Everything About GST for Foreign Companies: 40 Questions

GST Registration and Applicability

1. Does a foreign company need GST registration in India?

Yes, if the foreign company makes taxable supplies of goods or services in India. The registration requirement depends on two factors: whether you have a permanent establishment in India and whether your supplies are B2B or B2C.

If you have a branch office, subsidiary, project office, or any fixed place of business in India, you register as a regular taxpayer. If you do not have a physical presence, you register as a Non-Resident Taxable Person (NRTP) under Section 24 of the CGST Act.

2. What is the difference between regular GST registration and NRTP registration?

3. What documents are required for NRTP registration?

The foreign company must appoint an authorized signatory who is a resident Indian with a valid PAN. Required documents include:

• Certificate of Incorporation of the foreign entity
• Tax Identification Number (TIN) or equivalent from the home country
• Passport and visa details of the authorized signatory
• Authorization letter or Board Resolution appointing the signatory
• PAN card of the authorized signatory
• Indian bank account details
• Valid Indian mobile number and email address
• Proof of business premises in India (if any)

4. How long does NRTP registration take?

Registration must be completed at least 5 days before commencing business in India. The process involves filing Form GST REG-09 on the GST portal, depositing the estimated GST liability for the proposed business period, receiving a Temporary Reference Number (TRN), and obtaining the GSTIN once verified. Registration is typically granted within 3-7 working days where Aadhaar-linked authentication of the authorized signatory succeeds and no risk flags are triggered.

5. Can a foreign company register for GST without a PAN?

A foreign company itself does not need an Indian PAN, but the authorized Indian signatory must have a valid PAN. For companies with Indian subsidiaries or branch offices, the Indian entity will have its own PAN and can register directly.

6. Does the turnover threshold apply to foreign companies?

For NRTP registrations, there is no turnover exemption threshold—registration is mandatory for any taxable supply in India, regardless of amount. For foreign companies operating through an Indian entity (subsidiary, branch office), the standard thresholds apply: INR 40 lakh for goods and INR 20 lakh for services (INR 20 lakh and INR 10 lakh respectively for special category states like the northeastern states, Himachal Pradesh, and Uttarakhand).

A common mistake foreign companies make is assuming they do not need GST registration because their total India revenue is below the threshold. However, if you are conducting even a single taxable transaction as an NRTP—for example, participating in a trade show and making on-site sales—registration is required regardless of the transaction value. The penalty for operating without registration is the higher of the tax amount due or INR 10,000, plus 18% annual interest on the unpaid tax from the date it was due.

GST Rate Structure

7. What are the current GST rates in India?

Following the GST 2.0 reforms effective September 22, 2025, India's GST framework has been rationalized into four main slabs:

Special rates include 3% for gold and jewellery and 0.25% for rough diamonds and unprocessed precious stones.

8. What GST rate applies to most services consumed by foreign companies?

Most professional and business services—including consulting, IT services, legal services, accounting, and tax advisory—are taxed at 18% GST. This is the standard rate that applies to the majority of B2B service transactions in India.

9. How does GST apply to software and SaaS products?

Software supplied as a service (SaaS) attracts 18% GST under HSN code 998314 (licensing services for the right to use computer software). If a foreign company provides SaaS to Indian customers, the tax treatment depends on whether the customer is a registered business (B2B) or an unregistered individual (B2C). For B2B, the Indian business pays GST under the reverse charge mechanism and claims ITC. For B2C, the foreign provider must register in India and charge 18% IGST directly to the end consumer.

An important distinction exists between SaaS and packaged software delivered on physical media. Software on physical media (CDs, USBs) is classified as goods and may attract different rates depending on whether it is customized (18% as a service) or off-the-shelf (18% as goods). Cloud-delivered software is unambiguously treated as a service. For foreign SaaS companies with significant Indian B2C revenue, registration and compliance is unavoidable—the GST Council has been progressively tightening enforcement on foreign digital service providers.

OIDAR Services and Digital Taxation

10. What are OIDAR services under GST?

Online Information and Database Access or Retrieval (OIDAR) services are services delivered over the internet that are essentially automated, require minimal human intervention, and are impossible to provide without information technology. Common examples include streaming content (Netflix, Prime Video), music platforms (Spotify), video conferencing (Zoom), design tools (Canva), cloud storage (Google Drive, Dropbox), e-learning platforms (Udemy, Coursera), and downloadable software or e-books.

