India GST Guide 2026

India GST at a glance

Do I need to comply? — 60-second check

Four questions. By the end of them, you will know which compliance path applies.

• Indian-resident business? Whether you register depends on your aggregate annual turnover crossing the INR 40 lakh (goods) or INR 20 lakh (services) threshold, plus a handful of mandatory-registration triggers regardless of turnover. Jump to the Local Indian Business track.
• Foreign business selling digital services or SaaS to Indian customers? Foreign SaaS / Digital Services Seller track. India’s OIDAR regime requires registration from your first sale — there is no turnover threshold for non-residents — and Section 14 of the IGST Act requires you to appoint an Indian representative.
• Foreign business shipping physical goods to Indian consumers — e-commerce, marketplaces? Foreign E-commerce Seller track. The GST 2.0 reforms (effective 22 September 2025) materially lowered effective tax burden on most consumer goods, and the TCS regime for e-commerce operators changes how marketplaces handle your sales.
• Foreign business importing goods into India for distribution? Foreign Importer track. IGST applies at customs alongside Basic Customs Duty, and the SEZ / Free Trade Warehousing Zone framework provides specific preferential treatment for qualifying operations.

The big 2026 backdrop every reader should know up front: the September 2025 GST 2.0 reforms compressed India’s previous five-rate slab structure (0%/5%/12%/18%/28% plus cess) into a three-rate structure of 5% / 18% / 40%. Approximately 90% of items previously in the 28% slab moved to 18%; approximately 99% of items previously in the 12% slab moved to 5%. The transition was effective 22 September 2025 and the working-capital implications continued to ripple through finance teams into 2026.

Quick-jump to your persona

• Foreign SaaS / Digital Services Seller into India
• Foreign E-commerce Seller into India
• Foreign Importer / Physical Goods Seller
• Local Indian Business

Foreign SaaS / Digital Services Seller into India

Sell SaaS into India from outside? You’re operating under India’s OIDAR regime — Online Information Database Access and Retrieval — and the compliance posture is different from almost every other major jurisdiction. There is no registration threshold. Your first taxable sale to an Indian customer triggers a registration obligation. You must appoint an Indian representative under Section 14 of the IGST Act. And you file GSTR-5A monthly through the GST Portal. These rules apply to virtually every cloud, SaaS, streaming, app, or digital-content business serving Indian B2C customers.

Are your Indian sales actually in Indian tax territory?

Any service whose delivery is mediated by information technology over the internet — and which would be impossible to provide without that infrastructure — falls under OIDAR. The CBIC’s published examples include streaming on platforms like Netflix or Prime Video, music on Spotify, virtual meetings via Zoom, design tools like Canva, software and e-book downloads, cloud storage like Google Drive or Dropbox, and online learning platforms like Udemy or Coursera. If your product fits this description and the customer is in India, you are within the OIDAR net.

The customer’s location determines the place of supply. Three signals locate a customer in India: a billing address in India, an IP address in India, and an Indian-issued payment instrument. Capture at least two of three for every Indian sale and document them. From 2026, Indian tax authorities are increasingly linking GST compliance to payment and platform data — meaning the indicators you capture are cross-referenced against payment-processor data and platform records at audit.

Take Acme Cloud Ltd., a UK-based SaaS company with USD 1.2M ARR. Acme signs a USD 80,000/year contract with a Bengaluru technology group. The Bengaluru customer’s IP and billing address are Indian. The supply is squarely within OIDAR. Whether the customer is itself GST-registered (B2B) or not (B2C) changes the operational mechanic — but Acme’s underlying obligation to register, charge GST, and file GSTR-5A monthly does not disappear just because the customer is a registered business.

When the OIDAR clock starts running

The OIDAR registration trigger is the first taxable supply to a non-GST-registered Indian recipient (B2C). There is no turnover threshold. Registration is required even for a single transaction. The GST Council and CBIC have been clear about this: India does not extend the resident-business registration threshold (INR 40 lakh / 20 lakh) to non-resident OIDAR providers. Operating without registration accumulates back-tax exposure from the first sale.

For B2B sales to GST-registered Indian customers — what India calls B2B-OIDAR — the mechanic is different from pure-B2C. Under specific provisions of the IGST Act, the Indian registered customer may account for the tax on a reverse-charge basis. The practical implementation is contractual and has evolved since the OIDAR provisions were tightened in 2023; foreign sellers should not assume the B2B carve-out is automatic. Confirm the customer’s GST registration status before invoicing, and document the basis for any reverse-charge treatment applied. TaxDo’s Global Tax Identity engine validates customer Tax IDs across 150+ countries, including India GSTIN validation, and is the cleanest way to gate B2B-OIDAR treatment at the contract level.

Practical clock: from the day you make a first B2C sale into India, register through the GST Portal as a non-resident OIDAR provider within 30 days. The Indian representative appointment under Section 14 IGST Act must be in place before registration completes.

Getting registered with the GST Portal

Registration runs through the GST Portal at gst.gov.in. Four steps for non-resident OIDAR providers:

• Appoint an Indian representative under Section 14 of the IGST Act. The representative must be a person in India authorised to act on the non-resident’s behalf for all GST compliance matters — typically a chartered accountant firm or specialised tax-advisory firm. The representative is responsible for all return filings and assessments and is jointly liable for compliance failures.
• Apply for non-resident OIDAR registration through the GST Portal. Required documents include passport copy of the authorised signatory, business registration document from your home jurisdiction (with apostille or consular attestation depending on country), evidence of the appointed Indian representative, and bank account details.
• Receive your GSTIN. Non-resident OIDAR providers are assigned a special GSTIN format that distinguishes them from resident registrations. The GSTIN goes on every invoice and every GSTR-5A return.
• Configure your billing platform for GST treatment at 18% IGST. The Indian customer’s location triggers IGST (not CGST + SGST split), because the supply originates from outside India and is treated as inter-state.

