You are GST-registered, and your monthly costs include a design subscription billed in dollars, ad spend on a foreign platform and, now and then, a contractor abroad. Your CA asks whether any of it carries "reverse charge", and you realise you have never looked at who actually issues those invoices. Some of them show 18 percent GST with a GSTIN. Others show no Indian tax at all. The two cases are handled very differently.
If a foreign supplier sells you a service and does not charge Indian GST, a GST-registered freelancer pays the IGST themselves under reverse charge, reports it in GSTR-3B and can usually claim it back as input credit if the service is used for business. If an Indian entity of the vendor invoices you with GST, there is nothing to reverse. This post shows how to read your invoices, what the law says, and where to report the tax.
Reverse charge makes the buyer pay when the seller is abroad
Under Section 5(3) of the IGST Act, the government can notify supplies on which the recipient pays the tax. Notification 10/2017-Integrated Tax (Rate) lists, as its first entry, any service supplied by a person in a non-taxable territory to any person other than a non-taxable online recipient. Imported services are treated as inter-State supplies, so the tax is IGST. The notification text is on the GST Council site, and that copy is a 2019 compilation, so check the current version.
Since 1 October 2023, a "non-taxable online recipient" means any unregistered person receiving online services. A GST-registered freelancer is therefore not one, which means reverse charge applies to you even for online services such as software, cloud storage and advertising.
Which entity issues the invoice decides everything
Google's help page says a GSTIN is mandatory for business accounts, that IGST at 18 percent, or CGST and SGST at 9 percent each, applies, and that invoices show both Google's GSTIN and yours. The provider named for Indian customers is Google India Private Limited. Meta's help pages say ads bought in India are sold by Facebook India in rupees with GST, and that entering a GSTIN is optional and is for claiming credit. Adobe's help page says entering a GST number at purchase shows 0 percent GST on the invoice, and that GST may be reverse charged or paid by the supplier depending on government guidelines. These pages change, and the same vendor can bill from different entities, so read your own invoices.
Tools such as Zoom, Figma and Notion each bill through their own entity, so check their billing pages and your invoices. A foreign contractor you hire directly, such as a designer or developer abroad, is also a service from a person in a non-taxable territory, so reverse charge applies if the place of supply is in India. The rate depends on the service, so ask your CA.
Report it manually in GSTR-3B, and take the credit
Imports of services do not appear in GSTR-2B, so you enter them yourself. The GST portal's guidance puts the reverse charge liability in Table 3.1(d) and the matching input tax credit in Table 4(A)(2) of GSTR-3B, though table numbering has changed over time, so confirm the current layout before you file. The guide to GST return filing for freelancers covers the return itself.
You generally pay the reverse charge tax in cash, because the credit ledger cannot be used to discharge it, and then claim credit under Section 16 if the service is used in the course of your business and you make taxable supplies. A freelancer who makes only exempt supplies cannot take it. Reverse charge purchases are also excluded from aggregate turnover for the registration threshold, so they do not push you towards it.
An unregistered freelancer's position is not clearly settled
Section 24(iii) of the CGST Act lists persons liable to pay tax under reverse charge among those who must register, whatever their turnover. The exemption for suppliers whose tax is entirely payable by the recipient covers suppliers, not recipients. No published relaxation for unregistered freelancers receiving imported services was found, so, as we read it, the person receiving the service is the one who pays. Whether small unregistered freelancers are pursued in practice is unclear, so ask a CA before you ignore it. The guide on when a freelancer must register for GST covers the threshold.
Sales to platforms are a different question
This post is about what you buy from abroad. What a platform charges you on your earnings, such as Upwork's fee, is covered in the guide to GST on Upwork and Fiverr fees, and the collection of tax at source on marketplace sales is in the guide to GST TCS on Fiverr and platforms.
Keep invoices and working papers for every import
Keep the foreign invoice and a working showing the rupee value, the IGST paid and the date. Whether you must raise a self-invoice for each import is not clearly settled, so ask your CA. Rinto creates GST-ready invoices with automatic IGST, CGST and SGST calculation for your own sales, which keeps your outward side tidy. It does not file returns or handle reverse charge on your purchases. The guide to GST invoices for freelancers covers your own invoices. The law and table numbers cited here come from compilations that may be out of date, so check the current Act. This post is general information, not tax advice.
Frequently Asked Questions
Do I have to pay GST on reverse charge for foreign software?
If you are GST-registered and the vendor is a foreign entity that did not charge Indian GST, yes. A service from a person outside India to a recipient in India falls under reverse charge, and the tax is IGST. Since October 2023 a registered freelancer is not a non-taxable online recipient, so this applies to online services such as software and advertising too. If an Indian entity invoices you with GST, there is nothing to reverse, so read your invoice first.
Where do I report reverse charge on imported services in GSTR-3B?
Imports of services are not auto-populated from GSTR-2B, so you enter them yourself. The GST portal's guidance puts the reverse charge liability in Table 3.1(d) and the matching input tax credit in Table 4(A)(2) of GSTR-3B. Table numbering has changed over time, so confirm the current layout on the portal before you file. You generally pay the tax in cash and then claim the credit if the service is used for your taxable business. Keep the foreign invoice and your working with each return.
Does Google Ads or Meta Ads charge GST to Indian freelancers?
According to their help pages, Google bills Indian business accounts through Google India Private Limited with IGST at 18 percent or CGST and SGST at 9 percent each, and Facebook India sells ads bought in India in rupees with GST, where a GSTIN is optional and is for claiming credit. Billing entities can change, so read your own invoices. If an invoice comes from a foreign entity with no Indian GST, a registered freelancer accounts for the tax under reverse charge.
Can an unregistered freelancer ignore reverse charge?
Not safely. Section 24(iii) of the CGST Act lists persons liable to pay tax under reverse charge among those who must register, and the exemption for suppliers whose tax is wholly payable by the recipient covers suppliers, not recipients. No published relaxation for unregistered freelancers receiving imported services was found. Read literally, the person receiving the service pays. Whether small freelancers are pursued in practice is unclear, so ask a CA before you decide to ignore it. Keep a note of your CA's advice on file.
Can I claim input tax credit on reverse charge GST?
Generally yes, if the service is used in the course of your business and you make taxable supplies. You enter the credit in GSTR-3B under imports of services, and the reverse charge tax is generally paid in cash first. A freelancer who makes only exempt supplies cannot take the credit, and blocked credits can still apply. Reverse charge purchases do not count toward aggregate turnover for the registration threshold. Ask your CA to check which of your purchases qualify. Keep your working papers for each import.