GST on Software & IT Services in India — Complete Guide 2025
Updated: 3 June 2026
GST on software and IT services in India is uniformly 18% — whether custom development, SaaS, packaged software, or IT-enabled services. Export of software to foreign clients is zero-rated. Foreign software subscriptions attract 18% IGST under the Reverse Charge Mechanism (RCM).
18%
GST rate applicable to virtually all software and IT services in India — custom development, SaaS, packaged software, IT/ITES. Exception: Online gaming platforms attract 28% GST (post Oct 2023). Exports are zero-rated.
GST Rates on Different Types of Software & IT Services
Whether software is delivered as a product, a service, or through the cloud, GST applies at 18% in almost all cases. Here is the complete breakdown:
| Software / Service Type | GST Rate | Classification | SAC / HSN |
|---|---|---|---|
| Custom software development (for specific client) | 18% | Service | SAC 998313 |
| Packaged / off-the-shelf software (physical media) | 18% | Goods | HSN 8523 |
| Packaged software (electronic download) | 18% | Service | SAC 998314 |
| SaaS (Software as a Service) | 18% | Service | SAC 998315 |
| IT-enabled services (ITES, BPO) | 18% | Service | SAC 998311 |
| Software maintenance & support | 18% | Service | SAC 998314 |
| Data processing services | 18% | Service | SAC 998316 |
| Software subscriptions (foreign vendor — RCM) | 18% IGST | Import of Service (RCM) | SAC 998315 |
| Export of software / IT services (to foreign clients) | 0% (Zero-rated) | Export of Service | LUT required |
| Software supply to SEZ units | 0% (Zero-rated) | Zero-rated supply | — |
| Online gaming platforms (face value of bets) | 28% | Actionable claim | Post Oct 2023 |
Export of Software — Zero-Rated Supply
Indian IT companies and software exporters enjoy a key GST benefit: exports of services (including software) to foreign clients are zero-rated under the IGST Act. This means:
- No GST is charged on export invoices raised to foreign clients
- The exporter must file a Letter of Undertaking (LUT) at the beginning of each financial year to export without paying IGST upfront
- All input GST paid on purchases, office rent, software tools, etc. is eligible for refund as it is used for zero-rated supply
- Payment must be received in foreign currency within the permitted period
Supply of software to SEZ (Special Economic Zone) units or developers is also zero-rated — treated on par with exports.
Reverse Charge Mechanism (RCM) on Foreign Software
When an Indian GST-registered business pays a foreign software company — for SaaS subscriptions (e.g., Salesforce, Slack, Adobe Creative Cloud, AWS), licenses, or consulting — it is treated as an "import of service." The Indian company must self-pay 18% IGST under RCM:
| Scenario | Who Pays GST? | ITC Available? |
|---|---|---|
| Indian registered business pays foreign SaaS vendor | Indian recipient (RCM) | Yes — full ITC |
| Indian unregistered individual pays foreign SaaS | Foreign vendor (if registered under Simplified Scheme) | No |
| Indian registered business pays Indian software vendor | Indian vendor charges 18% GST | Yes — full ITC |
| Indian IT company exports software to foreign client | No GST (zero-rated) | ITC refund available |
ITC on Software Purchases
Unlike cars (where ITC is blocked for most businesses), ITC on software purchases is fully available to GST-registered businesses — provided the software is used for business purposes. This includes enterprise software, project management tools, accounting software, cloud services, and development tools. There are no restrictions under Section 17(5) for software. The only blocked scenario is if the software is used exclusively for non-business/personal activities.
Frequently Asked Questions
What is the GST rate on software in India?
Almost all types of software attract 18% GST in India — whether it is custom software development, packaged/off-the-shelf software, SaaS subscriptions, IT-enabled services, or software maintenance. The 18% rate applies regardless of whether the software is delivered electronically or on physical media. The only exception is gaming/online gaming platforms, which attract 28% GST on the face value of bets/deposits after the October 2023 GST Council amendment. Export of software services to foreign clients is zero-rated (0% GST) — the exporter files a Letter of Undertaking (LUT) and can claim ITC refund.
Is custom software development taxed at 18% GST?
Yes. Custom software — developed specifically for a particular client based on their requirements — is treated as a service under GST and taxed at 18%. This applies whether the development is done onshore (client in India) or onshore with offshore delivery. The SAC (Services Accounting Code) applicable is 998313 for custom software development. The developer charges 18% GST on their invoice. The client (if registered) can claim this as ITC, reducing their effective cost. Maintenance contracts and upgrades for custom software also attract 18% GST.
How is SaaS taxed under GST in India?
SaaS (Software as a Service) is treated as a service under GST and taxed at 18%. When an Indian company pays for a SaaS subscription from an Indian vendor (e.g., Zoho, Freshworks), the vendor charges 18% GST on the invoice. When an Indian company subscribes to a foreign SaaS vendor (e.g., Salesforce, Slack, HubSpot from their foreign entity), the Indian company must pay GST under the Reverse Charge Mechanism (RCM) — the recipient pays 18% IGST to the government directly instead of the foreign vendor collecting it. RCM-paid GST is eligible as ITC for businesses with valid GST registration.
What is GST on imported software or software purchased from foreign companies?
When an Indian GST-registered business imports software services or pays a foreign software company for subscriptions, licenses, or services, it falls under the "import of services" category. The Indian recipient must self-assess and pay 18% IGST under the Reverse Charge Mechanism (RCM) under Section 5(3) of the IGST Act. This applies even if the foreign company has no Indian entity. The RCM-paid amount is eligible for ITC credit in the same month if used for business purposes. For B2C consumers (individuals, unregistered entities), the foreign supplier may need to register under the Simplified Registration Scheme and pay GST.
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