Import of services and reverse charge under Section 5(3) of the IGST Act
Every foreign invoice is a potential self invoice. Most groups discover this in year four.
Import of services is defined in Section 2(11) of the IGST Act as a supply where the supplier is located outside India, the recipient is located in India and the place of supply is in India. Integrated tax on notified categories, including services supplied by a person outside India to a person in India, is payable by the recipient under reverse charge. The recipient must issue a self invoice under Section 31(3)(f), discharge the tax in cash, and may then avail credit subject to the ordinary conditions.
The mechanics
Identify the import: supplier outside India, recipient in India, place of supply in India under Section 13.
Determine the time of supply under Section 13(3) of the CGST Act for reverse charge supplies, which is the earlier of the date of payment and the date sixty days from the invoice, with the specific rule for associated enterprises where the date of entry in the books applies.
Issue a self invoice under Section 31(3)(f) and a payment voucher.
Discharge the tax in cash; the credit ledger cannot be used for reverse charge liability.
Avail the credit in the same or a subsequent period, subject to Section 16 and Section 17.
The categories most often missed
Software licences and subscriptions purchased from foreign vendors by credit card or online, which never reach the tax team.
Professional, legal and consultancy fees paid to foreign advisers.
Group charges — management fees, IT recharges, royalty, cost allocations — where the invoice is an intercompany debit note rather than a document that looks like an invoice.
Cloud, hosting and marketing platform charges, which are recurring and small individually and material in aggregate.
Interest and financial charges, where the exemption position must be examined rather than assumed.
Services from an overseas head office to an Indian branch, which are taxable as import of services notwithstanding that the two are the same legal person, subject to the specific valuation clarification.
The control that finds them
A monthly extract of all foreign currency payments from the accounts payable and treasury systems, reviewed against the reverse charge register. This single control finds most of the exposure.
A rule that no foreign vendor is onboarded without a reverse charge determination recorded.
A credit card and expense report review, because subscription purchases bypass procurement.
For associated enterprises, a check on the date of entry in the books as the time of supply, since it can precede payment by months.
Authorities relied on
Clarified the valuation of import of services from a related person outside India where the recipient is eligible for full input tax credit, including where no invoice is issued.
What to do on Monday
Institute a monthly foreign payment extract reconciled to the reverse charge register.
Require a reverse charge determination at foreign vendor onboarding.
Generate self invoices and payment vouchers systematically, not manually.
Check the associated enterprise time of supply rule against the date of entry in the books.
This page states the general position. A reader with a specific question on their own facts may write to the GST practice at AMLEGALS.
Write to the GST practiceQuestions we are asked on this
Can reverse charge tax be paid from the credit ledger?
No. It must be paid in cash, and the credit is then available.
Is a self invoice really required?
Yes, under Section 31(3)(f), and its absence is a penalty exposure and a credit risk. Generate them systematically.
What is the time of supply for a group charge?
For associated enterprises, the earlier of the date of entry in the books of the recipient and the date of payment. That often precedes the invoice.
Are head office charges to an Indian branch taxable?
Yes, as import of services, with the valuation clarified where the branch is eligible for full credit.
Is credit available on reverse charge tax?
Yes, subject to Sections 16 and 17. Note that reverse charge inward supplies are also treated as exempt supplies for the apportionment rules in Section 17(3).
In this cluster
- Place of supply under GST: the full decision tree
- Intermediary services: characterisation, exposure and structuring
- Export of services: the five conditions and where claims fail
- Dharmendra M. Jani: the constitutional attack on intermediary taxation, and where it stands
- Mohit Minerals: ocean freight, composite supply, and the sentence that changed GST federalism
- OIDAR services: registration, compliance and the 2023 amendment
- Bill to ship to transactions and Section 10(1)(b)
- High seas sales, bonded warehouse transfers and Schedule III
- Merchant trade and out and out supplies
- Goods transport agencies: reverse charge, the rate option and place of supply
GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.