Reverse Charge on Import of Services from a Foreign Parent (2026)

Written by CA Nandini Hasija, Krystal7 Consultants. Last updated 23 October 2026.

An Indian subsidiary pays GST itself, under reverse charge, on services from its foreign parent. Section 5(3) of the IGST Act makes the Indian recipient liable. The rate is 18 percent IGST for most services. The time of supply is the earlier of the booking date and the payment date. The tax is paid in cash in GSTR-3B Table 3.1(d). The same amount comes back as input tax credit in Table 4(A)(2).

This guide states the law on 23 Oct 2026, from the import tests to GSTR-3B reporting, with a worked example and a checklist.

How does reverse charge on import of services work?

Reverse charge on import of services means the Indian recipient pays IGST on a service bought from a supplier outside India. The foreign supplier charges no Indian GST. The Indian company works out the tax, pays it in cash and issues a self invoice. It then claims the tax back as input tax credit where the law allows.

Three provisions do the work:

1. Section 7(4) of the IGST Act treats every import of services as an inter State supply, so IGST applies, not CGST and SGST.
2. Section 5(3) of the IGST Act lets the government notify supplies on which the recipient pays the tax.
3. Entry 1 of Notification No. 10/2017-Integrated Tax (Rate) of 28 Jun 2017 covers services from a person located in a non taxable territory. It applies to any recipient other than a non taxable online recipient. The recipient located in the taxable territory pays, so the Indian subsidiary pays.

The foreign parent does not register in India for these charges. The subsidiary does all the compliance. A person liable to pay tax under reverse charge must register whatever its turnover. Section 24 of the CGST Act says so, and section 20 of the IGST Act applies it to IGST. Most subsidiaries already hold a GSTIN, as our guide to GST registration for foreign companies explains. The practical question is how to account for the charge each month.

Consumer facing digital services sold by foreign companies to unregistered Indians follow a different rule, where the foreign supplier pays. We cover that in our guide to OIDAR services under GST.

When is a service from a foreign parent an import of services?

A parent's charge is an import of services when three conditions in section 2(11) of the IGST Act are met together. The supplier is located outside India. The recipient is located in India. The place of supply is in India. For most services between a parent and a subsidiary, the place of supply is the location of the recipient, so the Indian subsidiary.

Test	Where it sits in the law	What we check for a parent charge
Supplier located outside India	Section 2(11)(i), IGST Act	The parent's own office abroad provides the service, not an Indian branch of the parent
Recipient located in India	Section 2(11)(ii), IGST Act	The Indian subsidiary's registered place of business receives and uses the service
Place of supply in India	Section 2(11)(iii) and section 13, IGST Act	Section 13(2) default rule: location of the recipient, unless a special rule in section 13(3) to 13(13) applies

Section 13 of the IGST Act applies when either the supplier or the recipient is outside India. Its default rule in section 13(2) is the recipient's location. A management fee, IT support, a licence of know how or a shared service charge almost always falls under that default rule.

Intermediary services changed in 2026. Until 30 Mar 2026, section 13(8)(b) placed an intermediary's service at the intermediary's own location. A foreign sales agent's commission was therefore outside the Indian GST net. The Finance Act, 2026 received assent on 30 Mar 2026. The GST Council's March 2026 newsletter says the omission of section 13(8)(b) came into effect with it.

In our reading, a commission paid to a foreign agent now falls under the default rule. It becomes an import of services taxed under reverse charge.

A subsidiary incorporated in India is a separate legal person from its parent. That is why the parent's charge is a supply between two persons, even though the group is one economic unit. A branch office of a foreign company is different, because it is part of the same company. Explanation 1 to section 8 of the IGST Act treats the branch and the head office as distinct persons.

Is a free service from the parent still a supply?

Yes, in most cases. Paragraph 4 of Schedule I to the CGST Act covers imports of services from a related person or from the importer's own establishment abroad. Such an import is a supply even without consideration, if made in the course or furtherance of business. A parent and its subsidiary are related persons under the Explanation to section 15.

Section 7(1)(b) of the CGST Act separately covers imports of services for consideration, whether or not in the course of business. So a paid service from anyone abroad is a supply. A free service is a supply only when it comes from a related person or the importer's own foreign establishment.

Tax officers have treated work done by group staff abroad as an import, even where the parent billed nothing. Typical examples are group legal review, regional finance oversight and time spent by group engineers on the Indian team's work. Circular No. 210/4/2024-GST of 26 Jun 2024 records that field formations were raising these demands. It then settled how to value them.

