GST on Software and SaaS: Rates, Export Rules, and Subscription Billing

GST on software SaaS in India: 18 percent IT services rate, SAC 998314, LUT for exports, and subscription billing compliance for Indian and foreign clients.

How GST Treats Software and SaaS

Under GST, software supplied electronically (download, SaaS, API access) is classified as a service under SAC 998314 (Information Technology design and development services) and attracts 18 percent GST. Custom software development, cloud subscriptions, and API access for Indian clients all fall here. Pre-packaged software supplied on physical media (CDs, DVDs) is still treated as goods under HSN 8523 with 18 percent GST. The distinction rarely matters today, but is occasionally relevant for OEM bundling.

SAC Codes Within the Software Stack

SAC 998314 covers most software design, development, and customization work. SAC 998313 covers IT consulting and support, including infrastructure management and managed services. SAC 998316 covers IT infrastructure provisioning, often used by hosting and cloud-resale businesses. Choosing the right SAC affects GSTR-1 reporting and is occasionally questioned during refund applications for exporters. Most Indian SaaS startups standardize on 998314 across customer types.

Exporting Software Services With an LUT

Software and SaaS supplied to clients outside India qualify as exports of services under Section 2(6) of the IGST Act provided the supplier is in India, the recipient is outside India, the place of supply is outside India, payment is received in convertible foreign exchange, and supplier and recipient are not merely establishments of a single person. With a Letter of Undertaking (LUT) filed in form RFD-11, exports can be made without paying IGST, and accumulated input ITC can be claimed as a cash refund. The forex realization must happen within one year for the supply to remain a valid export.

Subscription Billing and Recurring Revenue

For monthly or annual SaaS subscriptions, time of supply rules require GST to be paid when the invoice is issued or payment is received, whichever is earlier. Annual upfront contracts therefore trigger the full GST liability in the month of invoicing, even if revenue is recognized monthly in books. For credit-card auto-charges, the invoice must be issued within 30 days of each charge. Inconsistent invoicing across monthly versus annual plans is a common cause of GSTR-1 vs GSTR-3B mismatches for SaaS companies.

Built for Indian SaaS by BillBabu

BillBabu generates GST-compliant subscription invoices, supports both with-payment and LUT-based export invoices, and handles mixed Indian and foreign customer billing without manual GSTIN gymnastics. For SaaS founders, recurring schedules can be set per customer, forex realization tracked from FIRC imports, and one-click GSTR-1 exports filed monthly or quarterly. This is the difference between spending one day a month on GST and spending one hour.

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Built for Indian small businesses. BillBabu is GST-compliant billing software that helps you create invoices, manage estimates, track payments and stay audit-ready — from your phone. Learn more about BillBabu or download the app.