Almost all software and IT services attract 18% GST — custom software development, SaaS subscriptions, packaged/off-the-shelf software, IT-enabled services and software maintenance, whether delivered on media or electronically. Exports of software services are zero-rated (0%) under an LUT, and foreign software/SaaS subscriptions attract 18% IGST under Reverse Charge (RCM). These rates were unchanged by the GST 2.0 reform of 22 September 2025.
GST Rate on Software & IT Services — Decision Table
Every common software and IT-service scenario, with its GST rate, classification and SAC/HSN code.
| Software / Service Type | GST Rate | Classification | SAC / HSN |
|---|---|---|---|
| Custom software development | 18% | Service | SAC 998313 |
| Packaged software on 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 (AMC) | 18% | Service | SAC 998314 |
| Data processing / hosting services | 18% | Service | SAC 998315-16 |
| Foreign SaaS / software subscription | 18% IGST | Import of service (RCM) | SAC 998315 |
| Export of software / IT services | 0% | Export of service | LUT required |
| Supply to SEZ unit / developer | 0% | Zero-rated supply | — |
| Online money gaming (face value) | 40% | Actionable claim | Eff. 22 Sep 2025 |
Software/IT rates are unchanged under the GST 2.0 two-slab structure (eff. 22 Sep 2025); online money gaming rose from 28% to 40%. Confirm on the official GST portal before invoicing.
Custom Software vs SaaS — Both 18%
Under GST, software is a service in almost every delivery model, so the rate is 18% across the board. What changes is the SAC code, the invoicing party and whether the supply is domestic, an export, or an import under RCM.
Custom software & IT services
- Bespoke development for a specific client
- SAC 998313 · charged by the developer
- Client claims full ITC if registered
- AMC & upgrades also 18%
- Onshore & offshore delivery covered
SaaS & packaged software
- Subscription / licence to standard software
- SAC 998315 (SaaS) · HSN 8523 on media
- Domestic vendor charges 18%
- Foreign vendor → 18% IGST under RCM
- Buyer claims ITC on business use
Whether software is downloaded, streamed as SaaS, or shipped on a CD/USB, the GST rate is 18%. The old "goods vs service" debate affects only the SAC/HSN classification and place-of-supply — not the tax percentage a buyer pays.
Not sure how to classify your software supply?
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Export of Software — Zero-Rated Supply
Exports of software and IT services to foreign clients are zero-rated under the IGST Act. Indian IT companies raise export invoices without charging GST and still recover all input GST as a refund.
- 1File LUTLetter of Undertaking each FY
- 2Raise invoiceNo IGST on the export invoice
- 3Receive FXPayment in foreign currency
- 4Claim refundRefund of accumulated input ITC
- No GST is charged on export invoices raised to foreign clients.
- File a Letter of Undertaking (LUT) at the start of each financial year to export without paying IGST upfront.
- Input GST on office rent, software tools, cloud and salaries-linked inputs is eligible for refund as it feeds a zero-rated supply.
- Supply to an SEZ unit or developer is treated on par with exports — also zero-rated.
How GST Adds Up — ₹1,00,000 Software Invoice
18% Domestic software / SaaS
0% Export under LUT
A registered domestic client recovers the ₹18,000 as Input Tax Credit, so 18% is not a real cost to a B2B buyer. An exporter charges nothing but reclaims its own input GST.
Exporting software? Get your LUT filed and refunds claimed.
Get Export GST Help →Foreign Software & SaaS — 18% under RCM
When an Indian GST-registered business pays a foreign software company — for SaaS (Salesforce, Slack, Adobe, AWS), licences or consulting — it is an import of service. The Indian recipient self-pays 18% IGST under RCM (Section 5(3), IGST Act), even if the vendor has no Indian entity.
| Scenario | Who Pays GST | ITC |
|---|---|---|
| Registered business pays foreign SaaS vendor | Indian recipient (RCM) | Yes — full ITC |
| Registered business pays Indian software vendor | Vendor charges 18% | Yes — full ITC |
| Unregistered individual pays foreign SaaS | Foreign vendor (OIDAR/simplified) | No |
| Indian IT company exports to foreign client | No GST (zero-rated) | Refund |
RCM IGST is paid via GSTR-3B and, for business use, claimed back as ITC in the same period — usually tax-neutral.
Card payments to Salesforce, Google Workspace, AWS or GitHub trigger self-assessed 18% IGST under RCM. Businesses that forget to declare it face interest and penalties even though the credit is usually recoverable — reconcile foreign spend with your GSTR-3B every month.
Paying foreign SaaS vendors? Get your RCM & ITC handled.
Talk to a GST Expert →ITC on Software Purchases
Unlike motor cars, ITC on software is fully available to registered businesses when the software is used for business — enterprise software, project tools, accounting software, cloud services and development tools. There is no Section 17(5) block for software; credit is denied only for exclusively personal/non-business use.
✓ITC available when
- Software used for taxable business supplies
- Valid tax invoice with your GSTIN
- Invoice reflected in your GSTR-2B
- RCM IGST on foreign SaaS (business use)
!ITC restricted when
- Software used purely for personal purposes
- Supplier hasn't filed / invoice not in 2B
- Used for exempt supplies (proportionate)
- Blocked-credit categories under 17(5)
Software & IT Business — GST Checklist
- GST registration (GSTIN)
- Correct SAC classification (9983xx)
- LUT for exporters each FY
- Tax invoice / export invoice format
- RCM self-assessment on foreign SaaS
- GSTR-1 (outward supplies)
- GSTR-3B (monthly/quarterly)
- ITC reconciliation with GSTR-2B
- Refund claim on zero-rated supplies
- FEMA/FIRC for export receipts
- E-invoicing applicability
- GSTR-9 annual return
For a B2B software vendor, 18% is rarely the real cost — the registered buyer recovers it as ITC. The bigger levers are export zero-rating (protect it with a timely LUT) and RCM on foreign tools (declare it to keep the credit clean). Getting SAC codes and place-of-supply right matters more than the headline rate.
- Rates & notifications: gst.gov.in
- CBIC rate finder: cbic-gst.gov.in
- Import of service / RCM: Section 5(3), IGST Act 2017
- Zero-rated supply & LUT: Section 16, IGST Act; Rule 96A, CGST Rules
Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position with the official source before you act on it.