Two points keep the free service rule in proportion:

1. Holding shares in a subsidiary is not, on its own, a service by the parent. Circular No. 196/08/2023-GST of 17 Jul 2023 says so in terms.
2. The service must be in the course or furtherance of business. Social contact between group staff is not a supply.

What is the time of supply for services imported from a parent?

For a foreign parent and its Indian subsidiary, the time of supply is the booking date or the payment date, whichever is earlier. The booking date is the date the subsidiary enters the service in its books of account. This rule comes from the second proviso to section 13(3) of the CGST Act. It covers supplies by associated enterprises where the supplier is located outside India.

Section 2(12) of the CGST Act gives "associated enterprises" the meaning in section 92A of the Income Tax Act, 1961. From 1 Apr 2026 the same definition sits in section 162 of the Income Tax Act, 2025, headed "Meaning of associated enterprise". Section 8(1) of the General Clauses Act, 1897 reads a reference to a repealed and re enacted provision as a reference to its successor. In our reading, section 162 now supplies the meaning. A parent with a controlling stake in the subsidiary meets that test.

Supplier	Time of supply rule	Legal basis	Practical effect
Foreign associated enterprise (parent, sister company)	Earlier of date of entry in the recipient's books and date of payment	Second proviso to section 13(3), CGST Act	Booking a year end accrual for a parent charge triggers the tax, even if payment is months away
Unrelated foreign supplier	Earlier of date of payment and the date immediately after 60 days from the supplier's invoice	Section 13(3)(a) and (b), CGST Act	An unpaid foreign invoice becomes taxable on day 61
Either, where neither date can be found	Date of entry in the recipient's books	First proviso to section 13(3), CGST Act	Rarely used for imports

The associated enterprise rule matters at 31 March. A subsidiary that accrues the parent's annual management fee in its March books owes the reverse charge in the March GSTR-3B, due 20 Apr. It does not wait for the parent's invoice or the remittance. We see this missed most often when the accrual is booked as a provision during the audit and the GST team never hears about it.

The Finance (No. 2) Act, 2024 also amended section 13(3) from 1 Nov 2024 (Notification No. 17/2024-Central Tax of 27 Sep 2024). It added a clause for cases where the recipient issues the invoice. For a parent and subsidiary, the associated enterprise proviso still sets the date in our reading.

How do you value services imported from a related party?

Where the parent charges a fee, the value is the invoice amount converted into rupees, provided the subsidiary is eligible for full input tax credit. Rule 28(1) of the CGST Rules governs supplies between related persons. Its second proviso applies where the recipient is eligible for full input tax credit. In that case the value declared in the invoice is deemed to be the open market value.

The rupee figure uses rule 34(2) of the CGST Rules. The exchange rate is the rate under generally accepted accounting principles for the date of the time of supply. In practice we use the rate the company uses for the same entry in its books, so the GST value and the books agree.

Circular No. 210/4/2024-GST of 26 Jun 2024 extended the same logic to free services. Paragraph 3.7 deals with a foreign affiliate that serves a related Indian entity with full input tax credit. If the Indian entity has issued no invoice, the value may be deemed nil. That nil value is then treated as the open market value under the second proviso to rule 28(1).

Scenario	Value for reverse charge	Basis
Parent charges a fee; subsidiary eligible for full input tax credit	Invoice value, converted at the books rate	Second proviso to rule 28(1); rule 34(2)
Parent charges nothing; subsidiary eligible for full input tax credit; no invoice issued	Nil	Circular No. 210/4/2024-GST, paragraph 3.7
Parent charges nothing or an off market fee; subsidiary not eligible for full input tax credit	Open market value, then like kind and quality, then 110 percent of cost (rule 30) or reasonable means (rule 31)	Rule 28(1)(a) to (c)
Parent gives a corporate guarantee to the subsidiary's lender	1 percent a year of the amount guaranteed or the actual fee, whichever is higher; invoice value where full input tax credit	Rule 28(2) and Circular No. 225/19/2024-GST

"Eligible for full input tax credit" is the hinge. A subsidiary usually qualifies when it makes only taxable or zero rated supplies and uses the service for them. A subsidiary with exempt supplies, or one where the service is a blocked credit under section 17(5), does not. For that subsidiary the free service carries a real tax cost, because part of the reverse charge cannot be recovered.