11. How does GST apply to OIDAR services provided by foreign companies to Indian customers?

The treatment differs based on the customer type:

• B2C (to unregistered Indian consumers): The foreign OIDAR provider must register for GST in India and pay 18% IGST directly. This requires appointing an Indian agent or representative.
• B2B (to registered Indian businesses): The Indian business recipient pays GST under the reverse charge mechanism. The foreign provider does not need to register separately for B2B transactions.

12. What is the reverse charge mechanism and when does it apply to foreign companies?

Under the reverse charge mechanism (RCM), the liability to pay GST shifts from the supplier to the recipient. For foreign companies, RCM applies in two key scenarios:

1. Import of services: When an Indian business imports services from a foreign supplier with no fixed establishment in India, the Indian business pays IGST under RCM
2. Specified goods and services: Certain categories of supplies are designated under RCM regardless of the supplier's location

The Indian recipient self-assesses the GST liability, pays it while filing GSTR-3B, and can claim the same amount as input tax credit (ITC) if the services are used for taxable outward supplies.

13. Does a foreign company need to register for GST if it only supplies OIDAR services to Indian businesses (B2B)?

No. If your OIDAR services are exclusively B2B (supplied only to GST-registered Indian businesses), the Indian recipients handle GST payment under reverse charge. You do not need a separate GST registration. However, you must verify the GST registration status of your Indian customers.

14. What compliance changes for OIDAR providers were introduced in 2025?

The Indian government has progressively tightened record-keeping and data-disclosure expectations for foreign digital platforms supplying services to Indian consumers, with the GST Council and CBIC issuing clarifications to improve OIDAR compliance mechanisms. Foreign providers are expected to maintain electronic transaction records supporting B2C supplies to Indian consumers and be able to produce them on request.

Foreign OIDAR providers registered under the simplified registration scheme must file GSTR-5A (return for OIDAR service providers) on a monthly basis by the 20th of the following month. The return requires disclosure of all B2C supplies made to Indian consumers, the IGST collected, and payment details. Non-compliance with GSTR-5A filing triggers the same late fee and interest penalties as regular returns—INR 50 per day plus 18% interest on unpaid tax. The government has also introduced data-sharing agreements with payment gateways and app stores to cross-verify OIDAR revenue reported by foreign providers.

Import of Goods and Services

15. How is GST charged on imports of goods into India?

All imports of goods into India are treated as inter-state supply and attract IGST. The IGST rate is the same as the applicable GST rate for that product category. IGST is levied on the assessable value of goods, which includes customs duty. The formula is: IGST = (Assessable Value + Basic Customs Duty + Social Welfare Surcharge) × IGST Rate.

16. How is GST charged on imports of services into India?

Import of services attracts IGST under reverse charge. The place of supply is considered to be India (the recipient's location). The Indian recipient files the IGST liability in GSTR-3B and can claim corresponding ITC. For a transaction to qualify as an import of services, three conditions must be met: the supplier must be located outside India, the recipient must be in India, and the place of supply must be in India.

17. Are related-party transactions between a foreign parent and Indian subsidiary subject to GST?

Yes. Services provided between related parties—including a foreign parent company and its Indian subsidiary—are deemed supplies under GST even if no consideration is exchanged. The Indian subsidiary must pay IGST under reverse charge on the fair market value of services received. This includes management fees, shared services, and secondment of personnel.

18. How does GST interact with customs duty on imported goods?

IGST on imports is levied over and above customs duty, creating a layered tax structure at the port of entry. However, the IGST paid on imports is fully creditable as ITC against outward GST liability. The effective cash flow impact is: you pay customs duty + IGST at the port, claim IGST as ITC in your next GSTR-3B, and the net cost is customs duty only (IGST is recovered through ITC).

For example, if a foreign company's Indian subsidiary imports capital equipment worth INR 1 crore with a 10% basic customs duty and 18% IGST: Basic Customs Duty = INR 10 lakh, Social Welfare Surcharge (10% of BCD) = INR 1 lakh, Assessable Value for IGST = INR 1,11,00,000, IGST at 18% = INR 19.98 lakh. The subsidiary pays INR 30.98 lakh at the port but claims INR 19.98 lakh as ITC in the next GSTR-3B filing, resulting in a net customs cost of INR 11 lakh.

