Whether TDS u/s 195 required on foreign hosting / SaaS payments where GST RCM is paid

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Vish T

22 Points Posted on 05 February 2026

I seek guidance on applicability of TDS under Section 195 on certain foreign service payments.

Facts:

Indian business entity(Sole proprietor)
Payments made to non-resident service providers via credit card
Nature of services:
- VPS hosting from a Europe company (no PE in India) (>30k RS per year)
- Domain registration from Hostinger (Singapore) (<30k RS per year)
- API-based services from US Provider (less than 30k RS per year)

Treated as import of services and GST paid under RCM

Issue for clarification:

Does payment of GST under RCM automatically trigger TDS u/s 195?
If the income is in the nature of business income of the non-resident and not taxable in India due to absence of PE under relevant DTAA, is TDS still required?
TDS Rates

Replies (2)

Quick Summary

This discussion clarifies whether TDS under Section 195 is applicable to payments made to non-resident service providers for foreign hosting, SaaS, and API services, especially when GST is paid under the Reverse Charge Mechanism (RCM). The consensus is that paying GST under RCM does not automatically trigger TDS. TDS u/s 195 is only required if the income is taxable in India. If the non-resident has no Permanent Establishment (PE) in India and the income is considered business income not taxable in India under a Double Taxation Avoidance Agreement (DTAA), then TDS is generally not required. It's crucial to review the nature of the service and the specific agreements to determine taxability, rather than solely relying on the GST treatment or payment thresholds.

Aashok Kumar Sharma

Finance/Compliance Consultant

77999 Points Posted on 06 February 2026

GST RCM ≠ Income-tax TDS
Section 195 applies only if income is taxable in India
Business income without PE is not taxable
Your VPS, domain & API payments do NOT require TDS
Maintain documentation for audit safety

Rushabh

Automation Expert

10728 Points Posted on 13 November 2026

Payment of GST under RCM does not, by itself, trigger TDS under section 195. Section 195 applies only where the sum paid to a non-resident is chargeable to tax in India. If the payment is business income and the recipient has no PE in India under the applicable DTAA, it is generally not taxable here and section 195 withholding should not arise. The relevant question is the character of each service and the applicable treaty—not the GST treatment or the amount paid.

VPS hosting, domain registration and API access may be treated as ordinary service/business income where they provide standard facilities or access without transferring copyright or granting rights to use technical know-how. However, the agreement and actual deliverables matter: a licence, rights to exploit software/IP, or specialised technical services could lead to a different Indian tax and treaty analysis.
The ₹30,000 threshold is not a general section 195 exemption. If a sum is chargeable, withholding can apply regardless of amount; if it is not chargeable, the threshold does not make it taxable.
There is no single TDS rate on these facts. If tax is chargeable, the rate depends on the income classification, the applicable DTAA, documentation and the relevant Finance Act rate; section 195A gross-up may also be relevant if the payer bears the tax. Preserve contracts, invoices, payment records and evidence supporting the no-PE/treaty position.

This classification also helps keep foreign-service payments, GST RCM records and withholding-tax workings aligned. Manual reviews of recurring subscripttions and changing service terms are difficult; automation can reduce repetitive work while your professional judgment remains in control. At Jir AI we provide 2,000+ AI agents and 650+ integrations to streamline your practice’s day-to-day workload. For a more efficient review workflow, connect with us on WhatsApp: https://wa.me/message/3HVOZ7HIY4ESC1