Start here: the 60-second version
If you sell an AI product to someone in India and they pay you, India wants 18% on that sale. You do not need an Indian company to comply, and there is no revenue level below which you can ignore it. The flow below is the whole decision.
- Rate: 18%, charged on top of your price to Indian consumers.
- Threshold: none. The first paying Indian user creates the obligation.
- Registration: online, Form GST REG-10, no Indian entity or PAN.
- Ongoing: one return a month, by the 20th, even in months with no sales.
- Exception: business customers who give you a GSTIN pay the tax themselves.
What this tax actually is
Three things get confused constantly. Separating them takes a minute and saves a great deal of wasted effort.
| What it taxes | Does it apply to you? | |
|---|---|---|
| GST (OIDAR) | The sale of your service to a person in India | Yes, if you have paying Indian users. This is the whole subject of this page. |
| Income tax | Your company's profits | Generally no, unless you create a taxable presence in India — see section 11. |
| Tax treaty | Allocates income-tax rights between two countries | Irrelevant here. Treaties cover income tax, not GST. |
"OIDAR" is simply the label India uses for digital services supplied over the internet with little or no human involvement in delivery. Software and cloud subscriptions, APIs, apps, hosted models, online advertising and digital content all sit inside it. If a human does the substantive work and the internet is only the delivery route — bespoke consulting, a person reviewing each output — that is a different analysis.
Does it apply to your product?
Most AI business models land inside the rules. Here is where each one sits.
| What you sell | Covered? | What to watch |
|---|---|---|
| Consumer subscription (chat assistant, creative tool) | Yes | The clearest case. Charge 18% on conversion to paid. |
| API access, usage-based or per-token | Yes | Each billing cycle is its own supply. Re-check GSTIN each time. |
| Seat-based team or enterprise plan | Yes | Seat additions mid-term are separate supplies. |
| Agent or workflow product that calls other tools | Yes | Still automated delivery. The chain behind it does not change your supply. |
| Model weights downloaded and self-hosted by the customer | Usually yes | Delivered digitally over the internet. Licence terms matter — take advice if this is your main line. |
| Bespoke model training delivered by your engineers | Often no | Substantive human involvement points away from OIDAR, but a mixed contract needs splitting. |
The money: what you charge and what you keep
This is where founders get caught, because the decision looks like tax and behaves like pricing.
GST is designed to be added to your price and collected from the customer. You are a collector, not the payer — unless you choose to absorb it, in which case you are.
| Approach | Indian customer pays | You remit | You keep |
|---|---|---|---|
| Add on top — $20 plan, tax added | $23.60 | $3.60 | $20.00 |
| Absorb it — India price stays $20 | $20.00 | $3.05 | $16.95 |
If the price is treated as including tax, the tax is backed out at 18/118, which is why absorbing costs you about 15% of India revenue rather than 18%. On a $20 plan that is roughly $3 per user per month — a real number once you have a few thousand Indian subscribers.
Business customers work differently
Roughly half of a typical AI company's India revenue is business customers, and they follow a different route.
If your Indian customer is registered for GST and gives you their GSTIN — a 15-character identifier — you do not charge them tax. They account for it themselves under what India calls reverse charge, and because they are a registered business, they can usually recover it. You still report the sale in your monthly return; you simply do not collect the 18%.
If they do not give you a GSTIN, you treat them as you would a consumer: charge 18% and remit it.
Free tiers, trials and when the clock starts
Almost every AI company launches with a free tier. The rule here is simple and worth getting exactly right.
A free tier or trial creates no GST obligation. Nothing is being supplied for payment, so there is nothing to tax. The obligation starts at the exact moment a specific Indian user converts to a paid plan — not at signup, not at trial start, and not when India becomes commercially interesting.
The practical consequence of a promotional India price is volume. Low price points are designed to convert at scale, so the month a promotion works is the month a theoretical obligation becomes a real and quantified one.
Do you need an Indian company?
No — and incorporating one does not remove the obligation either. This is the most commonly misunderstood point on this page.
| Who contracts with and invoices the Indian customer | What follows |
|---|---|
| Your foreign company, selling directly | OIDAR supply. The foreign company registers on REG-10 and files monthly. No input tax credit. |
| An Indian subsidiary you set up | Ordinary Indian GST registration, standard returns, input tax credit available, heavier compliance. |
| Both, for different customers | Both obligations run at once. Each sale follows whichever entity made it. |
If a partner sells your product
Distribution in India increasingly runs through telecoms, app marketplaces and resellers. That moves the question of who is making the sale.
| Arrangement | What happens commercially | Who handles GST |
|---|---|---|
| Resale / bundle | The partner buys access and includes it in its own plan, sets the end price and bills the user | Your sale is to the partner. With their GSTIN, reverse charge applies. They handle the end user. |
| Listing / facilitation | The partner lists your product; the user is clearly buying from you; payment may route through them | Your sale is to the end user. Whether the platform is treated as supplier depends on how it behaves. |
| Referral | The partner sends users to you; you contract and bill directly | Yours, in full. Their referral fee is a separate inbound cost. |
India decides this on conduct — who sets the price, who owns the customer relationship, who takes the money, who the user thinks they bought from — not on what the contract calls the parties. An agreement describing a partner as a reseller will not produce resale treatment if you still set the price and bill the user.
