SaaS Company GST Billing: Place of Supply and Export Rules 2026
GST compliance for a SaaS company in India is not straightforward. The moment you start selling software subscriptions online, whether to Indian businesses, Indian consumers, or overseas clients, you step into the world of OIDAR (Online Information Database Access and Retrieval) services, and the rules here differ significantly from standard goods or services taxation. The place of supply determines whether you charge IGST, CGST/SGST, or nothing at all. Export classification determines whether you get a full refund of input taxes. And a zero GST registration threshold means even a day-one startup selling to overseas users needs to be registered.
This guide covers the complete GST framework for SaaS companies operating in India in 2026: OIDAR classification, place of supply rules for B2B and B2C, export of services conditions, zero-rated supply benefits, LUT filing, reverse charge on imported SaaS, and the compliance obligations that come with running a subscription software business at scale.
- SaaS = OIDAR: Most software-as-a-service products qualify as OIDAR under Section 2(17) of the IGST Act, 2017, triggering special place of supply and registration rules
- GST rate: 18% on all domestic SaaS sales (Heading 9983, Notification 11/2017-CT(Rate))
- B2B place of supply: Recipient's registered address (Section 12(2)(b), IGST Act)
- Export of services: Zero-rated under Section 16(1), IGST Act, when all 5 conditions under Section 2(6) are met
- Zero threshold for OIDAR: Compulsory registration regardless of turnover under Section 24(xi), CGST Act
- LUT filing: Mandatory to export without paying IGST; filed under Rule 96A, CGST Rules, renewed every financial year
- RCM on imports: Indian businesses importing overseas SaaS must self-assess and pay 18% IGST under Notification 10/2017-IGST(Rate)
- ITC refund: Exporters can reclaim all accumulated ITC on inputs via Form GST RFD-01 under Section 54(3), CGST Act
Governing laws and references for SaaS GST compliance:
- Integrated Goods and Services Tax Act, 2017 (IGST Act) - Sections 2(6), 2(17), 5(3), 8, 13, 14, 16
- Central Goods and Services Tax Act, 2017 (CGST Act) - Sections 22, 24(xi), 34, 50, 52, 54, 122
- CGST Rules, 2017 - Rule 96A (LUT), Rule 89 (Refund)
- Notification 10/2017-IGST(Rate) dated 28 June 2017 (RCM list)
- Notification 11/2017-CT(Rate) dated 28 June 2017 (SAC 9983, 18% rate)
- GSTN portal: gst.gov.in
What Are OIDAR Services and Why SaaS Falls Under This Category
The GST law does not use the phrase "SaaS" explicitly. It uses the term OIDAR (Online Information Database Access and Retrieval) services, defined in Section 2(17) of the IGST Act, 2017. OIDAR services are defined as services delivered over the internet or an electronic network that are essentially automated and involve minimal human intervention, making them impossible to ensure in the absence of information technology.
The IGST Act's definition covers a broad list of digital services, and most modern SaaS products fall squarely within it:
- Cloud software access (web-based CRM, project management tools, accounting software, HR platforms)
- Online database subscriptions (legal databases, financial data services, business intelligence tools)
- E-books, music, video, and gaming delivered digitally
- Web hosting and cloud infrastructure services
- Digital advertising services delivered programmatically
- Online education platforms with automated content delivery
The critical element is automation: the service must be delivered without meaningful human involvement in each transaction. A SaaS company where users sign up, pay, and access the product entirely through an automated system is OIDAR. A company where each implementation requires significant professional services is not purely OIDAR (though OIDAR elements may exist within a larger engagement).
Why does OIDAR classification matter for GST? Because it triggers three special rules that do not apply to most other services: (1) a zero GST registration threshold for overseas suppliers under Section 24(xi) of the CGST Act; (2) specific place of supply rules under Sections 12(11) and 13(12) of the IGST Act; and (3) the reverse charge mechanism for cross-border supply to non-taxable recipients under Section 14 of the IGST Act.
GST Registration Threshold for SaaS Companies: Why Zero Applies
For most Indian businesses, GST registration is required only after crossing the ₹20 lakh turnover threshold (₹10 lakh for specified special category states) under Section 22 of the CGST Act. SaaS companies are different.
Under Section 24(xi) of the CGST Act, 2017, any person who supplies OIDAR services from a place outside India to non-taxable online recipients (NTORs) in India must register compulsorily, regardless of turnover. An NTOR is any person who is either not registered for GST or is registered but receiving the OIDAR service for personal use (not for business).