Input Tax Credit (ITC)

19. Can foreign companies claim input tax credit in India?

Yes, but only through their Indian registered entity (subsidiary, branch office, or project office). A foreign company operating as an NRTP can also claim ITC, but only on goods and services used for making taxable outward supplies during the registration period. ITC cannot be claimed on goods or services used for personal consumption, exempt supplies, or non-business purposes.

20. What is the time limit for claiming ITC?

ITC must be claimed in the GSTR-3B return filed by November 30 of the following financial year, or by the date of filing the annual return (GSTR-9) for that year, whichever is earlier. For example, ITC for FY 2025–26 must be claimed by November 30, 2026 or the GSTR-9 filing date for FY 2025–26.

21. Can ITC be claimed on reverse charge GST paid on imported services?

Yes. When an Indian business pays IGST under reverse charge on imported services, that amount is fully creditable as ITC, provided the services are used for making taxable outward supplies. The ITC is claimed in the same GSTR-3B return where the reverse charge liability is discharged.

22. What happens to accumulated ITC that cannot be utilized?

Accumulated ITC can be claimed as a refund under two circumstances: exports (including zero-rated supplies under LUT) and inverted duty structure (where input GST rate exceeds output GST rate). Refund claims must be filed using Form RFD-01 within 2 years from the relevant date. The refund process typically takes 60 days from the date of filing a complete application.

For foreign company subsidiaries that export services (common in IT and BPO operations), accumulated ITC is a frequent issue because their outputs are zero-rated while their inputs (office rent, equipment, professional services) attract 18% GST. The recommended approach is to export under LUT and file quarterly ITC refund claims to avoid excessive working capital blockage. The refund amount is calculated as: (Turnover of zero-rated supply / Total turnover) × Net ITC. Ensure all supplier invoices are reflected in GSTR-2B before filing the refund claim, as mismatches will trigger deficiency memos and delay processing.

Exports and Zero-Rated Supplies

23. Are services exported from India subject to GST?

Services exported from India are zero-rated, not exempt. This is an important distinction: zero-rated supplies allow the exporter to claim ITC refund, while exempt supplies do not. To qualify as an export of services, five conditions must be met: the supplier must be in India, the recipient must be outside India, the place of supply must be outside India, payment must be received in convertible foreign exchange, and the supplier and recipient must not be establishments of the same entity.

24. What is a Letter of Undertaking (LUT) and when does a foreign company's Indian subsidiary need one?

An LUT allows exporters to make zero-rated supplies without paying IGST upfront. Instead of paying IGST and claiming a refund later, the exporter furnishes an LUT (Form GST RFD-11) and exports without any tax payment. This is the preferred option for most foreign company subsidiaries in India that export services, as it avoids blocking working capital. LUT must be renewed annually before the start of each financial year.

25. Can a foreign company provide services to its parent company without GST?

If an Indian subsidiary provides services to its foreign parent company, and all five export conditions are met (including payment in foreign exchange), the supply qualifies as an export and is zero-rated. The subsidiary can export under LUT without paying GST, or pay IGST and claim a refund. However, if the Indian entity and foreign entity are merely different offices of the same legal entity (e.g., a branch office), the supply may not qualify as an export because the fifth condition—supplier and recipient must not be establishments of the same person—is not met.

This is a critical structural consideration when choosing between a branch office and subsidiary in India. A subsidiary is a separate legal entity and can export services to its parent company at zero GST. A branch office is the same legal entity as the foreign company, so services provided to head office are not treated as exports and may attract GST. Many foreign companies that initially set up branch offices later convert to subsidiaries partly to resolve this GST issue.

GST Returns and Filing Requirements

26. What GST returns must a foreign company's Indian entity file?

The filing requirements depend on the registration type and turnover:

27. What returns does an NRTP file?

Non-Resident Taxable Persons file GSTR-5 instead of GSTR-1 and GSTR-3B. GSTR-5 is a consolidated monthly return that captures both outward supplies and inward supplies (for ITC claims). It must be filed within 20 days after the end of the tax period or within 7 days after the expiry of the registration period, whichever is earlier.