How to register, step by step
The process is genuinely light. Allow two to three weeks from decision to being able to invoice correctly.
Gather five things
Certificate of incorporation, passport copies for directors or promoters, your home-country tax identification number, and authorisation for whoever signs — plus an Indian mobile number for verification. No Indian PAN, no Indian address, no local director, and no Indian bank account.
Check the name matches everywhere
The entity name must read identically across the incorporation certificate, passports and the application. Inconsistent spellings are the single most common cause of delay.
Apply on Form GST REG-10
This is the OIDAR-specific form — not REG-09, which covers a different category. You get a temporary reference number, complete the application, then receive an application reference number for tracking.
Answer any query within the window
If the officer asks for clarification you typically have about seven working days. Missing it usually means starting again rather than getting an extension, so diarise it the day you apply.
Receive your GSTIN
Approval typically takes seven to fifteen working days once a complete application is in. You are expected to apply before you start supplying, not after — so start about three weeks before your India launch.
What you do every month
Once registered, the ongoing burden is one short return. The failure modes are predictable.
Separate your India sales
Split the month's Indian revenue into sales to unregistered customers (where you charged 18%) and sales to GSTIN-holding businesses (reverse charge). Both get reported; only the first carries your tax.
Convert to rupees consistently
Use one documented exchange-rate method and apply it the same way every month. Inconsistent rates between periods are an easy thing for a reviewer to pick up.
Pay, then file
The tax is paid through the portal before the return can be filed, not after. Leaving payment to the deadline day is how filings slip.
File GSTR-5A by the 20th
Every month, including months with no Indian sales — a nil return is still required. Filing is sequential, so one skipped month blocks every month after it.
If you are already late
Many companies discover this page after selling into India for a year or two. The position is recoverable, and the maths favours acting now.
The liability already exists from your first Indian sale. Staying unregistered does not pause it. Three charges run together, not as alternatives:
| Charge | What drives it |
|---|---|
| Late fee | Per return, per day late, capped |
| Interest | Around 18% a year on unpaid tax, calculated daily — driven purely by elapsed time |
| Penalty | Tiered by conduct: genuine error is treated differently from deliberate evasion |
What this guide does not cover
Said plainly, because an India launch raises questions outside GST and you should know where the edge of this page is.
- Permanent establishment. If you hire in India, open an office, or have people concluding contracts there, you may create a taxable presence for income tax. Different tax, different advisers.
- Transfer pricing. If an Indian subsidiary provides services to the parent, the price between them has to be defensible.
- Withholding on payments. Payments between India and your entity can attract withholding under the income-tax rules.
- Data protection and sector rules. Outside tax entirely, and outside our scope.
Checklist
If you do nothing else, do these in this order.
- Decide which entity sells to Indian customers, and write it down
- Decide whether 18% is added on top of your price or absorbed — model both
- Build GSTIN capture and State capture into checkout
- Make "first paid conversion by country" a tracked system event
- Apply on Form GST REG-10 about three weeks before launch
- Set a recurring monthly task: pay, then file GSTR-5A by the 20th, nil months included
- If a partner distributes your product, settle supplier status in the contract
- Assign an owner for PE, transfer pricing, withholding and data questions
A printable version of this is on the checklist page.
Common questions
Does India's GST apply to an AI company with no office or entity in India?
Yes, if you have paying users in India. India taxes the supply, not your presence, so having no Indian company, office, bank account or staff does not place you outside the rules. The charge is GST — an indirect tax on the sale — not income tax on your profits, which is why your home country's tax treaty does not remove it. There is no minimum revenue before it applies: one paying Indian consumer creates the obligation. The rate is 18%, charged on top of your price. You register online using your home-country tax ID, with no Indian entity required, and then file a short return every month.
We only sell API access to developers. Is that still covered?
Yes. API access is a digital service delivered over the internet with minimal human intervention, which is exactly what the rules cover. What changes with API billing is not whether GST applies but how often you have to decide: usage-based billing creates a series of supplies rather than one, so each billing cycle needs its own treatment. A developer who signs up without a GSTIN is treated as a consumer and you charge 18%. If that same developer later supplies a valid GSTIN, charges from that point move to reverse charge and they account for the tax. Re-check status at each billing event, not only at signup.
What happens if we have been selling in India for two years without registering?
The liability already exists and it does not go away by staying unregistered — it accrues from the first sale you made while unregistered. Three charges then run together rather than as alternatives: a late fee per return, interest on the unpaid tax at around 18% a year calculated daily, and a penalty. Registering now does not create the past liability; what it changes is your position on the penalty, because coming forward before any enquiry generally supports the lower end of the range. Interest keeps accruing either way, so delay has a running cost that no later argument recovers.
Can we just add 18% to the price, or does it come out of our revenue?
Either, but you must decide deliberately. GST is designed to be charged on top of your price and collected from the customer, so a $20 plan becomes $23.60 to an Indian consumer and you remit the $3.60. If instead you keep the India price at $20, the tax is treated as included within it, so you remit roughly $3.05 and keep about $16.95 — a 15% cut to your India revenue. Neither is wrong, but the second is a pricing decision disguised as a tax decision, and it is better made before launch than discovered at the first filing.