For Indian SaaS companies, the practical implication is as follows:
- If you are an Indian company selling SaaS to Indian B2B customers (registered businesses), you follow the standard ₹20 lakh threshold before registration is required
- If you are an Indian company selling SaaS to consumers or small unregistered businesses in India (NTOR supply), the same ₹20 lakh threshold applies because the Section 24(xi) mandatory registration rule is specifically aimed at foreign OIDAR suppliers
- If you are a foreign SaaS company selling to Indian users (registered or unregistered), you must register from the first rupee earned, with no threshold exemption
In practice, virtually every funded SaaS startup in India crosses ₹20 lakh quickly. More importantly, if your SaaS product is targeting both domestic and international markets, you should register on day one to enable proper export compliance and LUT filing from the start. Delayed registration creates gaps in ITC claims that cannot be retrospectively recovered.
Place of Supply Rules for SaaS: B2B vs B2C Explained
Place of supply is the most operationally important GST concept for SaaS companies. It determines which type of GST (IGST, CGST, SGST) applies to each invoice and, for exports, whether the supply qualifies as zero-rated. The rules differ based on whether your customer is a registered GST entity (B2B) or an unregistered individual or business (B2C).
B2B Transactions: Place of Supply Is the Recipient's Location
When you sell a SaaS subscription to a company or individual who provides their GSTIN, the place of supply is determined by Section 12(2)(b) of the IGST Act, 2017. The rule is: the place of supply is the registered address of the recipient as per their GST registration. This applies to all services supplied to a registered person, not just OIDAR.
What this means for invoicing:
- Customer in the same state as your registration: charge CGST 9% + SGST 9%
- Customer in a different state: charge IGST 18%
- Customer outside India with GSTIN (unlikely, but SEZ units with GSTIN): charge IGST 0% under zero-rated supply rules
B2C Transactions Within India: Supplier's State Governs
For B2C sales to unregistered individuals within India, OIDAR services follow a specific rule. Under Section 12(11) of the IGST Act, 2017, when an OIDAR service is supplied to a non-taxable online recipient (NTOR), the place of supply is the location of the supplier. This simplifies billing: you apply the taxes of your own state regardless of where the customer is located in India.
However, for B2C sales where the customer's address is known (and documented), some GSTN interpretations apply the customer's address. The safest approach, confirmed by CBIC circulars, is to collect and record the customer's address and apply supplier-state taxes when the address cannot be verified as belonging to a registered entity.
International Sales: Place of Supply Is Outside India
When your SaaS customer is outside India, Section 13(12) of the IGST Act confirms that for OIDAR services, the place of supply is the location of the recipient. Since the recipient is outside India, the place of supply is outside India. This is the foundation for treating the sale as an export of services.
| Customer Type | Location | Governing Section | Place of Supply | GST Applied |
|---|---|---|---|---|
| B2B (GST-registered) | Same state as supplier | Section 12(2)(b) | Recipient's registered address | CGST 9% + SGST 9% |
| B2B (GST-registered) | Different state | Section 12(2)(b) | Recipient's registered address | IGST 18% |
| B2C (unregistered individual/business) | Anywhere in India | Section 12(11) | Supplier's location (OIDAR rule) | IGST 18% or CGST + SGST 18% |
| Overseas client (B2B or B2C) | Outside India | Section 13(12) | Recipient's location (outside India) | Zero-rated (export of services) |
| SEZ unit (with SEZ authorisation) | Within India | Section 16(1)(b) | SEZ is treated as outside India | Zero-rated (supply to SEZ) |
Export of Services: The Five Conditions Every SaaS Company Must Know
Selling to overseas clients does not automatically make your supply an "export of services" under GST. Section 2(6) of the IGST Act, 2017 sets out five cumulative conditions. All five must be satisfied for the supply to qualify.
- The supplier of service is located in India: Your SaaS company must be incorporated and operating in India (which it is, if you are a registered entity).
- The recipient of service is located outside India: The client must be physically or legally located in a country other than India. An overseas subsidiary of an Indian company still satisfies this if it is an independent legal entity.
- The place of supply of the service is outside India: Under Section 13(12), the place of supply for OIDAR services is the location of the recipient, which is outside India.
