Expanding your business beyond India’s borders can open doors to new customers, bigger markets, and exciting growth opportunities. But along with the opportunities come complex GST rules that every business—whether importing goods, exporting services, or selling digital products—needs to get right.
Since the launch of GST in 2017, India’s indirect tax system has been more unified and transparent. However, cross-border trade is still a specialist area, with its own set of rules for imports, exports, place-of-supply, and compliance. A wrong move here could lead to blocked working capital, delayed shipments, or even penalties.
In this guide, we break down the GST essentials for cross-border trade, highlight compliance requirements, and share strategies that help businesses stay tax-efficient while keeping cash flow healthy.
Why GST Matters for International Business
When you’re working across borders, GST impacts more than just your invoices—it affects pricing, profitability, and liquidity. Here’s why it’s crucial to get it right:
- Place of Supply rules determine where and how GST applies
- Accurate documentation ensures smooth Input Tax Credit (ITC) claims
- Zero-rated benefits can improve competitiveness in global markets
- Compliance avoids penalties, disputes, and operational hiccups
GST on Imports into India
1. Imports of Goods
When goods are brought into India, Integrated GST (IGST) is charged along with Basic Customs Duty (BCD).
Example:
If goods worth ₹10 lakh are imported with 10% BCD and 18% IGST:
- BCD = ₹1,00,000
- IGST = 18% of (₹10,00,000 + ₹1,00,000) = ₹1,98,000
📌 Pro Tip: IGST paid on imports can be claimed as ITC to reduce domestic GST liability—provided your documentation is in order.
2. Imports of Services
When you hire overseas consultants, purchase foreign software licenses, or avail other cross-border services, GST is payable in India under the Reverse Charge Mechanism (RCM).
- You (the recipient) pay IGST directly to the government
- ITC is available if the services are for business use
💡 Keep contracts, invoices, and proof of payment ready for audits.
GST on Exports from India
1. Export of Goods
Exports are zero-rated, meaning:
- No GST on export invoices
- Option to claim refunds of unutilized ITC
- Option to export without paying IGST using an LUT (Letter of Undertaking)
This boosts liquidity and keeps Indian exports competitive globally.
2. Export of Services
To be treated as an export, your service must meet these five conditions:
- Supplier in India
- Recipient outside India
- Place of supply outside India
- Payment in convertible foreign exchange (or permitted INR cases)
- Supplier and recipient are not the same legal entity
Like goods, export of services also enjoys zero-rating benefits.
GST on Cross-Border Digital Services (OIDAR)
If you provide or consume digital services like cloud storage, streaming, or online courses across borders, GST applies under OIDAR rules.
- B2C (unregistered Indian recipient): Foreign provider must register and pay GST in India
- B2B (registered Indian recipient): GST payable under RCM by the Indian business
Examples include Netflix subscriptions, Google Workspace, or SaaS platforms billed from abroad.
Place of Supply – The Deciding Factor
Knowing your “place of supply” ensures you apply GST correctly:
- Imports of goods: Importer’s location in India
- Exports of goods: Destination outside India
- Imports of services: Location of the recipient in India
- Exports of services: Recipient’s location outside India
Reverse Charge Mechanism (RCM) – Bringing Foreign Supplies into the GST Net
- Imports of services: Always under RCM
- Supplies from unregistered foreign sellers: May also fall under RCM
Benefit? You can claim ITC on the tax you pay, keeping compliance smooth.
Common Cross-Border GST Challenges
- Refund delays affecting cash flow
- Misclassification of goods/services
- Complex valuation including freight & insurance
- Mismatch between GST returns and customs records
Smart Strategies to Optimize GST in Cross-Border Trade
- Use LUT for exports – Avoid blocking capital in IGST
- Maintain flawless documentation – Shipping bills, contracts, payment proofs
- Get valuation right – Include all relevant costs in customs value
- Track refund timelines – Don’t lose eligible claims
- Consult GST experts – Structure your international contracts tax-efficiently
Final Word
Cross-border business under GST is all about getting the details right. With the right structure, documentation, and planning, you can avoid tax pitfalls, keep your cash flow healthy, and ensure global competitiveness.
💼 Need expert guidance?
At Aplite Advisors, we help businesses simplify GST for imports, exports, and digital trade. From RCM compliance to refund claims, our team ensures you stay compliant while maximizing tax efficiency.
📞 Call: +91-9015036021
📧 Email: info@apliteadvisors.com
🌐 Visit: www.apliteadvisors.com