28. What happens if GST returns are filed late?

Late filing attracts a late fee of INR 50 per day (INR 25 CGST + INR 25 SGST) for GSTR-3B, and INR 50 per day for GSTR-1, subject to a maximum of INR 10,000 per return. For nil returns (no transactions), the late fee is INR 20 per day. Additionally, interest at 18% per annum is charged on the outstanding tax liability from the due date until the date of payment.

29. Can a foreign company file GST returns directly or does it need a representative?

Foreign companies operating as NRTP must appoint an authorized Indian representative to file returns. Companies operating through an Indian entity (subsidiary, branch) file returns through their Indian entity's authorized signatory. All filings are done electronically through the GST portal (gst.gov.in) using the entity's digital signature certificate (DSC).

Place of Supply Rules

30. How are place of supply rules determined for services involving foreign companies?

Place of supply for cross-border services follows Section 13 of the IGST Act. The general rule is that the place of supply is the location of the recipient. However, specific rules apply for certain categories:

• Services related to immovable property: Place where the property is located
• Performance-based services (events, training): Place where the service is performed
• Transportation services: Place where transportation terminates
• Banking/financial services: Location of the recipient
• Intermediary services: Location of the supplier (this is a critical distinction—if an Indian entity provides intermediary services to a foreign company, the place of supply is India, and the supply is not treated as an export)

31. What is the intermediary services issue and why does it matter for foreign companies?

An intermediary arranges or facilitates a supply between two other parties without being involved in the supply itself. If an Indian subsidiary acts as an intermediary for its foreign parent (e.g., facilitating sales to Indian customers, sourcing suppliers, or arranging logistics), the place of supply is India—meaning the supply is domestic, not an export. This triggers 18% GST with no zero-rating benefit, even if the parent company pays in foreign exchange.

This classification has been the subject of extensive litigation in India. The key test is whether the Indian entity is providing a service on its own account (export-eligible) or merely facilitating a transaction between the foreign parent and a third party (intermediary, not export-eligible). Foreign companies must carefully structure their Indian operations with clear service agreements that define the Indian entity as a principal service provider rather than an agent or broker. Common strategies include having the Indian entity independently contract with customers, maintain its own cost center, and bear business risk—all of which support a non-intermediary classification.

The financial impact of incorrect classification can be severe: if the Indian tax authorities reclassify export services as intermediary services, the subsidiary faces 18% GST liability on the entire revenue, plus interest at 18% per annum from the date the tax was originally due, plus potential penalties of up to 100% of the tax amount.

GST on Specific Transaction Types

32. Is GST applicable on royalty payments from India to a foreign company?

Yes. Royalty payments from an Indian entity to a foreign company for the use of intellectual property constitute an import of services. The Indian entity must pay 18% IGST under reverse charge mechanism. Additionally, withholding tax under Section 195 of the Income Tax Act applies, with rates varying based on the applicable DTAA (typically 10–15% for royalties). The Indian entity must also file Form 15CA/15CB before making the payment.

33. Is GST applicable on management fees charged by a foreign parent to its Indian subsidiary?

Yes. Management fees, cost recharges, and shared service allocations from a foreign parent to an Indian subsidiary are treated as import of services. The Indian subsidiary pays IGST under reverse charge and claims ITC. The key compliance requirement is ensuring the management fee is at arm's length—the transfer pricing documentation must support the amount charged.

34. How does GST apply to secondment of employees from a foreign company to India?

When a foreign company seconds employees to its Indian entity, the question of whether this constitutes a supply of manpower services has been extensively litigated. The current position (following the Supreme Court's ruling in Northern Operating Systems) is that if the seconded employees are on the foreign company's payroll and the Indian entity reimburses the salary cost, IGST applies under reverse charge on the reimbursement amount. However, if the employees are transferred to the Indian entity's payroll, no GST applies on the salary payments.

35. Is GST applicable when a foreign company provides a guarantee for its Indian subsidiary's loans?

Yes. Corporate guarantees provided by a foreign parent to Indian banks for subsidiary loans are treated as a supply of services under GST. The Indian subsidiary must pay IGST under reverse charge on the guarantee commission (or on 1% of the guarantee amount if no explicit commission is charged, as per RBI's transfer pricing guidelines). This was clarified by CBIC Circular 204/16/2023-GST.

