When does a free trial create an India GST obligation?

Not while it is free. A free trial or freemium tier involves no consideration from the Indian user, so there is nothing being supplied for GST purposes and no liability arises. The obligation begins at the exact moment a specific Indian user converts to a paid plan, and it is that conversion event, not the signup date or trial start, that your systems need to track. The practical risk runs in both directions. A large Indian free-tier base can make exposure look alarming when it is in fact nil. Equally, tracking signups rather than conversions can leave genuine paid customers unbilled for tax.

How is an annual subscription paid upfront treated?

The tax point generally falls when the payment is received and invoiced, not spread across the twelve months of service. The full 18% on the whole contract value therefore falls into the return for the period in which payment was received. This is the point where finance teams most often go wrong, because revenue recognition for accounting spreads the same contract across the service period, and it is tempting to let that treatment drive the GST filing. They are separate questions. Where a material share of your India revenue comes from annual upfront contracts, a single signing can create a disproportionately large liability in one month, which is worth planning for in cash-flow terms.

AI Company India Entry: Tax Checklist

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It is laid out to print cleanly as a one-page working checklist.

Read the full guide

How to use this

Work top to bottom. Everything above the launch line should be settled before your first paid Indian customer, because the obligation starts there rather than at a revenue milestone. Items are tax only — the final group lists what sits outside our scope and still needs an owner.

The checklist

Decide the structure

Before you price

Confirm the product is an OIDAR service — delivered online, minimal human intervention

Decide which legal entity will contract with and invoice Indian customers

If an Indian subsidiary exists or is planned, record which customers it serves and which the foreign entity serves

Confirm whether any distribution partner (telecom, marketplace, reseller) sits between you and the end user

Register

At least 2–3 weeks before first supply

Gather incorporation certificate, director passports, home-country tax ID, bank details

Check the entity name is spelled identically across every document

File Form GST REG-10 — no Indian PAN, entity or office required

Decide whether to appoint an Indian authorised representative (optional)

Diarise a 7-working-day response window in case a clarification notice issues

Build it into billing

Before launch

Add GSTIN capture at checkout for business customers, clearly and prominently

Re-check GSTIN status at every billing event, not only at signup

Track paid conversions by customer location as a system event, separate from signups

Capture the customer's State for Indian customers, and record it on the invoice

Retain location evidence — billing address, IP, payment instrument, SIM country

Model 18% into the India price rather than absorbing it after launch

Run it monthly

From the first supply

File GSTR-5A by the 20th of the following month, every month

File a nil return in any month with no Indian supplies

Confirm the prior month filed successfully before attempting the current one

Remember there is no input tax credit — the 18% is remitted in full

Recognise annual upfront contracts at the point of payment, not spread across the term

Not GST — assign an owner

In parallel

Permanent establishment risk, if you hire or incorporate in India

Transfer pricing between the foreign entity and any Indian subsidiary

Withholding on cross-border payments

Data protection and any sector-specific rules for your product

These are outside our scope as a GST practice — they still need someone accountable

The four assumptions that cause the most damage

Each of these is wrong

"We will formalise India once it is material." There is no threshold. The obligation exists from the first paid Indian user.
"Our Indian subsidiary covers it." Only for the supplies that subsidiary actually makes. Supplies invoiced by the foreign entity remain OIDAR supplies.
"Our free tier means we have Indian users but no obligation." True until the first conversion, and false the moment after.
"Our partner handles the tax." Sometimes true, often not. Settle supplier status in the contract rather than assuming it.

AI Company India Entry:The Tax Checklist