GST Compliance Guide for Foreign Companies

The Goods and Services Tax (GST), introduced in India on July 1, 2017, fundamentally reshaped the country's indirect tax landscape by subsuming over a dozen central and state levies into a unified framework. For foreign companies operating in or selling to India, GST compliance is not optional — it is a prerequisite for doing business, and the consequences of non-compliance range from financial penalties to operational disruption.

As of 2026, the GST framework has matured significantly. The GSTN portal has been upgraded with AI-driven compliance tools, e-invoicing is mandatory for businesses with turnover exceeding INR 5 crore, and the government has introduced real-time invoice matching to curb tax evasion. For foreign entities, this increased sophistication means both greater clarity in obligations and higher expectations of compliance.

This guide is designed specifically for foreign companies — whether you operate through an Indian subsidiary, a branch office, a liaison office, or supply digital services cross-border. We cover the essentials: registration, rate structure, filing cadences, input tax credit mechanics, and the most common mistakes we see in practice.

GST registration is mandatory for any entity making taxable supplies in India, and several triggers apply specifically to foreign companies:

• Indian Subsidiary or Branch Office: Any company incorporated or registered in India with aggregate turnover exceeding INR 20 lakh (INR 10 lakh in special category states) must register.

• Non-Resident Taxable Person (NRTP): A foreign entity that occasionally supplies goods or services in India but has no fixed place of business must register as an NRTP. This registration is valid for the period specified in the application (maximum 90 days, extendable).

• Online Information and Database Access or Retrieval (OIDAR) Services: Foreign companies providing digital services to non-registered recipients in India must register regardless of turnover. This covers SaaS platforms, streaming services, online advertising, cloud computing, and similar digital offerings.

• E-Commerce Operators: Foreign e-commerce platforms facilitating supplies in India must register under GST, regardless of whether they have a physical presence.

The registration process is entirely digital, conducted through the GST portal (gst.gov.in). Foreign entities without an Indian PAN can obtain registration using a Tax Deduction Account Number (TAN) or by appointing a fiscal representative in India.

Key documentation includes certificate of incorporation, proof of business address, bank account details, authorization for the Indian representative, and a digital signature certificate.

India's GST operates on a multi-rate structure with four principal slabs: 5%, 12%, 18%, and 28%. Essential goods and services attract the lowest rate, while luxury and demerit goods carry the highest. Additionally, a compensation cess applies to certain items such as automobiles, tobacco, and aerated beverages.

For foreign companies, the most commonly applicable rates are:

• Information Technology Services: 18%
• Management and Consulting Services: 18%
• Import of Goods: IGST at the applicable rate, levied at customs along with basic customs duty
• Royalty and License Fees: 18% (reverse charge mechanism applies when paid to a foreign entity)
• Construction and Works Contract: 12% or 18% depending on project type

Correct classification under the HSN (Harmonized System of Nomenclature) for goods and SAC (Services Accounting Code) for services is critical. Misclassification leads to short payment of tax, excess payment, or incorrect input tax credit claims — all of which attract scrutiny during audits.

In 2026, the GST Council has rationalized several categories, reducing the number of items in the 28% slab and moving more services to the 12% bracket. The Council has also introduced a new simplified classification tool on the portal to assist businesses in determining the correct rate.

GST compliance involves periodic filing of returns, each serving a distinct purpose:

• GSTR-1: Outward supply statement, due by the 11th of the following month. This details all invoices issued during the tax period.
• GSTR-3B: Summary return with tax payment, due by the 20th of the following month. This is the primary vehicle for discharging tax liability.
• GSTR-9: Annual return, due by December 31 of the following financial year.
• GSTR-9C: Reconciliation statement (audit certification), mandatory for entities with turnover exceeding INR 5 crore.

For NRTPs, GSTR-5 replaces GSTR-1 and GSTR-3B, and must be filed within 20 days after the end of the registration period. OIDAR service providers file GSTR-5A on a quarterly basis.

Input Tax Credit (ITC) is the mechanism by which GST paid on inputs is offset against GST collected on outputs. For foreign companies, key ITC considerations include:

• ITC is available only if the supplier has filed their return and the invoice appears in the recipient's GSTR-2B auto-drafted statement.
• ITC on goods and services used for exempt supplies or personal consumption is not available.
• Blocked credits include motor vehicles, food and beverages, beauty treatment, and club memberships.
• Reversal of ITC is required if payment is not made to the supplier within 180 days.

Late filing attracts a fee of INR 50 per day (INR 20 for nil returns), capped at INR 10,000 per return. Interest on late payment of tax is 18% per annum. These penalties compound quickly and can become material for high-volume businesses.

In our practice, we consistently observe certain mistakes among foreign companies navigating GST:

• Ignoring Reverse Charge Mechanism (RCM): When an Indian company pays for services from a foreign entity without a GST registration, the Indian company must self-assess and pay GST under RCM. Many companies miss this, leading to demand notices.

• Incorrect Place of Supply: The place of supply rules determine whether CGST+SGST or IGST applies. Cross-border services generally attract IGST, but the rules for intermediary services and OIDAR services have specific carve-outs that are frequently misapplied.

• Failure to Reconcile: The introduction of GSTR-2B auto-matching means discrepancies between your purchase records and your suppliers' filings will surface. Monthly reconciliation is essential to protect your ITC claims.

• Not Maintaining Proper Documentation: GST audits are becoming more frequent, and the department expects detailed working papers linking every ITC claim to a valid tax invoice, proof of receipt, and payment evidence.

• Overlooking Anti-Profiteering Provisions: If a company benefits from rate reductions or increased ITC availability, the savings must be passed on to consumers. The National Anti-Profiteering Authority actively investigates complaints.

At Sivadinesh & Co., we provide comprehensive GST advisory and compliance management for foreign companies operating in India. From initial registration through monthly filings, annual audits, and dispute resolution, our team ensures your GST obligations are met accurately and on time.