GST compliance may tighten for businesses paying for overseas software, cloud and consulting services
The GST Council has proposed expanding e-invoicing to imported services and purchases from unregistered suppliers under the reverse charge mechanism for businesses with an annual turnover of ₹5 crore or more. A return correction mechanism is also proposed from April 2027.
Indian businesses that purchase software, cloud services and consulting from overseas could face stricter goods and services tax (GST) compliance rules, as the government considers extending e-invoicing to imported services and transactions involving unregistered suppliers. The proposal, backed by the 57th GST Council, targets businesses with an annual turnover of ₹5 crore or higher.
If enacted, companies may need to adjust their documentation, validation and reporting of GST under the reverse charge mechanism. Currently, Indian businesses typically account for applicable GST under reverse charge, issuing self-invoices for purchases from overseas suppliers who do not provide Indian GST invoices. The proposed expansion could integrate these transactions into a more standardized e-invoicing framework.
However, the precise implementation details, such as how these invoices would be incorporated into the Invoice Management System, have not been finalized. The proposal aims to minimize discrepancies between tax liabilities declared in returns and input tax credit claimed, potentially strengthening the reconciliation between GSTR-3B and the credit reflected in GSTR-2B.
The proposed amendments could come into effect from the April 2027 return period and will be open for public consultation before finalization. Finance Minister Nirmala Sitharaman has been granted authority to approve adjustments based on stakeholder input.
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