Corporate guarantees from a parent have their own rule and recent court rulings. We cover them in our guide to GST on cross charges between related companies.

Is there an exemption for imports from related parties?

No general exemption exists. Circular No. 210/4/2024-GST of 26 Jun 2024 is a valuation clarification, not an exemption. The tax still applies; the circular only allows a nil or invoice value when the subsidiary has full input tax credit. Two narrow sector exemptions exist or are proposed.

Instrument	Date	Who it covers	Status on 23 Oct 2026
Circular No. 210/4/2024-GST	26 Jun 2024	Any registered person importing services from a related person with full input tax credit	In force; valuation only
Notification No. 08/2024-Integrated Tax (Rate), inserting entry 10L in Notification No. 9/2017-Integrated Tax (Rate)	8 Oct 2024, effective 10 Oct 2024	Indian establishment of a foreign airline importing services from a related person or its own foreign establishment, without consideration	In force, subject to Ministry of Civil Aviation certificates on designation and reciprocity
57th GST Council recommendation (item C2.10)	8 Oct 2026	Indian establishment of a foreign shipping company importing services from a related person, without consideration	Recommended; past periods to be regularised on an "as is where is" basis; needs a notification

The airline exemption has conditions. The Indian establishment must pay GST on its transport of passengers and goods. The Ministry of Civil Aviation must certify that the airline is designated under a bilateral air services agreement. It must also certify that India's designated airlines face no similar tax in that country.

Some commentary refers to a "June 2024 exemption" for related party imports. We found no such notification. The June 2024 instrument is Circular No. 210/4/2024-GST, which works only through valuation.

Who issues the invoice, and what goes in a self invoice?

The Indian subsidiary issues the invoice to itself. Section 31(3)(f) of the CGST Act covers a registered person paying reverse charge on a supply from an unregistered supplier. That person must issue the invoice. Paragraph 3.6 of Circular No. 210/4/2024-GST confirms this applies to imports from a related person abroad.

Rule 47A of the CGST Rules, inserted by Notification No. 20/2024-Central Tax of 8 Oct 2024 with effect from 1 Nov 2024, sets the deadline. The self invoice must be issued within 30 days from the date of receipt of the service. Section 31(3)(g) also requires a payment voucher when the subsidiary pays the supplier.

A self invoice carries the usual rule 46 particulars. We include these fields:

1. The subsidiary's name, address and GSTIN, shown as both recipient and issuer.
2. The parent's name, address and country, and the parent's own invoice number and date where one exists.
3. A description of the service and its SAC code.
4. The foreign currency amount, the exchange rate used and the rupee value.
5. The IGST rate and amount, and the words "tax payable on reverse charge".
6. Place of supply, which is the subsidiary's State.
7. A serial number from a separate series kept only for reverse charge self invoices.

The parent's commercial invoice does not replace the self invoice. The parent's document supports the value. The self invoice is the document that supports the credit under section 16(2)(a).

On 8 Oct 2026 the 57th GST Council recommended e invoicing for the import of services (PIB release, item 18(4)). It would apply to taxpayers with aggregate annual turnover of INR 5 crore or more. Until a notification follows, self invoices for imports stay outside e invoicing.

Can the subsidiary claim input tax credit on the reverse charge?

Yes, where the service is used for taxable or zero rated supplies and is not a blocked credit. The subsidiary pays the IGST in cash and claims the same amount as input tax credit, usually in the same GSTR-3B. The credit then sets off output tax or, for exporters, builds a refund claim.

The conditions in section 16 of the CGST Act still apply (our guide to input tax credit rules covers them in full):

1. The subsidiary holds the self invoice (section 16(2)(a)).
2. It has received the service (section 16(2)(b)).
3. The tax has been paid (section 16(2)(c)).
4. It has filed the return (section 16(2)(d)).

The time limit is in section 16(4). The claim must be made by 30 November after the end of the invoice's financial year, or by the annual return date if earlier. Circular No. 211/5/2024-GST of 26 Jun 2024 deals with reverse charge supplies from unregistered suppliers. For these, the relevant year is the year in which the recipient issues the self invoice. The circular's own example is a free service by an overseas related person that was first missed and later regularised.

This helps a subsidiary that finds an old parent charge during an audit. It can issue the self invoice now, pay the tax with interest and still claim the credit. Paragraph 2.7 of the circular adds that a penalty under section 122 may also apply to the late invoice and payment.