- Payment for such service has been received by the supplier in convertible foreign exchange or in Indian Rupees wherever permitted by the Reserve Bank of India: Payment must arrive through a valid banking channel as foreign currency (USD, EUR, GBP, etc.) converted to INR via SWIFT/wire transfer, or as INR where RBI permits. Payments through payment gateways (Stripe, Razorpay international) qualify if the funds are remitted as foreign exchange with a corresponding FIRC (Foreign Inward Remittance Certificate) or eBRC (Electronic Bank Realisation Certificate).
- The supplier of service and the recipient of service are not merely establishments of a distinct person: Under Explanation 1 to Section 8 of the IGST Act, a company and its overseas branch (not subsidiary) are treated as distinct persons. If you supply SaaS to your own overseas branch, it is not an export of services; it is a taxable inter-state supply. To avoid this, the overseas entity must be a legally independent subsidiary (incorporated separately with its own directors and shareholders), not merely a branch or liaison office of the Indian company.
Zero-Rated Supply: What It Means and How to Claim the Benefit
A zero-rated supply under Section 16(1) of the IGST Act, 2017 is a supply that is taxable at 0%, but unlike a genuine nil-rated supply, the supplier can still claim full Input Tax Credit (ITC) on inputs used to produce the zero-rated supply and obtain a cash refund of that ITC.
Under Section 16(1), zero-rated supplies include:
- Section 16(1)(a): Export of goods or services (SaaS exported to overseas clients falls here)
- Section 16(1)(b): Supply of goods or services to a Special Economic Zone (SEZ) unit or SEZ developer
For a SaaS company, zero-rated status is enormously valuable. Cloud infrastructure costs (AWS, Azure, GCP), internet bandwidth, office space, employee compensation (not directly GST-eligible but related overhead), and software tool subscriptions all generate GST credits. If 100% of your revenue is from exports, all these input credits accumulate and can be refunded in cash.
Two Options for Zero-Rated Supply
A registered SaaS exporter has two options under Section 16(3) of the IGST Act:
- Option A (Preferred for cash flow): Export under LUT without paying IGST - The supplier files an LUT for the financial year, exports all services without charging IGST, and claims a refund of accumulated ITC on inputs. The refund is filed in Form GST RFD-01.
- Option B: Pay IGST and claim refund - The supplier charges 18% IGST on export invoices (the overseas client pays it), the IGST is deposited in the GST treasury, and the supplier later claims a refund of the IGST paid. This option ties up working capital and is generally used only by companies that forget to file their LUT on time.
Filing the Letter of Undertaking (LUT): A Complete Guide
The LUT is the single most important compliance document for a SaaS exporter. Without a valid LUT for the financial year, you must either charge IGST on every export invoice (and claim it back later) or risk being treated as a non-exporting supplier. Here is the complete process under Rule 96A of the CGST Rules, 2017.
Who Can File an LUT?
Any registered taxable person who wants to export goods or services without payment of IGST can file an LUT, subject to one negative condition: the person must not have been prosecuted for any offence under the CGST Act, IGST Act, or any earlier tax law where the tax evaded exceeds ₹2.5 crore. A first-time startup with no compliance history is eligible.
How to File the LUT Online
- Log in to the GST portal at gst.gov.in with your GSTIN credentials
- Navigate to Services > User Services > Furnish Letter of Undertaking (LUT)
- Select the financial year for which the LUT is being filed
- Fill in the details: entity name, GSTIN, authorised signatory details, and type of export (goods/services/both)
- Upload the required document: Copy of previous year's LUT (if any) and the authorised signatory's identity proof
- Submit the form after providing a digital signature or EVC (Electronic Verification Code)
- The LUT is deemed accepted immediately on submission. The portal generates an ARN (Application Reference Number) as confirmation
Key Conditions in the LUT
By filing the LUT, the exporter undertakes to:
- Realise export proceeds within one year of the date of invoice for services (or the due date for goods)
- Pay the applicable IGST with interest (18% per annum under Section 50 of the CGST Act) if proceeds are not realised in time
- Renew the LUT before the beginning of each financial year (i.e., before 1 April)
Reverse Charge Mechanism on Imported SaaS
Indian businesses that subscribe to overseas SaaS platforms (examples: Salesforce, HubSpot, Slack, GitHub, Figma, AWS, Google Workspace paid from an Indian entity) are technically importing OIDAR services. GST law requires these businesses to pay tax on these imports through the Reverse Charge Mechanism (RCM).
