GST on IT & Software Services —
18% or Zero-Rated?
The GST rate for software development, SaaS, cloud and IT consulting, how exports become zero-rated under LUT, OIDAR & RCM on foreign software, and full ITC for IT companies.
All IT and software services — custom development, SaaS, cloud, app development and IT consulting — attract 18% GST under SAC 9983. Pre-packaged software on physical media is goods under HSN 8523, also 18%. Export of IT services is zero-rated under an LUT, with an ITC refund. IT companies get full ITC on hardware and software used in business.
GST Rate for IT & Software — Decision Table
The GST rate and ITC position for every common IT, software and SaaS scenario, with the correct SAC / HSN code.
| Supply | SAC / HSN | GST Rate | ITC |
|---|---|---|---|
| Custom software development | 9983 | 18% | Yes |
| SaaS / cloud subscription (domestic) | 9983 | 18% | Yes |
| Pre-packaged software (physical media) | 8523 | 18% | Yes |
| Software download / ESD | 9983 | 18% | Yes |
| IT consulting / advisory | 9983 | 18% | Yes |
| App development (mobile / web) | 9983 | 18% | Yes |
| Software maintenance & support (AMC) | 9983 | 18% | Yes |
| ITeS / BPO / KPO | 9983 | 18% | Yes |
| Export of IT service (foreign client, LUT) | 9983 | 0% · Zero-rated | ITC refund |
| Foreign SaaS to Indian business (no GSTIN) | 9983 | 18% · RCM | Yes |
The 18% rate on SAC 9983 was retained under the GST 2.0 two-slab structure effective 22 September 2025. Confirm on the official GST portal before invoicing.
Software as Goods or Service?
Software can be goods or a service depending on how it is delivered — but the effective rate is 18% either way, so classification mainly affects the correct HSN/SAC code and place-of-supply rules, not the tax you pay.
Service — SAC 9983
- Custom development & customisation
- SaaS, PaaS, IaaS & cloud
- Software download / ESD
- IT consulting, AMC & support
- Taxed as a supply of service
Goods — HSN 8523
- Off-the-shelf / boxed software
- Delivered on CD, DVD or pen drive
- Discs, tapes & storage devices
- Taxed as a supply of goods
- Same 18% rate as the service
When hardware and implementation are bundled, it can be a composite supply under Section 2(30). The whole bundle is taxed at the rate of the principal supply — if the dominant element is the service, the entire package attracts 18%.
Not sure whether your supply is goods, a service or a bundle?
Get My Classification →Export of IT Services — Zero-Rated under LUT
Export of IT services is a zero-rated supply under Section 16 of the IGST Act — no GST on the export invoice, and you can still claim a refund of the ITC on your inputs. Most IT firms export under a Letter of Undertaking (LUT) so they need not block cash in IGST.
To qualify as export of service under Section 2(6) of the IGST Act: the supplier is in India, the recipient is outside India, the place of supply is outside India, payment is received in convertible foreign exchange, and the two are not merely branches of the same person.
18% Domestic IT service — ₹1,00,000
0% Exported IT service (LUT) — ₹1,00,000
If you export without filing an LUT, you must pay 18% IGST up front and claim it back later — a refund that can take months. Filing the LUT (RFD-11) before the financial year begins lets you invoice at zero GST from day one.
Serving overseas clients? Get your LUT filed and ITC refunds claimed.
Get Export GST Help →GST on SaaS, Cloud & Foreign Software
SaaS, PaaS and IaaS are services taxed at 18% under SAC 9983 — no physical product changes hands, only access over the internet. The complexity is cross-border, where OIDAR and RCM rules decide who pays.
| SaaS scenario | GST Rate | Who Pays |
|---|---|---|
| Indian SaaS → Indian business/consumer | 18% | SaaS provider (forward charge) |
| Indian SaaS → overseas client (LUT) | 0% · Zero-rated | No GST — export of service |
| Foreign SaaS → Indian consumer (B2C) | 18% | Foreign provider (OIDAR registration) |
| Foreign SaaS → Indian business, no GSTIN | 18% · RCM | Indian business (reverse charge) |
OIDAR = Online Information & Database Access or Retrieval. Foreign providers serving Indian consumers must register even without a physical presence.
Paying for AWS, Zoom, Salesforce or similar from a foreign entity with no Indian GSTIN? Your business must self-pay 18% GST under Reverse Charge in GSTR-3B — and can then claim it back as ITC if used for taxable supplies.
Running a SaaS product or paying for foreign cloud tools?
Talk to a GST Expert →ITC & Registration for IT Companies
An IT business supplying taxable or zero-rated services can claim Input Tax Credit on virtually all business inputs, subject to Section 16 conditions. Registration is mandatory once aggregate turnover crosses ₹20 lakh (₹10 lakh in special-category states), and generally regardless of turnover for inter-state supply or export.
| Input | ITC? | Reason |
|---|---|---|
| Laptops, servers & networking (18%) | Yes | Used to provide taxable IT services |
| Software licences & SaaS tools (18%) | Yes | Business use — normal B2B ITC |
| RCM GST on foreign SaaS | Yes | Claim after self-paying the RCM tax |
| Office rent (commercial, 18%) | Yes | Business premises — eligible |
| Motor vehicles / personal-use items | No | Blocked under Section 17(5) |
ITC must reflect in GSTR-2B and be claimed within the Section 16(4) time limit.
- GST registration (GSTIN)
- Correct SAC 9983 / HSN 8523 classification
- Tax invoice with SAC & place of supply
- LUT (RFD-11) for exporters
- GSTR-1 (outward supplies & exports)
- GSTR-3B with RCM on foreign SaaS
- ITC reconciliation with GSTR-2B
- Refund of accumulated ITC (RFD-01)
- FEMA / FIRC for export receipts
- E-invoicing where applicable
- GSTR-9 annual return
- Books & records upkeep
For an exporting IT firm, GST is often a net cash inflow: exports carry no output tax, yet the ITC on salaries-adjacent costs like hardware, cloud and office rent is refundable. Filing the LUT early and reconciling ITC well is what turns that into real working-capital savings.
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