Reverse charge cannot be paid with input tax credit. Section 2(82) of the CGST Act excludes reverse charge tax from "output tax". Section 49(4) allows the credit ledger only for output tax.

The GST portal manual for GSTR-3B states that reverse charge liabilities can be paid only from the cash ledger. An exporter with a large credit balance still needs fresh cash each month for reverse charge. That cash returns only through a refund. Our guide to GST refunds of unutilised ITC for exporters covers that claim.

How do you report import of services in GSTR-3B?

The tax goes into Table 3.1(d) and the credit goes into Table 4(A)(2) of the same GSTR-3B. Table 3.1(d) covers inward supplies liable to reverse charge. Table 4(A)(2) is labelled "Import of Services" and carries the note that the tax should have been declared in Table 3.1.

GSTR-3B table	What goes in	Note
3.1(d) Inward supplies liable to reverse charge	Taxable value and IGST on the import	Auto drafted from GSTR-2B for domestic reverse charge; imports from abroad are entered by the taxpayer
4(A)(2) Import of services	IGST credit on the import	The portal warns if credit in 4(A)(2) and 4(A)(3) exceeds the 3.1(d) liability plus the RCM statement balance
4(A)(3) Inward supplies liable to reverse charge	Credit on domestic reverse charge supplies	Keep imports out of this row
6.1 Payment of tax	Reverse charge IGST paid from the cash ledger	Credit cannot set off reverse charge

The GSTR-3B manual warns when credit in Tables 4(A)(2) and 4(A)(3) exceeds the Table 3.1(d) liability. The check also counts the closing balance of the RCM Liability/ITC Statement. It also says a taxpayer cannot file the next GSTR-3B if entries for the previous period are not posted in that statement.

From the February 2026 tax period, the portal also asks taxpayers to confirm a "Tax Liability Breakup, As Applicable" tab before filing. The GST Council's March 2026 newsletter reports this. This matters when a missed reverse charge from an earlier month is paid in the current return.

On 8 Oct 2026 the 57th GST Council also recommended a new rule 86D (PIB release, item 5.1(2)). It would create an electronic statement of reverse charge tax paid and the credit claimed on it. Once notified, it would put the portal statement on a rules footing.

Which charges from a parent usually trigger reverse charge?

Most recurring charges from a parent are imports of services at 18 percent IGST. The 56th GST Council set a standard rate of 18 percent and a merit rate of 5 percent (PIB release of 3 Sep 2025). Service rate changes took effect on 22 Sep 2025. Business support services stayed at the standard rate. The table lists what we see in subsidiary books.

Charge from the parent	Import of services?	Points to watch
Management fee or head office support	Yes	Benefit test for transfer pricing; time of supply on accrual
IT support, hosting, group software and licences	Yes	Licences of software may be goods or services; check the contract
Recharge of secondee salary paid abroad	Yes, as manpower supply in most cases	See our guide to seconding employees to India
Free review or advice by group staff	Yes, a Schedule I supply	Nil value only with full input tax credit and no invoice
Royalty or brand licence fee	Yes	Also a royalty for withholding tax
Commission to a foreign sales agent	Yes, from 30 Mar 2026 in our reading	Section 13(8)(b) omitted by the Finance Act, 2026
Reimbursement of third party costs the parent paid	Usually yes	Pure agent treatment under rule 33 needs a written agency and separate disclosure
Interest on a loan from the parent	Exempt service, but still reported	Treat as an exempt inward supply

Purchases from the parent's Indian branch or an Indian group company are not imports. Those come with the supplier's own GST invoice under forward charge.

What happens if reverse charge was missed?

Pay the tax with interest as soon as the gap is found, issue the self invoice, and claim the credit. Interest runs at 18 percent a year under section 50(1) of the CGST Act from the day after the GSTR-3B due date. Because reverse charge must be paid in cash, interest applies to the full tax, not to a net figure.

If an officer finds the gap first, the department issues a show cause notice. Demands for periods up to FY 2023-24 fall under sections 73 and 74 of the CGST Act. Demands for FY 2024-25 onwards fall under section 74A. Penalty depends on the section and on whether fraud or suppression is alleged.

The revenue neutral argument has limits. A subsidiary with full input tax credit will say the tax and the credit cancel out. The interest does not cancel out. The credit is also lost if the self invoice is never issued, or if it comes after the section 16(4) date for its year.

We run a reverse charge check at every quarter end for subsidiaries we look after. We match three lists: the parent's intercompany invoices, foreign currency entries in the ledger and the outward remittance advices from the bank. Any foreign charge that is in the books but not in Table 3.1(d) is a gap.