The Legal Basis
The RCM obligation for imported OIDAR services flows from two provisions:
- Section 5(3) of the IGST Act, 2017: The central government can specify categories of supplies where the recipient (not the supplier) is liable to pay tax
- Notification 10/2017-IGST(Rate) dated 28 June 2017: OIDAR services imported by any person from a person located outside India are explicitly listed as a category where the recipient in India is the person liable to pay IGST
How RCM Works for the Indian Buyer
| Step | Action Required | Form / Portal |
|---|---|---|
| 1. Identify the import | Confirm the overseas SaaS service qualifies as OIDAR under Section 2(17) | Invoice review |
| 2. Calculate IGST | Apply 18% IGST on the invoice value (Notification 11/2017-CT(Rate), SAC 9983) | Internal calculation |
| 3. Pay IGST | Deposit IGST through GSTR-3B under RCM heading | GSTR-3B, Table 3.1(d) |
| 4. Claim ITC | If the service is used for taxable business output, the same IGST paid under RCM is claimable as ITC in GSTR-3B | GSTR-3B, Table 4(A)(3) |
| 5. Report in GSTR-1 | RCM supplies are also reportable in GSTR-1 if the registered entity is the recipient | GSTR-1, Table 4B |
For most GST-registered Indian businesses, RCM on imported SaaS is net zero in cash terms: you pay IGST and immediately claim the same amount back as ITC (assuming the SaaS is used for taxable business activities). The cash impact is only timing-based. For exempt-supply businesses (hospitals, educational institutions) or composition dealers, there is no ITC claim, making RCM a real cash cost.
GST Refund Process for SaaS Exporters
A SaaS company exporting under LUT accumulates ITC on all its inputs but collects zero output GST. This creates a refundable ITC balance that must be claimed through the formal refund process under Section 54 of the CGST Act, 2017 and the accompanying Rule 89 of the CGST Rules, 2017.
Refund Application: Form GST RFD-01
The refund application for export of services under LUT is filed in Form GST RFD-01 at gst.gov.in. The refund is classified as "Refund of ITC on account of export of services without payment of tax".
Documents Required for Refund
- Statement of invoices covered in the refund period
- Bank Realisation Certificate (BRC/eBRC) or FIRC confirming foreign exchange receipt
- LUT ARN confirming the LUT was filed before the relevant export invoices
- GSTR-3B and GSTR-1 filed returns for the refund period
- Declaration confirming no unjust enrichment (the ITC not passed on to the recipient)
Refund Timeline
Under Section 54(7) of the CGST Act, 2017, the GST officer must make an order sanctioning or rejecting the refund within 60 days of receiving a complete application. If the refund is not processed within 60 days, interest at 6% per annum under Section 56 of the CGST Act accrues in favour of the applicant. In practice, export service refunds often take 45 to 90 days for initial sanction and another 15 to 30 days for the amount to credit into the bank account.
Annual GST Compliance Checklist for SaaS Companies
Running a SaaS business means monthly and annual GST compliance tasks. Missing any of these creates penalties, interest, and audit exposure. The following is the complete compliance calendar for a SaaS company in India for FY 2026-27.
| Return / Action | Frequency | Due Date | Key Requirement |
|---|---|---|---|
| GSTR-1 | Monthly (if turnover above ₹5 crore) | 11th of following month | All outward supply invoices including export invoices (Table 6A/6B) |
| GSTR-1 (IFF) | Quarterly (QRMP scheme, if turnover below ₹5 crore) | 13th of month 1 and 2; 13th of month 3 | Invoice furnishing for B2B invoices only; full GSTR-1 quarterly |
| GSTR-3B | Monthly | 20th of following month | Summary return with output tax, ITC, RCM liability, and export data |
| LUT Renewal | Annual | Before 1 April (start of new FY) | File under Rule 96A at gst.gov.in for each financial year |
| Form GST RFD-01 | As applicable (monthly or quarterly) | Within 2 years of export date | ITC refund on zero-rated exports; attach eBRC/FIRC for each period |
| GSTR-9 | Annual | 31 December (for FY 2026-27) | Annual return reconciling all monthly GSTR-1 and GSTR-3B data |
| GSTR-9C | Annual (if turnover exceeds ₹5 crore) | 31 December (for FY 2026-27) | Reconciliation statement certified by a qualified professional |
| ITC Reconciliation (GSTR-2B) | Monthly | 14th of following month (auto-generated) | Match purchase invoices against GSTR-2B; resolve mismatches before filing GSTR-3B |
Common GST Mistakes SaaS Companies Make and How to Avoid Them
GST audits on technology companies are increasing. GSTN's analytics identify SaaS companies with large ITC accumulations and zero domestic output tax as potential high-risk for erroneous export classification. These are the five most common errors seen in practice.