Common reason for delay: insufficient apostille or attestation on the home-jurisdiction business registration document. The Indian consular requirements vary by country and the document chain often takes 2–4 weeks to assemble. Budget the time.

What you charge, and on what

OIDAR services attract 18% IGST. This is the standard rate for services under India’s GST structure and applies uniformly to all OIDAR supplies, regardless of the underlying service type. The GST 2.0 reforms of September 2025 did not change the 18% standard rate for services; the rate compression at 12% and 28% affected mainly goods.

For exports out of India — for example, if you have an Indian subsidiary selling to non-Indian customers — those supplies are zero-rated under the IGST Act, with input tax credit available. This matters for foreign SaaS sellers who have an Indian subsidiary handling local operations; the zero-rating on the subsidiary’s exports is operationally significant for working-capital management.

Consider BrightLearn Inc., a US-based online-course company selling USD 99/month subscriptions. A Mumbai consumer subscribes. BrightLearn charges USD 99 + 18% IGST = USD 116.82, and is responsible for collecting and remitting the INR equivalent of USD 17.82 (approximately INR 1,480) to GSTN in its monthly GSTR-5A return.

What an OIDAR invoice must say

Foreign OIDAR providers issue invoices in a specific format defined by the CGST Rules. For B2C OIDAR supplies, a full tax invoice is required only for supplies exceeding INR 200; below that threshold a simplified tax invoice or consolidated tax invoice for the day’s supplies is permitted. For B2B OIDAR supplies to GST-registered Indian customers, a full tax invoice is mandatory regardless of value.

Mandatory elements on every OIDAR invoice:

• Your business name and GSTIN (the non-resident OIDAR special-format GSTIN).
• Customer name and (where the customer is registered) GSTIN. For B2C consumers, customer name and address suffice.
• Sequential invoice number and date of issue.
• Description of services supplied.
• Amount in INR (with FX rate source if invoiced in another currency).
• IGST rate (18%), IGST amount, total inclusive of IGST.
• Place of supply (typically the Indian state where the consumer is located — required for IGST allocation between states).

E-invoicing under India’s IRP framework does not apply to non-resident OIDAR providers — the IRP/IRN system is reserved for resident businesses above the INR 5 crore turnover threshold. OIDAR invoices flow through the standard GST Portal as part of the monthly GSTR-5A submission.

Filing and paying GSTN

Foreign OIDAR providers file GSTR-5A monthly. The deadline is the 20th day of the month following the tax period. For January’s supplies, GSTR-5A is due by 20 February. There is no quarterly election for non-residents.

GSTR-5A includes: total outward OIDAR supplies, IGST collected, the breakdown by Indian state (for IGST distribution between Centre and States), and the IGST payable. Payment is made through the GST Portal via authorised Indian banking channels.

Cross-border payments from outside India must reach the GSTN’s designated account by the 20th of the following month. Allow extra business days for international wire transfers; the Indian representative typically handles the operational mechanics.

What this actually costs

Approximate ranges for a non-resident OIDAR provider:

• Indian representative retainer (mandatory): INR 1,50,000–4,00,000 per year (approximately USD 1,800–4,800), depending on the firm and transaction volume. Higher for firms with strong CBIC liaison capability and for OIDAR providers with complex multi-product portfolios.
• Monthly GSTR-5A preparation and filing (if outsourced): INR 15,000–40,000 per return — usually bundled into the representative retainer.
• Initial set-up — registration, document apostille, billing-platform configuration for 18% IGST and place-of-supply state allocation: USD 5,000–15,000 of internal or external implementation work.
• Penalty exposure if you delay registration: see below.

What we see foreign SaaS sellers get wrong

Three patterns in conversations with foreign SaaS founders selling into India.

The first: assuming the resident-business threshold (INR 40 lakh for goods, INR 20 lakh for services) extends to non-resident OIDAR providers. It does not. The OIDAR regime explicitly excludes non-residents from the turnover-threshold benefit. Founders coming from EU compliance experience sometimes assume a threshold exists because most other regimes have one; in India, the first taxable B2C sale triggers registration.

The second: underestimating the Indian representative requirement. Section 14 of the IGST Act makes this mandatory, and the joint-liability framework gives the representative real exposure for filing failures and back-tax accumulation. Picking the cheapest firm available in the market typically results in late filings, missed GSTR-5A deadlines, and increasingly assertive collection action from the representative’s side to indemnify themselves. Treat the representative selection as a structural decision, not a procurement line item.

The third: missing the state-level place-of-supply allocation on GSTR-5A. IGST collected from OIDAR sales is distributed between Centre and States based on the consumer’s state. If your billing platform doesn’t capture the consumer’s state cleanly, the monthly GSTR-5A filing requires manual state-allocation work that is both labour-intensive and error-prone. Configure the place-of-supply capture at the billing layer from day one.

If you get this wrong

Penalty framework under the CGST and IGST Acts:

• Late-filing of GSTR-5A: INR 50 per day (INR 25 CGST + INR 25 SGST) per return, capped at INR 5,000 per Act per return. The cap means the absolute penalty exposure on any single late return is bounded — but if you miss multiple returns in succession the cumulative exposure builds.
• Late-payment interest: 18% per annum on outstanding tax, calculated from the original due date.
• Failure to register where required: penalty of 10% of tax due, with a minimum of INR 10,000. Enhanced to 100% of tax due for deliberate evasion.
• Failure to issue an invoice or to issue a defective invoice: INR 10,000 per offence.

Voluntary disclosure before the GST department identifies the discrepancy materially reduces penalty exposure. India’s voluntary-disclosure framework operates under Section 73 of the CGST Act (for non-fraudulent cases) — penalty exposure reduces to 15% of tax due (or zero in certain limited circumstances) if disclosure happens promptly. The specifics depend on whether the disclosure is pre-notice or post-notice and on the facts.

If you’ve been selling without registering

Three steps, in this order.

