Non payment of GST under RCM on import of service - purchased through credit cards

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Naresh Gorantla

23 Points Posted on 08 August 2023

Dear All,

A software company has to purchase some software licenses from outside India. What it does is, it is telling their employees to purchase these software licenses through their credit cards and the amount incurred by their employees have been reimbursed to them on time to time basis.

In this case, whether GST under RCM to be paid by the company as the software is being utilized by the company. Please enlighten me!

Replies (3)

Quick Summary

This discussion explores the applicability of GST under Reverse Charge Mechanism (RCM) for software licenses purchased from abroad using employee credit cards and subsequently reimbursed. The key question is whether the company is liable for RCM when employees make these purchases, even if the company ultimately uses the software. Clarification is sought on scenarios where the software is bought in the company's name versus the employee's name.

CA. Roopali Kadam

Jobs on assignment basis.

967 Points Posted on 08 August 2023

In whose name software was purchased?

Naresh Gorantla

23 Points Posted on 08 August 2023

If it was purchased on the company name and used by the company, but employee paid for it - then I think RCM is applicable

If it was purchased on the employee name and the employee paid for it but the company used it for its business purposes- whether RCM is applicable in this case?

Aashok Kumar Sharma

Finance/Compliance Consultant

75875 Points Posted on 07 November 2026

Import of software licences/services needs RCM by the Indian business:

• Software licences downloaded from a foreign vendor (no physical media) are a supply of services (or OIDAR). For a registered business recipient (B2B), IGST is payable by the recipient under RCM (Sec 5(3) IGST, Notf 10/2017-IT(R) entry 1), at 18% on the value paid.

• The foreign vendor charges no GST. The OIDAR registration obligation applies to B2C supplies to non-taxable online recipients.

• Pay RCM in 3.1(d) in the month of payment (or 61 days after the invoice), issue a self-invoice (Rule 47A), and claim ITC in 4A(2) (import of services). Usually tax-neutral.

• If not paid: pay with interest via DRC-03. ITC is then available (subject to time limits under Circular 211). The department may demand under Sec 73/74 with penalty.

• Income-tax: payments for software licences may attract Sec 195 TDS (royalty?). The SC in Engineering Analysis (2021) held off-the-shelf licences aren't royalty, so no TDS for treaty countries. Equalisation levy (2%) was abolished from August 2024.