For example, if a Swiss parent company provides a corporate guarantee of INR 50 crore for its Indian subsidiary's term loan, and no explicit guarantee fee is charged, the subsidiary must pay IGST on 1% of INR 50 crore = INR 50 lakh × 18% = INR 9 lakh. This amount can be claimed as ITC. Many foreign companies overlook this obligation because no actual payment flows from subsidiary to parent, but the deemed supply provisions under GST create a tax liability regardless of whether consideration is exchanged between related parties.

Penalties and Compliance Risks

36. What are the penalties for non-registration under GST?

A person required to register under GST who fails to do so is liable to a penalty equal to the tax amount due or INR 10,000, whichever is higher. Additionally, the full tax amount plus interest at 18% per annum is recoverable from the date registration was due. For foreign companies, this can create substantial exposure—if a company has been conducting taxable activities in India for several years without GST registration, the cumulative tax, interest, and penalty amounts can be significant.

The enforcement mechanism has teeth: the GST authorities can issue a show cause notice under Section 73 (for cases not involving fraud, with a 3-year limitation period) or Section 74 (for cases involving fraud or willful misstatement, with a 5-year limitation period and penalties of up to 100% of the tax amount). Foreign companies that discover they should have been registered are advised to register voluntarily and settle past dues with interest, as voluntary compliance is treated more favorably than enforcement-driven compliance.

37. What are the penalties for incorrect ITC claims?

If a taxpayer claims ITC incorrectly (excess credit, credit on ineligible items, or credit without actual receipt of goods/services), the following consequences apply:

• Interest: 18% per annum on wrongly availed ITC that has been utilized, under Section 50(3) of the CGST Act read with Rule 88B
• Penalty: Equal to the tax amount involved, subject to a minimum of INR 10,000
• Prosecution: For deliberate fraud exceeding INR 5 crore, imprisonment up to 5 years

38. Can GST penalties be appealed?

Yes. Appeals must be filed using Form APL-01 on the GST portal within 3 months of receiving the penalty order. A pre-deposit of 10% of the disputed tax amount (subject to a maximum of INR 25 crore) is required. First appeal lies to the Appellate Authority, second appeal to the GST Appellate Tribunal (GSTAT), and further appeals to the High Court and Supreme Court on questions of law.

39. What is the penalty for issuing fake invoices or fraudulent ITC?

This is a serious criminal offense under GST law. Penalties include 100% of the tax amount as penalty, imprisonment ranging from 1 year (for tax amount INR 1–2 crore) to 5 years (for tax amount exceeding INR 5 crore), and the offense is cognizable and non-bailable for amounts exceeding INR 5 crore. The Directorate General of GST Intelligence (DGGI) has been aggressively pursuing fake invoice cases since 2020, with special drives targeting shell companies and circular trading networks.

For foreign companies, the risk of inadvertent involvement in fraudulent ITC chains is real. If one of your Indian subsidiary's vendors turns out to be a shell company that issued invoices without actual supply of goods or services, the ITC claimed on those invoices can be reversed with interest and penalties—even if your subsidiary acted in good faith. The mitigation strategy is to conduct vendor due diligence, verify GSTIN validity through the GST portal, ensure goods/services are actually received and documented, and maintain complete payment trails through banking channels.

E-Commerce and Marketplace GST Rules

36A. How does GST apply to foreign companies selling through Indian e-commerce marketplaces?

When a foreign company sells goods through an Indian e-commerce operator (Amazon India, Flipkart, Myntra), the e-commerce operator is required to collect Tax Collected at Source (TCS) at 0.5% (0.25% CGST + 0.25% SGST, or 0.5% IGST for inter-state supplies) on the net value of taxable supplies made through the platform, per the rate reduction effective after the 53rd GST Council meeting. The foreign company's Indian entity must be GST-registered to sell through these platforms—there is no threshold exemption for suppliers on e-commerce platforms.

The e-commerce operator files GSTR-8 (TCS return) and deposits the collected tax with the government. The supplier can claim credit for the TCS deducted while filing their own GSTR-3B. Foreign companies must reconcile their GSTR-2A/2B with the TCS amounts reflected by the e-commerce operator to ensure full credit is captured.