First, quantify the exposure. Pull the full record of Indian B2C and B2B sales since the first taxable supply. Apply 18% IGST to the gross. Identify the state-level allocation for each sale. The state-level breakdown matters because GSTR-5A requires it; reconstructing it retrospectively is often the most labour-intensive part of remediation.

Second, appoint an Indian representative and register. Section 14 IGST Act requirement applies even on a backdated basis. Once the representative is in place, file the pending GSTR-5A returns for each affected month, with interest at 18% per annum on the outstanding tax.

Third, engage with the local jurisdictional GST office for any disclosure beyond standard back-filing. Practice in India varies by jurisdictional office, and the representative’s experience with the specific office often determines outcomes. Pre-notice voluntary disclosure under Section 73 unlocks the 15% penalty cap; post-notice disclosure does not.

How TaxDo helps SaaS sellers stay compliant in India

India’s OIDAR regime — no threshold, mandatory Indian representative, monthly GSTR-5A, place-of-supply state allocation — is structurally distinct from compliance in most other markets. Doing this by hand across markets breaks at the third country. TaxDo plugs into your billing or subscription system, applies the correct India IGST treatment at the point of invoice, captures the place-of-supply state allocation automatically, and surfaces your exposure across every market on one dashboard before a tax authority does. Real-time India IGST calculation at checkout with automatic state-allocation, integrated with Stripe Billing, Recurly, Chargebee, and custom billing systems.Continuous exposure tracking across 150+ countries — alerts before you cross a foreign registration trigger.Global Tax Identity engine — validates customer GSTINs across India and Tax IDs across 150+ countries, supporting B2B-OIDAR treatment at the contract level.Native integrations with Salesforce, HubSpot, NetSuite, and the major accounting platforms.

Foreign E-commerce Seller into India

Shipping physical goods to Indian consumers? Amazon.in, Flipkart, Myntra, your own Shopify store, or a marketplace-routed model through a Domestic Indian importer — the compliance picture changed materially with the GST 2.0 reforms of September 2025. Rates on most consumer goods compressed downward: items previously taxed at 28% now sit at 18%; items previously at 12% now sit at 5%. The Tax Collected at Source (TCS) regime for e-commerce operators sits on top of this, and the import-IGST mechanic at customs adds the third layer. The big strategic question for foreign sellers is whether to register an Indian entity for direct sales or to sell through an Indian e-commerce operator who handles the consumer-facing compliance.

Does this apply to your store?

If physical goods you sell arrive at an Indian address, you’re in scope. The treatment then depends on the channel through which the goods reach the consumer and on whether you have a registered Indian entity:

• Direct cross-border shipping (you ship internationally to the Indian consumer): import-IGST is collected at customs alongside Basic Customs Duty (BCD) and any applicable cess. The Indian consumer typically pays this at clearance via the carrier. Your consumer-pricing model needs to account for the landed cost; this is the model that competes most directly with domestic Indian e-commerce, and the GST 2.0 rate compression on consumer goods has tightened the margin gap.
• Indian fulfilment via a Domestic Indian distributor or your own Indian subsidiary: the goods are imported under the Indian entity’s name, full IGST and BCD paid at customs, then domestic GST applies on each onward sale. The Indian entity registers for GST, claims input tax credit on the import IGST, and operates as a normal resident e-commerce seller.
• Marketplace-routed sales via Amazon.in, Flipkart, Meesho, Myntra: the e-commerce operator (ECO) applies a 1% TCS on the net taxable value of supplies. The TCS regime under Section 52 of the CGST Act sits on top of the underlying GST, not in place of it. Sellers operating through an ECO continue to need their own GST registration for the goods sales themselves.

When the registration question kicks in (or doesn’t)

Foreign businesses without an Indian legal entity cannot operate the Indian fulfilment or marketplace-routed paths directly — those require a GST-registered Indian entity. The realistic structural choices are: register an Indian subsidiary or branch, partner with a Domestic Indian distributor who takes title and resells, or limit yourself to direct cross-border shipping where the Indian consumer pays import-IGST at clearance. Each has different working-capital and operational implications.

If you’re routing through an Indian subsidiary, the GST registration thresholds (INR 40 lakh for goods, INR 20 lakh for services) apply to the subsidiary’s aggregate annual turnover. Most foreign-backed e-commerce subsidiaries cross these thresholds quickly, so the practical question is composition scheme versus regular registration — composition is available up to INR 1.5 crore for goods but loses input tax credit, which is rarely the right choice for an import-based business that wants to claim credit on customs IGST.

Getting set up with GSTN

If you’re going the Indian subsidiary route, the registration sequence is: subsidiary incorporation under the Companies Act 2013 → PAN (Permanent Account Number) issuance → GST registration through the GST Portal → IEC (Importer Exporter Code) registration with DGFT for customs operations → bank account configurations. The full sequence typically runs 6–10 weeks; the GST registration itself takes 7–15 working days from a complete application.

For the marketplace-routed sales channel, the marketplace handles their own compliance for the platform-facilitation layer; you still need your own subsidiary GST registration to use the marketplace as a registered seller.

Charging GST on goods, shipping, and returns

Under the post-GST 2.0 framework (effective 22 September 2025), most consumer goods now sit in the 5% or 18% slab. Items previously at 28% — small petrol and diesel cars under specified engine/length limits, ACs, TVs, refrigerators, washing machines, cement — moved to 18%. Items previously at 12% — many packaged consumer goods, basic household items — moved to 5%. The 40% slab is reserved for tobacco, premium cars (large engines, larger vehicles), and aerated beverages.

For your Indian subsidiary as a resident GST-registered business, the applicable rate depends on the HSN (Harmonized System of Nomenclature) code of the goods. Apply the correct rate per HSN; the GST Council and CBIC publish detailed rate-notification documents that map HSN codes to rate slabs.

Returns are treated as credit-note adjustments. Issue a Credit Note in GSTR-1 referencing the original invoice number and date; the credit reduces output GST in the period the credit note is issued.