How does reverse charge sit with TDS, transfer pricing and FEMA?

Each regime asks a different question about the same parent charge. The answers must use the same numbers.

1. Withholding tax: payments to a foreign parent need TDS under section 393 of the Income Tax Act, 2025, subject to the tax treaty. See our guide to TDS on payments to non residents.
2. Remittance forms: money remitted from 1 Apr 2026 uses Forms 145 and 146, the successors to Forms 15CA and 15CB. See our guide to Forms 145 and 146.
3. Transfer pricing: the fee must meet the arm's length test, and intra group services need a benefit and need test. See our guide to transfer pricing between a US parent and an Indian subsidiary.
4. Bank purpose codes: the AD bank needs the right purpose code for the remittance. See our guide to RBI purpose codes.

Officers compare Form 3CEB with GSTR-3B. We keep one intercompany schedule that feeds all four files.

What changed in 2026

Topic	Old position	New position	Date	Instrument
Intermediary services from abroad	Place of supply was the intermediary's location, so no import	Default rule applies, so the Indian recipient pays reverse charge in our reading	30 Mar 2026	Finance Act, 2026, omission of section 13(8)(b), IGST Act
GSTR-3B filing	No separate confirmation of liability breakup	Taxpayer must open and confirm the "Tax Liability Breakup, As Applicable" tab	February 2026 tax period	GSTN portal update of 16 Mar 2026
E invoicing of import of services	Self invoices for imports outside e invoicing	Recommended for aggregate annual turnover of INR 5 crore or more	8 Oct 2026 (recommendation)	57th GST Council, item 18(4)
Reverse charge statement	Portal RCM Liability/ITC Statement	New rule 86D recommended for the statement	8 Oct 2026 (recommendation)	57th GST Council, item 5.1(2)
Related party imports by foreign shipping lines	Taxable, valued under rule 28	Exemption without consideration recommended, past periods regularised	8 Oct 2026 (recommendation)	57th GST Council, item C2.10

Earlier changes still shape the rules. They include the 30 day self invoice deadline (rule 47A, from 1 Nov 2024) and the airline exemption (from 10 Oct 2024). They also include Circulars No. 210 and 211 of 26 Jun 2024.

Notification No. 16/2024-Central Tax brought sections 11 and 12 of the Finance Act, 2024 into force on 1 Apr 2025. They make an Input Service Distributor compulsory for common services received for other GST registrations of the same company.

Amended section 2(61) of the CGST Act defines the ISD as an office receiving input service invoices for distinct persons. The definition expressly includes services taxed under reverse charge under section 9(3) or 9(4). Substituted section 20(1) requires that office to register as an ISD under section 24(viii) and distribute the credit. The GST Council approved this text at its 52nd meeting.

Rule 39(1A), in force from 1 Apr 2025 under Notification No. 09/2025-Central Tax, lets the registration that paid the reverse charge pass the credit to an ISD with the same PAN and State. A subsidiary with GSTINs in more than one State must now route a shared parent charge through its ISD registration.

Worked example

A Bengaluru subsidiary of a US company is registered in Karnataka and files GSTR-3B monthly. It exports software development services to its parent under a letter of undertaking. It has no exempt supplies, so it is eligible for full input tax credit. We use INR 88.00 to the US dollar and INR 112.00 to the pound sterling as assumed rates for the example.

Charge A, IT support from the parent

The parent invoices USD 60,000 for April to June 2026, dated 30 Jun 2026. The subsidiary books it on 30 Jun 2026 and pays on 20 Aug 2026.

Charge B, a free budget review

The parent's regional finance team reviews the subsidiary's budget in June 2026. The parent charges nothing, and the subsidiary issues no invoice.

Charge C, a UK sales agent

A UK agent introduces a new client and invoices a commission of GBP 4,000 on 10 Aug 2026. The subsidiary books and pays it the same day.

Item	Time of supply	Value (INR)	IGST at 18% (INR)	GSTR-3B period
A: IT support, USD 60,000 at 88.00	30 Jun 2026 (booking, earlier than payment)	52,80,000	9,50,400	June 2026, due 20 Jul 2026
B: free budget review	Not applicable	Nil (Circular No. 210/4/2024-GST)	Nil	None
C: UK agent commission, GBP 4,000 at 112.00	10 Aug 2026	4,48,000	80,640	August 2026, due 20 Sep 2026

For charge A, the subsidiary issues a self invoice by 30 Jul 2026. That is within 30 days of 30 Jun 2026, which we treat as the date of receipt because the service period ends then. It pays INR 9,50,400 in cash in the June 2026 return. It claims the same INR 9,50,400 in Table 4(A)(2) of that return. Because it is an exporter with little output tax, the credit adds to its refund claim, while the cash leaves the bank each month.

