GST on software services for Indian and overseas clients

A note on accuracy

General information, dated October 2026. GST law, rates and procedures change, and the right treatment depends on the facts of each case. Confirm the treatment with your chartered accountant before relying on it for a decision, a quote or a tax return.

Buyers often ask how tax affects the price of software work from an Indian company. The 2good.dev prices are quoted before tax: USD 2 or INR 199 an hour at the Prime tier, with a minimum block of 150 hours, which is INR 29,850 or USD 300 before tax. Taxes are charged as applicable, and what that usually means differs for Indian clients and for clients outside India.

GST in brief

Goods and Services Tax, or GST, is the indirect tax on most supplies of goods and services in India. Software development, maintenance and related IT services are treated as services for GST purposes. When an Indian business supplies these services, it normally charges GST on its invoice, collects it from the client and pays it to the government.

GST comes in parts depending on where the supply happens:

• When the supplier and the client are in the same state, the invoice usually shows Central GST and State GST, split equally.
• When they are in different states, the invoice usually shows Integrated GST, or IGST, as a single amount.

Code Colonies Private Limited is registered for GST in Gujarat. So a client elsewhere in Gujarat would usually see CGST and SGST on the invoice, and a client in Mumbai, Pune or Bengaluru would usually see IGST. The total tax is the same either way. Only the split differs.

Indian clients

GST is charged at the prevailing rate

Indian clients are charged GST at the rate that applies to software services on the date of supply. At the time of writing, the rate commonly applied to IT services is 18%. Rates are revised from time to time.

At 18%, a Prime block of INR 29,850 would carry GST of INR 5,373, making the invoice INR 35,223. Your invoice will use the rate in force when it is raised.

Input tax credit for registered businesses

If your business is registered for GST and the software is used in the course of your business, you can usually claim input tax credit for the GST you pay. In simple terms, the GST on the invoice is set off against the GST you collect on your own sales, so it does not end up as a cost to your business.

Input tax credit has conditions. Broadly, you need a valid tax invoice, the supplier must have reported the invoice in its own GST returns, you must have received the service, and the purchase must be for business use. There are also rules about time limits and about certain items on which credit is blocked.

A Rajkot engineering firm that is registered for GST and buys a job card system for its shop floor would typically fall in this group. For that firm, the useful number to budget against is the price before tax, as long as the credit is available.

If you are not registered

Some small businesses, professionals and early stage founders are not registered for GST. If that is your situation, you cannot claim input tax credit, so the GST on the invoice is a real cost. A Pune founder building a first version before setting up a company should budget for the price including GST.

Tax deducted at source

Separately from GST, Indian clients may have obligations under income tax law to deduct tax at source on payments for professional or technical services, depending on the type of payer and the amount. This is a different tax with its own rules.

Overseas clients

Export of services

When an Indian company supplies services to a client outside India, the supply may qualify as an export of services under the Integrated Goods and Services Tax Act. The Act sets out conditions that must all be met. In general terms, they are:

• The supplier is located in India.
• The recipient of the service is located outside India.
• The place of supply of the service is outside India.
• Payment is received in convertible foreign exchange, or in Indian rupees where the Reserve Bank of India permits this.
• The supplier and the recipient are separate persons, and are more than different establishments of the same entity.

If any condition is unmet, the supply may be treated as a domestic supply with GST charged in the normal way. That is why the details of the contract, the client's location and the way payment is received matter.

Zero rating and the Letter of Undertaking

An export of services is treated as a zero rated supply. In practice, the supplier can usually do one of two things:

• Supply the service without charging IGST, under a Letter of Undertaking, usually called an LUT, filed with the GST authorities for the financial year.
• Charge IGST and later claim a refund of that tax.

Many Indian service companies use an LUT, because it keeps the invoice simple for the client and avoids waiting for a refund. Under an LUT, the invoice to an overseas client usually shows no Indian GST and carries a note that the supply is made under an LUT without payment of IGST.

So a London startup buying a Prime block from 2good.dev would, if all the export conditions are met and an LUT is in place, typically see an invoice of USD 300 with no Indian GST added. The client may still have tax obligations in its own country, such as accounting for VAT or a similar tax under local rules.

Place of supply rules matter

Whether the place of supply is outside India is decided by the place of supply rules in the IGST Act. For most software development and IT services delivered to a business abroad, the general rule looks to the location of the recipient. There are exceptions for certain kinds of services, for example some services tied to goods or people physically present in India. Software work is usually covered by the general rule.

Some situations need extra care. If an overseas company asks for the work to be delivered to, used by or paid for by an Indian group company, the treatment may change. The same applies if the client has an office or branch in India. Raise these points early, so the agreement and the invoices reflect the real arrangement.

What to look for on an invoice

A proper GST invoice for software services usually includes:

• The supplier's name, address and GSTIN, the 15 character GST identification number.
• The client's name and address, and the client's GSTIN if the client is registered in India.
• An invoice number and date.
• A description of the service, such as the block of hours and the work accepted.
• The SAC code, the Services Accounting Code that classifies the service for GST.
• The taxable value, the rate and amount of each part of GST, and the total.
• For exports under an LUT, a note to that effect, and the place of supply.

If you are registered for GST, check that your GSTIN and legal name are correct on every invoice. Errors here are a common reason input tax credit gets held up.

How this fits with paying after acceptance

With 2good.dev, you pay after you accept the work against a signed specification, and there is no advance. Tax follows the same invoices: GST, where it applies, is charged on the invoice for accepted work. The offer sets out the terms, and pricing shows the rates for each tier before tax. If you need a quote that shows tax separately for your budget or your board, ask and the team will prepare one.

Check with your chartered accountant

General information dated October 2026, to help you ask the right questions and understand a quote. It is not tax advice for your situation. GST rates, the conditions for export of services, the rules on input tax credit and the procedure for a Letter of Undertaking can all change, and small facts can change the answer. Confirm the treatment of your own purchase with your chartered accountant; overseas clients should also check their local tax position with their own adviser.

Sources

• Central Board of Indirect Taxes and Customs, GST: the GST Acts, rules, rate notifications and circulars.
• GST portal: registration, returns and the Letter of Undertaking for exports.