Take Maple Goods Co., a Canadian DTC brand operating through an Indian subsidiary. Maple imports a consignment of household goods, paying customs IGST at 18% plus BCD at customs. The subsidiary then sells a USD 60 item to a Hyderabad consumer. The invoice is USD 60 + 5% GST (post-GST 2.0 the item now sits at 5%) = USD 63. Maple’s subsidiary collects the GST, files monthly, claims input tax credit on the import IGST and on overhead expenses. Net working-capital impact is modest because the input credit on imports typically more than offsets the output GST on retail sales.

Invoice rules for e-commerce

The standard GST tax invoice format applies. Your Indian subsidiary issues invoices that include GSTIN of supplier and (where applicable) recipient, HSN code per line item, applicable rate, taxable value, GST amount, and total. The invoice flows into your GSTR-1 monthly outward supply return and is reconciled by the buyer in their input tax credit claim.

E-invoicing applies when your subsidiary’s aggregate annual turnover crosses INR 5 crore. Invoices are generated in your accounting system, transmitted to the Invoice Registration Portal (IRP), and receive an Invoice Reference Number (IRN) and QR code before being shared with the buyer. The IRP system has been operational since 2020 and the threshold has been progressively lowered: it started at INR 500 crore, then INR 100 crore, then INR 50 crore, then INR 20 crore, then INR 10 crore, and currently sits at INR 5 crore. Further reductions are expected through 2026 as the GST Council moves toward universal e-invoicing.

E-way bills are required for inter-state and certain intra-state movement of goods where consignment value exceeds INR 50,000. The e-way bill is generated through the e-way bill portal and travels with the goods; tax authorities may stop and verify in transit. For e-commerce shipments, the e-way bill compliance burden typically sits with the fulfilment partner, but the seller remains responsible for the underlying data accuracy.

Filing — and the e-commerce operator TCS question

Your Indian subsidiary files GSTR-1 and GSTR-3B monthly (or quarterly under the QRMP scheme if eligible), plus an annual GSTR-9 reconciliation return. Filing deadlines: GSTR-1 by the 11th of the following month, GSTR-3B by the 20th of the following month.

The e-commerce-specific item is the TCS regime under Section 52 of the CGST Act. An e-commerce operator (Amazon.in, Flipkart, etc.) that facilitates supplies through its platform must collect 1% TCS on the net value of taxable supplies and deposit it to the credit of the supplier. The supplier (your Indian subsidiary) claims this TCS as a credit on their own GSTR-2A/2B reconciliation. The TCS regime is not a substitute for your own GST registration and filing — it’s an additional withholding mechanism that affects your cash flow timing and adds a reconciliation workstream.

The compliance cost stack

Total run-rate for a mid-volume foreign e-commerce seller operating through an Indian subsidiary typically lands in the INR 8,00,000–25,00,000 range per year (approximately USD 9,500–30,000), driven by the volume of monthly filings, the reconciliation work on TCS credits, and the e-invoicing infrastructure cost if you’re above the INR 5 crore threshold. Indian subsidiary establishment is a separate one-time cost (INR 5,00,000–15,00,000), and customs brokerage runs on a per-shipment basis (INR 5,000–25,000 per consignment depending on complexity). The marketplace-routed path bundles many of these compliance costs into platform commissions that typically run 8–20% of GMV.

The patterns that catch e-commerce sellers out

The biggest trap we pull foreign e-commerce sellers out of is mis-estimating the post-GST-2.0 landed-cost competitiveness of direct cross-border shipping. Before September 2025, the 28% slab made many consumer goods materially more expensive when imported via direct cross-border shipping vs. domestic alternatives, which justified the operational cost of running an Indian subsidiary just to bring the rate down. After GST 2.0 compressed most consumer goods to 18% or 5%, the calculation often inverts — direct cross-border shipping becomes competitive on landed price, but the underlying customs IGST is still payable by the consumer at clearance, which affects conversion and customer experience in ways the headline rate doesn’t capture.

Adjacent to that trap, and just as expensive: under-investing in the TCS reconciliation workstream for marketplace-routed sales. The 1% TCS collected by the e-commerce operator should reconcile cleanly against your GSTR-2A/2B — but in practice, mismatches between what the marketplace reported and what the seller’s records show are routine, and the resolution process is slow. For a seller with INR 10 crore of marketplace GMV, even a 5% reconciliation gap is INR 5 lakh of working capital tied up in unrelieved TCS credits.

And the one that’s still wide open: e-invoicing readiness as the threshold continues to fall. The threshold has dropped from INR 500 crore in 2020 to INR 5 crore in 2023, and further reductions are expected through 2026. Sellers operating just under the current threshold often assume they’re safe, then find themselves scrambling for IRP integration when the threshold drops mid-year. Build the IRP readiness now if you’re in the INR 2–5 crore range; the cost of preparing in advance is small compared to the cost of scrambling at the threshold change.

The penalty exposure

Same framework as the SaaS track applies: 18% per annum interest on outstanding tax, INR 50/day late-filing fee (capped at INR 5,000 per Act per return), 10% penalty for short-payment (minimum INR 10,000), 100% penalty for deliberate evasion. Plus customs-specific penalties under the Customs Act 1962 for misdeclaration, undervaluation, or violation of import controls — these can include goods detention, fines exceeding the customs value, and importer blacklisting.

The e-commerce-specific risk worth naming: a customs reassessment that reclassifies your goods into a different HSN code with a higher GST rate triggers retroactive IGST exposure on the import value plus interest plus penalties. The CBIC’s audit programme has been increasingly active on HSN classification post-GST 2.0, because the slab compression created more classification arbitrage opportunities at the margin between 5% and 18%.

If you’ve been selling without proper structure

If you’ve been operating an Indian fulfilment model or marketplace-routed sales without your own Indian GST registration, the remediation path runs through subsidiary establishment and retrospective registration. The local GST jurisdictional office for the subsidiary’s registered address handles the back-filing. India’s voluntary disclosure framework under Section 73 of the CGST Act offers materially reduced penalties for pre-notice disclosure (15% penalty cap) versus post-notice disclosure (full penalties). Engage an Indian tax advisor with experience in your specific jurisdictional office before initiating any disclosure; jurisdictional-office practice varies and the right disclosure strategy depends on local context.