For charge C, the agent is not related, so the 60 day rule would apply to an unpaid invoice. Here payment and booking fall on the same day. Before 30 Mar 2026 this commission would have been outside GST.

What late payment costs

Suppose the team missed charge A and paid it with the September 2026 return on 20 Oct 2026. Interest runs from 21 Jul 2026 to 20 Oct 2026, which is 92 days. Interest is INR 9,50,400 x 18% x 92 / 365 = INR 43,120. The credit is still available, because the self invoice falls in FY 2026-27 and its section 16(4) date is 30 Nov 2027.

Without full input tax credit

Suppose the subsidiary also made exempt supplies. Charge B could then not be valued at nil. Assume the parent's cost for the review was USD 10,000 and no market price exists. Rule 30 gives 110 percent of cost, which is USD 11,000 or INR 9,68,000. The IGST would be INR 1,74,240, and only part of it would be recoverable as credit.

Common mistakes

1. Waiting for the parent's invoice. For associated enterprises the booking date triggers the tax. Fix: tell the GST team about every intercompany accrual before the month's GSTR-3B.
2. Paying reverse charge from the credit ledger. The portal blocks it, and old manual workarounds fail scrutiny. Fix: fund the cash ledger each month for reverse charge.
3. Treating Circular No. 210/4/2024-GST as an exemption. It gives a nil value only with full input tax credit and no invoice. Fix: test credit eligibility first and record the basis.
4. Skipping the self invoice. Without it, the credit has no supporting document. Fix: issue it within 30 days under rule 47A, from a separate series.
5. Putting import credit in Table 4(A)(3). The portal compares rows. Fix: use Table 4(A)(2) for imports and keep domestic reverse charge in 4(A)(3).
6. Ignoring foreign agents after 30 Mar 2026. Commissions paid abroad now fall under the default place of supply rule in our reading. Fix: add agent and broker contracts to the reverse charge review.
7. Using one exchange rate for GST and another for the books. Fix: apply the rule 34(2) accounting rate used in the books on the time of supply date.
8. Valuing GST and transfer pricing differently without a reason. Fix: keep one intercompany schedule for GST, TDS and Form 3CEB.

If you want a second look at your parent charges, email [email protected] with last year's intercompany schedule and three recent GSTR-3B returns.

Checklist

1. List every charge from the parent and other foreign group companies, paid, accrued or free.
2. Confirm each one meets the three import tests in section 2(11) of the IGST Act.
3. Fix the time of supply: booking or payment date for associated enterprises, the 60 day rule for others.
4. Test whether the subsidiary is eligible for full input tax credit on each service.
5. Value each charge: invoice value, nil under Circular No. 210/4/2024-GST, or rule 28 open market value.
6. Convert foreign currency at the rule 34(2) rate used in the books.
7. Issue a self invoice within 30 days of receiving the service, and a payment voucher when paying.
8. Pay the IGST in cash through Table 3.1(d) of GSTR-3B.
9. Claim the credit in Table 4(A)(2) and reconcile it with the RCM Liability/ITC Statement.
10. Route shared parent charges through the Input Service Distributor where the company has GSTINs in several States.
11. Match GST values with the TDS, Form 145 and 146 and transfer pricing records each quarter.
12. Pay any missed tax with 18 percent interest and issue the self invoice in the current year.

Frequently Asked Questions

Is reverse charge on import of services paid as IGST or CGST and SGST?+

It is paid as IGST. Section 7(4) of the IGST Act treats every import of services as an inter State supply, so the subsidiary pays IGST at the full rate, usually 18 percent. It does not split the tax into CGST and SGST, even though the subsidiary and the place of supply are in the same State.

Does an Indian subsidiary pay GST if the foreign parent provides a service for free?+

Usually it must account for it, but the value can be nil. Paragraph 4 of Schedule I treats a free import from a related person as a supply. Circular No. 210/4/2024-GST lets the value be nil where the subsidiary has full input tax credit and has issued no invoice. Without full credit, the value follows rule 28.

