) of the CGST Act, it is the earlier of the payment date and the day after 60 days from the vendor's invoice.
• Raise the self-invoice: Section 31(3)(f), within 30 days under Rule 47A.
• Pay the IGST in cash: Reverse charge cannot be paid from the credit ledger.
• Report it: the liability in Table 3.1(d) of GSTR-3B, and the credit in Table 4(A)(2).
• Keep the paper trail: Keep the vendor invoice, the card or bank statement, and the self-invoice together, since none of it will show up in GSTR-2B.
• Watch the deadline: Claim the credit before the Section 16(4) time limit for that financial year. 

How the data was collected 

The numbers come from the FindThatSoftware catalog as of 27 September 2026: 301 published software tools, of which 125 price in a foreign currency. Whether a vendor issues an Indian GST invoice is recorded from its own billing, tax and terms pages; where we could not verify it, the tool is marked unknown and excluded. Cost figures use each tool's lowest published monthly plan, a ₹95.6 per dollar rate, a 3.5% card forex markup and 18% GST. 

This is not tax advice for any specific case. Treatment can differ, for example where the software is used partly for non-business purposes, so the final call on any client file sits with their CA. 

The author is co-founder of FindThatSoftware, which tracks the real India cost of business software, including forex and GST.