How TaxDo helps e-commerce sellers stay compliant in India Post-GST-2.0 rate slabs across HSN codes, TCS reconciliation against marketplace data, e-invoicing thresholds dropping, customs-IGST interaction, e-way bill chains — solvable individually, but together they swallow finance teams. TaxDo connects to your marketplace, store, and 3PL data, applies the correct India GST treatment per HSN per transaction, tracks your exposure across every destination, and supports periodic filings in around 150 countries through one workflow. Real-time tax calculation at checkout with HSN-correct rates post-GST 2.0 — Amazon.in, Flipkart, Shopify, custom storefronts supported.Automated registration and filing across 150+ countries — no separate filing agent per market.Global Tax Identity engine — validates Indian GSTINs and customer Tax IDs across 150+ countries.Exposure tracking across every destination, including TCS reconciliation against marketplace data.

Foreign Importer / Physical Goods Seller into India

Customs IGST at clearance, Basic Customs Duty layered on top, Social Welfare Surcharge at 10% of BCD, optional Anti-Dumping Duty or Safeguard Duty by HS code, recoverability through the input tax credit mechanism — five lines on every customs entry into India. The structural choices for foreign importers are: full Indian subsidiary (Wholly Foreign-Owned Indian Subsidiary or branch), DDP sale to an Indian distributor who imports under their own name, or operation through a Free Trade Warehousing Zone (FTWZ) for goods held under bond. SEZ status changes the picture again for specific qualifying operations.

Whether you’re the importer of record

Bring goods into the Indian customs territory and Indian Customs assesses Basic Customs Duty, IGST at clearance, applicable cesses (Social Welfare Surcharge, Agriculture Infrastructure and Development Cess where applicable), and any sector-specific anti-dumping or safeguard duty. The combined liability is payable at the time of clearance, before goods are released into the domestic tariff area.

If you also resell those goods inside India under your own name, you need an Indian GST-registered legal entity. If you sell only to an Indian distributor who takes title and imports under their own name (DDP from your perspective), they are the importer of record and your direct Indian compliance footprint is limited.

Registering as importer of record

The Indian subsidiary route requires GST registration and IEC (Importer Exporter Code) registration with the Directorate General of Foreign Trade (DGFT). The two registrations are operationally connected — GST registration includes IEC details in many cases, and IEC issuance now flows through the same GST Portal interface for most applicants. Full registration sequence typically runs 3–6 weeks once the subsidiary entity is incorporated.

GST registration plus customs registration

Three importer-specific registrations on top of standard GST registration:

• IEC (Importer Exporter Code). Required for every commercial import; assigned through DGFT, now integrated into the GST Portal workflow.
• AD Code (Authorized Dealer Code) registration. Required for each port through which you intend to import; processed through your banker.
• Bond registration if you’re operating an FTWZ or warehousing model. The bond holds your import IGST liability in deferment until goods clear into the domestic tariff area.

How import IGST is calculated

Standard rate IGST on the import value depends on the HSN classification of the goods. The post-GST-2.0 framework means most consumer goods import IGST at 5% or 18%; sin/luxury items at 40%; specific export-promotion categories at 0%.

The IGST base is: customs value (CIF) + Basic Customs Duty + Social Welfare Surcharge + any sector-specific duty + Agriculture Infrastructure and Development Cess (where applicable). The IGST is calculated after all customs duties are added, creating a compounding effect.

Run the numbers on a USD 100,000 shipment (CIF) of standard consumer goods at 18% IGST. Assume Basic Customs Duty at 10% (varies by HSN) = USD 10,000. Social Welfare Surcharge at 10% of BCD = USD 1,000. IGST base = USD 111,000. IGST at 18% = USD 19,980. Total at clearance: USD 30,980 (BCD + SWS + IGST). If the Indian subsidiary is a regular GST taxpayer using the goods for taxable supplies, the USD 19,980 IGST is recoverable as input tax credit on the next monthly GSTR-3B return. The BCD and SWS are not recoverable — they’re true cost items that affect landed-cost competitiveness.

Invoicing for re-sold imports (the Indian invoicing chain)

The Tax Invoice field set follows the standard GST format. Three importer-specific notes:

• Reference the Bill of Entry number on the GST invoice for goods you imported and re-sold; this is the chain of documentary evidence Indian Customs and the GST department use for reconciliation.
• For sales to other GST-registered Indian businesses, the customer can claim input tax credit on the GST you charge — so accurate GSTIN capture on both sides matters operationally and is required for the input-credit chain to function.
• Operation through an FTWZ or SEZ requires the documentation chain (Bond Movement Documentation, Bill of Entry for ex-bond clearance, etc.) to substantiate the preferential treatment in audit. Without the chain, the preferential treatment fails and full mainland rates apply retroactively.

Filing — and where importers extract real value

Your Indian subsidiary files GSTR-1 (outward supplies) by the 11th, GSTR-3B (summary including input tax credit claims) by the 20th of the following month, plus annual GSTR-9. The GSTR-3B is where the input tax credit on import IGST is claimed; documentation discipline at the Bill of Entry level is what enables clean credit claims.

The input tax credit reclaim is where importers extract most of their compliance value at the 18% IGST rate. It’s also where most GST audits focus. Reconciliation between the import IGST paid (visible in GSTR-2A/2B from customs data) and the input credit claimed (in GSTR-3B) is the standard audit starting point.