1. Treating All International Revenue as Export Without Verifying the Five Conditions
Not every payment received in USD is an export of services. If the overseas entity is your own branch (not a subsidiary), or if the payment comes through an Indian account of an overseas entity, the fifth condition under Section 2(6) may not be met. Verify each client relationship against the five conditions and document the analysis.
2. Forgetting to Renew the LUT Before 1 April
LUTs are financial-year specific. Raising export invoices in April without a valid LUT for the new financial year means those invoices are technically liable for IGST. Many SaaS companies discover this only during the refund process. Set a calendar reminder for the LUT renewal in March every year.
3. Not Filing Form GST RFD-01 or Filing It Late
ITC accumulation is only valuable if you actually claim the refund. The two-year limitation period under Section 54(1) of the CGST Act is real: ITC older than two years cannot be refunded. Companies that defer refund claims until year-end often find large portions of ITC have lapsed.
4. Ignoring RCM on Imported SaaS Tools
Most Indian tech companies use overseas SaaS tools (GitHub, Notion, Figma, Slack, AWS, Google Workspace). Each of these is an OIDAR import subject to RCM at 18%. Not reporting and paying RCM on these imports is a compliance gap that shows up clearly in GSTN's automated reconciliation. The good news: for registered businesses, the ITC offset makes the cash cost zero. There is no reason to avoid the RCM compliance.
5. FIRA/eBRC Gaps in the Refund File
The GST refund for export of services requires proof of foreign exchange realisation (eBRC or FIRC). If a payment gateway (Stripe, PayPal) remits funds in INR to your bank without generating an eBRC, the refund officer may reject the claim. Always ensure your bank issues eBRCs for all inward foreign currency receipts, even for amounts settled through payment gateways. The RBI's EDPMS (Export Data Processing and Monitoring System) tracks these.
SaaS companies building for global markets often assume GST is irrelevant once they start exporting. The opposite is true: a well-structured GST compliance posture (LUT filed on day one, monthly RFD-01 claims, eBRC tracking) turns the GST system into a working capital benefit. Every rupee of GST paid on cloud infrastructure, developer tools, and office expenses comes back as a refund, effectively reducing your effective operating cost by 18% on those inputs.
Compliance teams at Indian SaaS companies commonly recover ₹5 lakh to ₹50 lakh annually in ITC refunds once the process is set up correctly.
IncorpX provides assistance for GST registration with GSTN, LUT filing under Rule 96A, and periodic GST return compliance for technology and SaaS companies. If your SaaS company is scaling and you need support setting up the export GST compliance framework, our team can help you get it right from the start.
For companies that are not yet incorporated, starting as a Private Limited Company provides the legal structure needed for export contracts, FIRC generation, and bank account management required for the GST export refund process.
Special Scenarios: SEZ Clients, Related-Party Supply, and Freelancers
Supplying SaaS to an SEZ Unit
A supply of SaaS to an SEZ unit or SEZ developer within India is treated as a zero-rated supply under Section 16(1)(b) of the IGST Act, 2017, equivalent in treatment to an export. The SEZ unit must provide a Letter of Authorisation from the Development Commissioner confirming its SEZ status. The SaaS supplier can supply under LUT (no IGST) and claim ITC refund, or pay IGST and claim it back. The SEZ unit itself cannot claim the IGST paid to the SaaS supplier as ITC, making the LUT route preferable for both parties.
Freelancers Providing Software Services to Overseas Clients
Individual freelancers (registered as sole proprietors for GST) providing software development, UI/UX design, or digital marketing services to overseas clients must also satisfy the five export conditions. The key issue for freelancers is the registration threshold: if annual receipts from overseas clients exceed ₹20 lakh (₹10 lakh in some states), GST registration is mandatory. Once registered, freelancers can file an LUT and export without IGST. Below the threshold, freelancers are not liable for GST on exports and need not register.
SaaS Companies with Mixed Revenue (Domestic + Export)
If your SaaS company has both domestic subscribers (paying INR) and overseas subscribers (paying foreign currency), you must apportion ITC between zero-rated exports and taxable domestic supplies. Under Rule 89(4) of the CGST Rules, 2017, the refundable ITC for exports is calculated as: Adjusted ITC x (Turnover of zero-rated supplies / Aggregate turnover). The balance ITC applies against domestic output tax. A clean invoice-level classification system is essential to make this calculation accurate.
Nebin Binoy 
