Introduction
API subscriptions and software platform charges — access to APIs, platform fees, and usage-based charges — are common in the digital economy. The question arises: How are API subscriptions and platform charges taxed under GST?
This guide explains the classification, GST rate, and compliance obligations.
Legal Framework: Classification of API and Platform Services
SAC Codes
- SAC 998314: Licensing services for the right to use computer software and databases.
- SAC 998315: Licensing services for the right to use other IT products.
- SAC 998313: IT infrastructure provisioning services.
GST Rate
API subscriptions and software platform charges attract 18% GST.
Place of Supply Rules
Domestic Customers
For domestic customers, the place of supply is the location of the recipient.
Foreign Customers
For foreign customers, the supply is treated as export of services and is zero-rated, provided the conditions under Section 2(6) of the IGST Act are met.
Import of API Services
For API services purchased from foreign suppliers, the import is subject to reverse charge.
ITC on API and Platform Charges
API subscriptions and platform charges used for business purposes are eligible for ITC, subject to the conditions under Section 16.
Documentation Requirements
- Tax Invoice: With GSTIN, SAC code, and applicable GST rate.
- Service Agreement: Documentation of the service terms.
- Payment Records: Proof of payment.
Best Practices
- Determine Place of Supply: Assess the location of the recipient.
- Apply RCM for Imports: Pay IGST under RCM for foreign API services.
- File Returns on Time: Ensure timely filing.
- Claim ITC: Claim ITC on business-use API services.
- Seek Professional Assistance: For complex arrangements.
Conclusion
API subscriptions and software platform charges attract 18% GST. Import of API services is subject to reverse charge. Proper documentation and ITC reconciliation are essential.
Using API subscriptions or software platforms? Anuj Desai & Associates provides expert guidance on GST compliance. Contact us today.
Contact us:
- Email: office@anujdesaiassociates.com
- Phone: 9619456656
- Website: https://anujdesaiassociates.com
- LinkedIn: linkedin.com/in/ca-anuj-desai-122547230