The real cost of compliance for importers

Itemised cost matrix for a mid-sized foreign importer operating through an Indian subsidiary (INR 30 crore–INR 150 crore of annual Indian turnover, approximately USD 3.6M–USD 18M):

Three things importers keep missing

The importer’s exposure checklist — four lines we audit every foreign-importer engagement against:

• ☐  HSN classification correct and defensible. The post-GST-2.0 rate slab compression created classification arbitrage opportunities at the boundary between 5% and 18%, and CBIC audit attention to HSN classification has intensified through 2026. Misclassification triggers retroactive IGST exposure plus interest plus penalty. Maintain HSN classification documentation that withstands a customs valuation officer’s questioning.
• ☐  Input tax credit reconciliation discipline. The credit on import IGST (visible in GSTR-2B from customs data) must reconcile cleanly to your GSTR-3B claim. Mismatches between the two are the standard GST audit starting point. For an importer with INR 50 crore of Indian turnover, missing the overheads input credit recovery on office rent, professional fees, and software typically leaves INR 30 lakh–INR 1 crore on the table per year.
• ☐  Bill of Entry chain documented for every consignment. The Bill of Entry number on outward invoices is the link between customs records and GST records; both authorities use it for audit reconciliation. Missing or mis-keyed Bill of Entry references trigger reconciliation queries that delay refund processing and complicate audit defence.
• ☐  FTWZ / SEZ documentation chain in place where preferential treatment is claimed. The Free Trade Warehousing Zone, the various SEZ locations, and the Bonded Warehousing scheme each have specific documentary requirements. Operating under one without the documentation chain to substantiate the treatment fails in audit; back-IGST plus penalty becomes payable retroactively.

Customs and GST penalties together

The GSTN penalty framework applies as for other personas: 18% per annum interest, INR 50/day late filing (capped), 10% short-payment penalty (minimum INR 10,000), 100% for deliberate evasion. Plus Customs Act 1962 penalties for misdeclaration, undervaluation, or violation of import controls — these can include goods seizure, fines up to five times the customs duty involved, and importer blacklisting under the DGFT framework.

Indian Customs and the GST department share data extensively, especially since the unified Customs ICEGATE-GST Portal integration. A customs reassessment routinely triggers a GST reassessment because the import IGST base depends on customs valuation. Treating customs and GST as separate compliance silos is how importers create their own worst exposure in India.

If you’ve been importing without proper structure

Importer remediation checklist:

• ☐  Engage both a Customs House Agent (CHA) AND a GST consultant before filing any disclosure. Importers facing exposure have two evidence chains to reconcile — customs and GST — and the disclosure must clean across both.
• ☐  Pull the Bill of Entry records first, GST records second. Customs (Indian Customs ICEGATE) is the authoritative source; the GST picture is derivative of it. Reconcile to customs.
• ☐  File voluntary disclosure under Section 73 of the CGST Act (for non-fraudulent cases) before the GST department issues a Show Cause Notice. Pre-notice disclosure caps the penalty at 15% of tax due; post-notice the cap is materially higher.
• ☐  Expect a reconciliation meeting with the jurisdictional GST officer before disclosure is accepted. The reduced-penalty path under Section 73 is real but gated on the disclosure being technically complete and reconciling cleanly across the customs-GST chain.

How TaxDo helps importers stay compliant in India

Import IGST at 18% (or 5% / 40% by HSN), customs-IGST interaction via the unified ICEGATE-GST Portal, recoverability through input tax credit, FTWZ / SEZ documentation, e-invoicing at INR 5 crore — technically solvable, operationally painful at scale. TaxDo integrates with your ERP, ingests customs and logistics data, computes recoverable input tax credit positions, tracks your exposure across all destinations, and supports periodic filings in around 150 countries through one workflow. Native ERP integrations — NetSuite, SAP S/4HANA, Oracle Fusion, Microsoft Dynamics 365.Automated registration and filing in around 150 countries, including the customs-GST-e-invoicing chain.Global Tax Identity engine — validates supplier and customer GSTINs across India and Tax IDs across 150+ countries.Real-time exposure tracking — flags input tax credit recovery and registration gaps before they cost you.

Local Indian Business

If your business is established in India, the question of whether GST applies isn’t really a question — it’s the operational reality of the indirect tax landscape every day. The GST 2.0 reforms of September 2025 reshaped the working-capital picture for many finance teams: rate compression on inputs and outputs both moved, and the net working-capital impact varied sharply by sector. Multi-state operations remain a separate registration per state. E-invoicing has come down to INR 5 crore aggregate turnover and is moving lower. Here’s what 2026 looks like in practice for a local Indian business.

When the threshold kicks in

You’re in scope as a GST-registered business when your aggregate annual turnover crosses INR 40 lakh for goods (most states) or INR 20 lakh for services (most states). Special category states — North-Eastern states, Sikkim, Uttarakhand, Himachal Pradesh — apply lower thresholds: INR 20 lakh for goods, INR 10 lakh for services.

Several activities trigger mandatory registration regardless of turnover: inter-state taxable supplies, supplies through an e-commerce operator (subject to specific rules under Section 24 of the CGST Act), supplies on which reverse charge applies, and certain notified business categories. Pure services delivered intra-state from a single state can qualify for a higher threshold of INR 20 lakh; inter-state services bring the registration obligation immediately.

Acting in time and what backdating means

Within 30 days of becoming liable to register. India’s GST framework is strict on backdating: your effective registration date is the date you became liable, not the date the registration is processed. Operating without registration once liable accumulates tax exposure and penalty exposure from the liability trigger date, not from the date the department catches you.

If you anticipate crossing the threshold imminently, voluntary registration in advance is permitted and often advisable. Voluntary registration triggers the full obligation set — monthly returns, input credit discipline, e-way bills where applicable — but it gives you a clean compliance posture from day one and unlocks input tax credit on pre-revenue expenses.

Registering as a resident Indian business

Through the GST Portal at gst.gov.in. Documents required:

• Permanent Account Number (PAN) of the business and authorised signatories.
• Proof of business constitution — Certificate of Incorporation for companies, partnership deed for partnerships, etc.
• Proof of principal place of business — utility bill, property tax receipt, lease agreement.
• Bank account details with cancelled cheque or bank statement.
• Aadhaar of the authorised signatory (with Aadhaar authentication enabled — this has been the standard path since 2021).