What is the time of supply when the parent's invoice arrives months later?+

For a parent and subsidiary, the time of supply is the earlier of the date the subsidiary books the charge and the date it pays. This is the second proviso to section 13(3) of the CGST Act. A March accrual therefore makes the tax due in the March GSTR-3B, even if the invoice comes in May.

Can reverse charge on import of services be paid using input tax credit?+

No. Section 2(82) of the CGST Act excludes reverse charge tax from output tax, and section 49(4) allows credit only against output tax. The GST portal accepts reverse charge only from the electronic cash ledger. The subsidiary pays cash first and then claims the same amount as credit in Table 4(A)(2).

Which GSTR-3B tables are used for import of services?+

The tax goes in Table 3.1(d), inward supplies liable to reverse charge. The credit goes in Table 4(A)(2), import of services. The portal warns when credit in Tables 4(A)(2) and 4(A)(3) exceeds the reverse charge liability, after counting the RCM Liability/ITC Statement balance. Domestic reverse charge credit belongs in Table 4(A)(3).

Does the subsidiary need to issue a self invoice for imports from its parent?+

Yes. Section 31(3)(f) of the CGST Act requires it, and paragraph 3.6 of Circular No. 210/4/2024-GST confirms it for imports from a related person abroad. Rule 47A, in force from 1 Nov 2024, requires the self invoice within 30 days of receiving the service. A payment voucher is also needed when paying the parent.

Is there a GST exemption for services imported from a related party?+

There is no general exemption. Circular No. 210/4/2024-GST of 26 Jun 2024 only deals with value. Notification No. 08/2024-Integrated Tax (Rate) exempts free related party imports by Indian establishments of foreign airlines from 10 Oct 2024. The 57th GST Council recommended a similar exemption for foreign shipping lines on 8 Oct 2026.

What is the deadline to claim credit on reverse charge for a parent's service?+

Section 16(4) of the CGST Act allows credit until 30 November after the end of the financial year to which the invoice relates, or the annual return date if earlier. Circular No. 211/5/2024-GST says the relevant year is the year in which the subsidiary issues its self invoice.

What interest applies if reverse charge on an import was paid late?+

Interest runs at 18 percent a year under section 50(1) of the CGST Act, from the day after the GSTR-3B due date until payment. Reverse charge is paid in cash, so interest applies to the full tax. Claiming the matching credit in the same return does not reduce the interest.

Is a commission paid to a foreign sales agent subject to reverse charge?+

From 30 Mar 2026, in our reading, yes. The Finance Act, 2026 omitted section 13(8)(b) of the IGST Act, which used to place intermediary services at the intermediary's location. The default rule now applies, so the place of supply is the Indian recipient, and the commission becomes an import of services taxed under reverse charge.

Does a recharge of a secondee's salary attract reverse charge?+

In most cases, yes. Where the parent employs the secondee and recharges the salary, tax officers treat it as a supply of manpower by the parent. The Indian company pays IGST under reverse charge on the recharge. Where the subsidiary has full input tax credit, the invoice value is the taxable value under rule 28.

How should the exchange rate be chosen for the reverse charge value?+

Rule 34(2) of the CGST Rules uses the exchange rate under generally accepted accounting principles for the date of the time of supply. We use the rate the company applies to the same entry in its books. That keeps the GST value, the ledger and the transfer pricing records in line.

Does reverse charge apply if the subsidiary has GST registrations in several States?+

Yes, and the company must decide which registration receives the service. From 1 Apr 2025 a common service received for several registrations must be distributed through an Input Service Distributor. The registration that pays the reverse charge can pass the credit to an ISD with the same PAN and State under rule 39(1A), and the ISD distributes it under rule 39(1).

Does the foreign parent need to register for GST in India for these charges?+

No. Under reverse charge the Indian subsidiary is the person liable to pay the tax and file the return. The parent has no GST filing for business to business charges. A foreign company selling online services to unregistered Indian customers is different; it must register under section 14 of the IGST Act.