36B. Does a foreign company need GST registration in every Indian state where it has customers?

Not necessarily, but the answer depends on the supply model. If a foreign company's Indian subsidiary supplies services from a single office location, one GST registration in that state suffices—regardless of where customers are located, because inter-state supplies are covered by IGST. However, if the company has physical offices, warehouses, or places of business in multiple states, separate GST registrations are required in each state. Each state registration operates as a separate taxpayer identity with its own GSTIN, GSTR-1, and GSTR-3B filings. Transfers of goods between warehouses in different states are treated as inter-state supplies and attract IGST, though ITC is available to the receiving unit.

36C. What is the GST treatment of free trials and promotional offers by foreign digital platforms?

Free trials of digital services (SaaS, streaming) provided to Indian users do not attract GST as long as no consideration is received. However, if the free trial automatically converts to a paid subscription and the user is charged, GST applies from the date of the first paid transaction. Promotional discounts and coupons that reduce the transaction value are allowed as deductions from the taxable value, provided they are established before or at the time of supply and can be linked to specific invoices. Buy-one-get-one offers and bundled pricing must be carefully structured to avoid anti-profiteering concerns if the net effective rate increases despite the apparent discount.

Practical Compliance Tips for Foreign Companies

40. What is the recommended GST compliance calendar for foreign companies operating in India?

Here is the monthly and annual compliance calendar that every foreign company's Indian entity should follow:

For comprehensive GST compliance support, including registration, return filing, and audit representation, Beacon Filing provides end-to-end services tailored for foreign companies operating in India. Our annual compliance packages ensure you never miss a deadline.

Practical tips that save foreign companies from common GST pitfalls:

• Automate GSTR-2B reconciliation: Every month, reconcile your purchase register with the auto-populated GSTR-2B before filing GSTR-3B. ITC claims that do not match GSTR-2B will be flagged and may be reversed by the tax authorities.
• Maintain a transfer pricing log for intercompany transactions: Every management fee, royalty payment, or service charge from the foreign parent triggers both GST (reverse charge) and income tax (withholding under Section 195) obligations. Document the arm's length nature of each transaction contemporaneously.
• Set up a compliance calendar with automated reminders: Missing even one GSTR-3B filing prevents you from filing GSTR-1 for subsequent periods, creating a cascading compliance failure that compounds late fees and interest.
• Get your LUT renewed proactively: If your LUT lapses and you make zero-rated supplies without it, you must pay IGST on those supplies and claim a refund—blocking working capital for 60-90 days.
• Register for GST before commencing operations: Retrospective registration is not permitted under GST. Any supplies made before obtaining a GSTIN are technically unregistered supplies, attracting penalties even if the tax amount is subsequently paid.
• Track the GSTR-2A vs GSTR-2B distinction: GSTR-2A is a dynamic statement that updates in real-time as suppliers file their returns. GSTR-2B is a static statement generated on the 14th of each month. ITC claims should be based on GSTR-2B, as this is the statement the tax authorities use for verification. Any ITC claimed in excess of what appears in GSTR-2B must be supported by complete documentation during assessments.
• Plan for GST audits: Foreign company subsidiaries with annual turnover exceeding INR 5 crore must file GSTR-9C, a reconciliation statement certified by a chartered accountant. This is essentially a GST audit that reconciles your books of account with your GST returns. Prepare for this throughout the year, not at the last minute—reconciliation gaps discovered late create unnecessary interest and penalty exposure.

Key Takeaways

• Registration is mandatory for any foreign company making taxable supplies in India—NRTPs have no turnover exemption threshold
• GST 2.0 (September 2025) simplified rates to four main slabs: 0%, 5%, 18%, and 40%
• OIDAR providers must register for B2C sales to Indian consumers; B2B transactions are handled under reverse charge by the Indian buyer
• Related-party transactions between foreign parents and Indian subsidiaries trigger GST under reverse charge—even without explicit consideration
• ITC is fully available on reverse charge payments for imported services, making the net cash impact manageable
• Late filing penalties are INR 50/day per return plus 18% interest on outstanding tax—automate your compliance calendar