Multi-state operations require a separate GST registration per state. Each state-level registration receives its own GSTIN; inter-state branch transfers within the same legal entity are still treated as supplies under the IGST Act.

What you charge — and the GST 2.0 rate-tier logic

Post-GST 2.0 (effective 22 September 2025): standard rate 18% on most goods and services. Merit rate 5% on essential consumer goods and certain services. Sin / luxury rate 40% on tobacco, premium cars, aerated beverages.

Approximately 90% of items previously in the 28% slab moved to 18%. Approximately 99% of items previously in the 12% slab moved to 5%. Electronics, white goods, and small cars (engine under specified limits, length under 4 metres) moved from 28% to 18%. Most packaged consumer goods, household items, basic toiletries moved from 12% to 5%. The cement industry moved from 28% to 18%.

Zero-rated: exports of goods and services, supplies to SEZs and SEZ developers. Input tax credit is available against zero-rated supplies, which is the structural difference between zero-rated and exempt — zero-rated supplies still permit recovery of input GST.

Invoicing rules and the e-invoicing rollout

The standard tax invoice field set applies: GSTIN of supplier and (where applicable) recipient, HSN code, applicable rate, taxable value, GST amount, total inclusive of GST. Invoice numbering must be sequential within a financial year and consistent across the year.

E-invoicing applies if your aggregate annual turnover is above INR 5 crore (lowered from INR 10 crore in August 2023). Invoices are generated in your accounting system, transmitted to the Invoice Registration Portal (IRP), and receive an Invoice Reference Number (IRN) and QR code before being shared with the buyer. The IRP is operated by GSTN with multiple Authorized Invoice Registration Portal (AIRP) channels available. Further reductions in the e-invoicing threshold are expected through 2026; businesses in the INR 2–5 crore range should plan IRP readiness now.

Filing rhythm for local businesses

GSTR-1 (outward supplies) by the 11th of the following month. GSTR-3B (summary return with tax payment) by the 20th of the following month. GSTR-9 (annual reconciliation) by 31 December following the financial year-end.

Small taxpayers (aggregate turnover up to INR 5 crore) can opt into the Quarterly Return Monthly Payment (QRMP) scheme — quarterly GSTR-1 and GSTR-3B filings, with monthly tax payments via PMT-06 challan. The QRMP scheme reduces the compliance volume but doesn’t change the underlying tax liability.

The internal cost of being VAT-compliant

For most resident Indian businesses, the live cost of GST compliance is people-time and accounting-system investment. A small business under the QRMP scheme can manage GST in-house with an accountant and basic accounting software. A mid-sized business — broadly, INR 10 crore turnover and above — typically spends INR 6,00,000–20,00,000 per year on external GST advisory and compliance support, more for multi-state operations or businesses with complex input credit positions.

Three cost lines are worth singling out because they’re one-off or category-specific:

• E-invoicing IRP integration when you cross INR 5 crore: INR 3,00,000–12,00,000 of one-off integration work depending on accounting platform. Cheaper if you’re on Tally, Zoho Books, or another platform with native IRP integration; more if you’re on a bespoke system.
• Annual GSTR-9 reconciliation: INR 1,00,000–5,00,000 of advisory work depending on complexity. The GSTR-9 ties together the year’s GSTR-1, GSTR-3B, and books of accounts; reconciliation gaps surface here even if monthly filings were clean.
• GST audit / departmental scrutiny support, if selected: INR 2,00,000–10,00,000 of professional fees for support. Departmental scrutiny under Section 61 of the CGST Act and full audits under Section 65 are both routine processes; the right preparation reduces both the cost and the risk.

The traps for local Indian businesses

Where do most local Indian finance teams trip up first in 2026?

Misjudging the working-capital impact of the GST 2.0 transition. The rate compression that moved consumer goods from 28% to 18% and from 12% to 5% affected both input and output rates. Businesses that supply into the consumer-goods value chain saw their output GST drop, but their input GST often didn’t drop in the same proportion because input categories moved differently. The net result for some sectors was a working-capital squeeze that wasn’t anticipated in the pre-transition models. Re-run the working-capital model with the post-September-2025 rates on both sides; the answer may differ from the headline narrative of “GST 2.0 simplified everything.”

What’s next?

Underestimating the e-invoicing threshold trajectory. INR 5 crore is the current aggregate-turnover threshold, but every step downward since 2020 has caught a wave of businesses without IRP integration in place. The threshold has moved from INR 500 crore (2020) → INR 100 crore → INR 50 crore → INR 20 crore → INR 10 crore → INR 5 crore (current). Further reductions are expected. If your aggregate turnover is in the INR 2–5 crore range, the IRP readiness work should start now — not when the threshold drops mid-year and you’re scrambling.

And the third?

Treating multi-state operations as a single compliance posture. Each state-level GSTIN is a separate compliance entity with separate GSTR-1, GSTR-3B, and GSTR-9 returns. Inter-state branch transfers within the same legal entity remain taxable supplies under the IGST Act and require careful documentation. Businesses operating in three or four states routinely under-staff the multi-state compliance workstream and end up with reconciliation gaps that surface in the annual GSTR-9 process.

Penalty exposure for residents

The framework applies as for other personas: 18% per annum interest on outstanding tax, INR 50/day late filing fee (capped at INR 5,000 per Act per return), 10% short-payment penalty (minimum INR 10,000), 100% penalty for tax evasion. Two resident-specific items worth flagging:

• Failure to obtain registration when required: INR 10,000 or 10% of tax due, whichever is higher (Section 122 CGST Act).
• Issuing an invoice without supply or supply without invoice: 100% of tax due, with potential prosecution under Section 132 of the CGST Act for amounts exceeding specified thresholds (INR 5 crore for cognisable offences).