Sources

• CBIC, Circular No. 210/4/2024-GST, Clarification on valuation of supply of import of services by a related person where the recipient is eligible for full input tax credit, 26 Jun 2024, https://gstcouncil.gov.in/sites/default/files/2024-09/circular-no-210-04-2024.pdf
• CBIC, Circular No. 211/5/2024-GST, Time limit under section 16(4) for reverse charge supplies from unregistered persons, 26 Jun 2024, https://gstcouncil.gov.in/sites/default/files/2024-09/circular-no-211-05-2024.pdf
• CBIC, Circular No. 199/11/2023-GST, Taxability of services between distinct persons, 17 Jul 2023, https://gstcouncil.gov.in/sites/default/files/2024-06/circular-cgst-199.pdf
• CBIC, Circular No. 196/08/2023-GST, Taxability of share capital held in a subsidiary, 17 Jul 2023, https://gstcouncil.gov.in/sites/default/files/2024-06/circular-cgst-196.pdf
• CBIC, Circular No. 225/19/2024-GST, Corporate guarantee between related persons, 11 Jul 2024, https://gstcouncil.gov.in/sites/default/files/2024-09/circular-no-225-2024.pdf
• Ministry of Finance, Notification No. 20/2024-Central Tax (rule 47A), 8 Oct 2024, https://gstcouncil.gov.in/sites/default/files/2024-10/ct-20-2024.pdf
• Ministry of Finance, Notification No. 17/2024-Central Tax (Finance (No. 2) Act, 2024 commencement), 27 Sep 2024, https://gstcouncil.gov.in/sites/default/files/2024-10/17-2024-ct-eng.pdf
• Ministry of Finance, Notification No. 16/2024-Central Tax (Finance Act, 2024 sections 11 and 12 from 1 Apr 2025), 6 Aug 2024, https://gstcouncil.gov.in/sites/default/files/2024-09/16-2024-ct-eng.pdf
• Ministry of Finance, Notification No. 08/2024-Integrated Tax (Rate), 8 Oct 2024, as reproduced by the Karnataka Commercial Taxes Department, https://gst.kar.nic.in/Documents/General/ITR08141024.pdf
• GST Council Secretariat, Newsletter March 2026 (Finance Act, 2026 and GSTN updates), https://gstcouncil.gov.in/sites/default/files/2026-04/newsletter-march-2026.pdf
• Ministry of Finance (PIB), Recommendations of the 57th Meeting of the GST Council, 8 Oct 2026, https://www.pib.gov.in/PressReleasePage.aspx?PRID=2320934
• Ministry of Finance (PIB), Recommendations of the 56th Meeting of the GST Council, 3 Sep 2025, https://www.pib.gov.in/PressReleasePage.aspx?PRID=2163555
• CBIC, Notification No. 10/2017-Integrated Tax (Rate), reverse charge on services (entry 1), 28 Jun 2017, https://cbic-gst.gov.in/hindi/pdf/integrated-tax-rate/Notification10-IGST.pdf
• GST Council Secretariat, Consolidated Notification No. 10/2017-Integrated Tax (Rate) as amended to 1 Apr 2019, https://gstcouncil.gov.in/sites/default/files/2024-02/10-reverse_charge-igst-01.04.2019.pdf
• Income Tax Department, Income Tax Act, 2025, section 162 (Meaning of associated enterprise), https://www.incometaxindia.gov.in/w/section-162-86
• GST Council, 53rd meeting agenda with the Council approved text of amended section 2(61) and substituted section 20 of the CGST Act, https://gstcouncil.gov.in/node/5061
• Ministry of Finance, Notification No. 12/2024-Central Tax (rules 28(2), 39 and 39(1A)), 10 Jul 2024, https://gstcouncil.gov.in/sites/default/files/2024-09/central-tax-12-2024-11072024.pdf
• Ministry of Finance, Notification No. 09/2025-Central Tax (rule 39 amendments in force from 1 Apr 2025), 11 Feb 2025, https://gstcouncil.gov.in/sites/default/files/2025-04/09-2025-ct-eng.pdf
• CBIC, Integrated Goods and Services Tax Act, 2017 as enacted on 12 Apr 2017, https://cbic-gst.gov.in/aces/Documents/IGST-bill.pdf
• India Code, Integrated Goods and Services Tax Act, 2017 (updated text), https://www.indiacode.nic.in/bitstream/123456789/2251/1/A201713.pdf
• CBIC, Central Goods and Services Tax Act, 2017 (as amended to 1 Jan 2022), https://cbic-gst.gov.in/pdf/CGST-Act-2017-amended-01012022.pdf
• CBIC, Central Goods and Services Tax Rules, 2017, https://cbic-gst.gov.in/pdf/cgst-rules-30122017.pdf
• GSTN, GST portal user manual for Form GSTR-3B, https://tutorial.gst.gov.in/userguide/returns/Create_and_Submit_GSTR3B.htm