Catching up after a misclassification

The remediation path for most local Indian businesses runs through Section 73 of the CGST Act (for non-fraudulent cases). A common pattern: an external review at year-end picks up the misclassification — HSN code wrong, an exempt supply treated as taxable or vice versa, input tax credit claimed against an exempt supply, an e-invoice missed for a transaction above the threshold. The standard fix is voluntary disclosure to the jurisdictional GST officer, payment of tax with interest, and where applicable an amended GSTR-1 / GSTR-3B filing. Pre-notice disclosure caps the penalty at 15% of tax due; post-notice (after a Show Cause Notice has been issued) the cap is materially higher. Engage a Chartered Accountant or Advocate with experience in the specific local jurisdictional office before initiating the disclosure; local-office practice varies and the right approach depends on context.

How TaxDo helps Indian businesses stay compliant Local GST compliance — customer GSTIN verification for input tax credit, multi-state registration discipline, e-invoicing readiness as the threshold falls, monthly GSTR-1/GSTR-3B and annual GSTR-9 cycles, TCS reconciliation for marketplace sales — is moving from paper to platform fast, particularly post the GST 2.0 reforms. TaxDo connects to your accounting platform, automates your periodic filing workflow, and validates customer GSTINs and Tax IDs across India and 150+ countries through the Global Tax Identity engine — so your team can spend time on the things software cannot do. Native integration with Tally, Zoho Books, Xero, QuickBooks, Sage, and major accounting platforms used in India.Global Tax Identity engine — validate the GSTINs and Tax IDs of every B2B customer and supplier across India and 150+ countries before invoicing.Automated filing workflow — your monthly GSTR-1, GSTR-3B, and annual GSTR-9 returns prepared from your accounting data, ready for review and submission.

Cross-track essentials

Invoicing requirements

The standard GST tax invoice format under the CGST Rules applies across all registered taxpayers. Mandatory elements:

• “Tax Invoice” as the document title.
• Supplier name, address, and GSTIN.
• Customer name and, where the customer is GST-registered, GSTIN.
• Sequential invoice number (within the financial year) and date of issue.
• HSN code for goods or SAC code for services.
• Description, quantity, unit, taxable value per line item.
• Applicable GST rate (per the post-GST-2.0 5%/18%/40% structure plus zero-rated/exempt categories).
• GST amount split appropriately (CGST + SGST for intra-state; IGST for inter-state).
• Total inclusive of GST.
• Place of supply (state name and code) — required for IGST allocation.
• For supplies through an e-commerce operator, reference to the ECO’s GSTIN where applicable.

E-invoicing under the IRP framework

Mandatory for businesses with aggregate annual turnover above INR 5 crore. Each invoice is generated in the seller’s accounting system, transmitted to the Invoice Registration Portal (IRP) operated by GSTN, validated, and returned with an Invoice Reference Number (IRN) and QR code before being shared with the buyer. The IRN appears on the printed/PDF invoice; the QR code is mandatory.

Practical preparation starts with counterparty data quality: invoices flowing through the IRP must reference valid GSTINs for B2B counterparties. Invoices with malformed or stale GSTINs are rejected at the IRP layer. TaxDo’s Global Tax Identity engine validates customer GSTINs across India alongside Tax IDs across 150+ countries, which is the cleanest first step toward IRP operational readiness regardless of the specific accounting platform you use.

Audit and record-keeping

Records must be retained for a minimum of 6 years from the due date of the annual return for the relevant financial year (i.e., effectively 7 years from the close of the financial year). Records must reconcile across tax invoices, credit/debit notes, supplier invoices, Bills of Entry for imports, bank statements, contracts, and accounting ledgers. Departmental scrutiny under Section 61 and full audits under Section 65 of the CGST Act are routine; sector-specific audit campaigns have been increasingly common post-GST-2.0.

Penalties summary

Voluntary disclosure before the GST department issues a Show Cause Notice — under Section 73 of the CGST Act (non-fraudulent cases) — caps the penalty at 15% of tax due. Section 74 (fraud cases) has materially higher penalty exposure regardless of disclosure timing.

Recent and upcoming changes

Already in effect

• GST 2.0 reforms — effective 22 September 2025 — 56th GST Council meeting recommendations. New rate structure: 5%, 18%, 40% (replacing the earlier 0%/5%/12%/18%/28% + cess). ~90% of 28% slab items moved to 18%; ~99% of 12% slab items moved to 5%.
• E-invoicing threshold lowered to INR 5 crore aggregate annual turnover (from INR 10 crore) — effective August 2023.
• OIDAR enforcement intensification — from 2026, Indian tax authorities are increasing the use of data analytics and linking GST compliance more closely with payment and platform data for foreign digital service providers.
• Aadhaar-based authentication standard for new GST registrations — operational since 2021.

Coming up

• Further reductions in the e-invoicing threshold expected through 2026 as the GST Council moves toward universal e-invoicing coverage.
• Continued GST 2.0 rate-rationalisation work — the Council has signalled intent to further harmonise rates within the simplified 5%/18%/40% structure.
• Enhanced data-sharing between Indian Customs (ICEGATE) and GSTN — already operational, with deeper integration expected.

Primary sources cited in this guide

• Goods and Services Tax Network (GSTN)
• Central Board of Indirect Taxes and Customs (CBIC)
• GST Council — recommendations, notifications, FAQs
• Press Information Bureau — GST Reforms 2025 official communication
• Directorate General of Foreign Trade (DGFT) — IEC registration
• Indian Customs ICEGATE
• Ministry of Finance, Department of Revenue
• ClearTax — GST 2.0 reforms summary
• India Briefing — OIDAR compliance for foreign digital service providers

Disclaimer

This guide is provided for general informational purposes by the TaxDo Tax & Regulatory Advisory Team. While our team thoroughly reviews and updates this content for accuracy before publishing, tax regulations change rapidly and local practices vary. This article does not constitute formal legal, tax, or accounting advice and should not be relied upon for specific compliance decisions. Always consult a qualified, licensed tax professional before taking action. TaxDo accepts no liability for actions taken based on this content.