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Last Updated: June 2026
β±οΈ Reading Time: ~7 minutes
π Topic: GST β’ RCM β’ Import of Services
βοΈ Acts: IGST Act 2017 β’ Income-tax Act 1961
β±οΈ Reading Time: ~7 minutes
π Topic: GST β’ RCM β’ Import of Services
βοΈ Acts: IGST Act 2017 β’ Income-tax Act 1961
β‘ Quick Reference β GST on Foreign Consultancy
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Governing Law
Section 5(3), IGST Act 2017
Notification 10/2017-IT(Rate)
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Who Pays GST?
Indian Recipient (RCM)
Foreign consultant does not charge
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GST Rate
18% IGST
On consultancy fee / transaction value
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Time of Supply
Earlier of payment or 60 days from invoice
Section 13(3), CGST Act
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GSTR-3B Reporting
Table 3.1(d) + Table 4(A)
Liability + ITC same period
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Income Tax
Section 195 + Form 15CA/15CB
Separate β before every remittance
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π Table of Contents
- Practical Scenario β Is GST Payable?
- What Qualifies as Foreign Consultancy?
- Relevant Legal Provisions
- Reverse Charge Mechanism β How it Works
- GST Computation with Example
- Time of Supply
- GSTR-3B Reporting & ITC
- TDS under Section 195
- Form 15CA and Form 15CB
- Documents to Maintain
- Common Mistakes to Avoid
- Pre-Payment Compliance Checklist
Indian businesses frequently engage foreign consultants for management advisory, technical services, legal opinions, business restructuring, software implementation, digital transformation, marketing strategy, and international expansion.
β οΈ
GST on Foreign Consultancy ServicesΒ Common Misconception: Many businesses assume GST is not applicable when the foreign consultant does not charge GST. This assumption is incorrect in most cases.
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GST on Foreign Consultancy Services : Practical Scenario β Is GST Payable?
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Answer: Yes, in most cases. The transaction generally qualifies as an import of services and IGST becomes payable under Reverse Charge Mechanism (RCM). The Indian company β not the foreign consultant β is responsible for paying the GST.
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What Qualifies as Foreign Consultancy?
Foreign consultancy services cover a broad range of professional advisory services. GST implications remain largely similar irrespective of the consultancy type.
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Management Consultancy
Business strategy & restructuring
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Legal & Tax Advisory
International tax, compliance opinions
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Technical & IT Consulting
ERP implementation, architecture
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HR & Organisation
Workforce planning, HR transformation
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Engineering Advisory
Project management, design consulting
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Digital Transformation
Cloud migration, digital strategy
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Relevant Legal Provisions for GST on Foreign Consultancy Services
Section 2(11) β Import of Services
π Section 2(11), IGST Act 2017
Import of services means a supply where all three conditions are simultaneously satisfied:
| 1 Supplier of service is located outside India |
| 2 Recipient of service is located in India |
| 3 Place of supply is in India |
Section 7(4) β Inter-State Supply
π Section 7(4), IGST Act 2017
Import of services is treated as an inter-State supply β therefore IGST becomes applicable (not CGST + SGST).
Section 13(2) β Place of Supply
π Section 13(2), IGST Act 2017
Where either the supplier or the recipient is located outside India, the place of supply is the location of the recipient. Since the Indian company is the recipient, the place of supply is India β confirming GST applicability.
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GST on Foreign Consultancy Services : Reverse Charge Mechanism β How it Works
βοΈ Section 5(3), IGST Act 2017
Import of services is covered under Reverse Charge through Notification No. 10/2017-Integrated Tax (Rate). The Indian recipient is solely responsible for self-assessing and paying IGST.
Step-by-Step RCM Process
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π Foreign Consultant
raises invoice No Indian GST charged
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β |
ππ³ Indian company
self-assesses IGST @18% on fee
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β |
π³ Deposit via
Cash Ledger Cannot use ITC to pay
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β |
π Report in
GSTR-3B 3.1(d) Same tax period
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β |
β
Claim ITC in
Table 4(A) Net cash impact = Nil
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π‘
Key point: The foreign consultant has no obligation to register for GST in India or charge any Indian tax. The entire compliance burden rests with the Indian recipient company.
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GST on Foreign Consultancy Services : GST Computation β Worked Example
π§ IGST Computation under RCM
| Foreign Consultancy Fee | βΉ10,00,000 |
| Applicable GST Rate (IGST) | 18% |
| IGST Liability under RCM (βΉ10,00,000 Γ 18%) | βΉ1,80,000 |
Amount to deposit via Electronic Cash Ledger
βΉ1,80,000
βΉ1,80,000
Accounting Entries
π Journal Entries
On Receipt of Consultant Invoice
Consultancy Expense A/c Β Β Β Β Β Dr.βΉ10,00,000
To Foreign Consultant A/cβΉ10,00,000
GST Liability under RCM
RCM IGST Input A/c Β Β Β Β Β Β Β Β Β Dr.βΉ1,80,000
To IGST Payable A/c (RCM)βΉ1,80,000
Payment of GST via Cash Ledger
IGST Payable A/c (RCM) Β Β Β Β Dr.βΉ1,80,000
To Bank A/cβΉ1,80,000
On Availing ITC
IGST Credit Ledger Β Β Β Β Β Β Β Β Β Dr.βΉ1,80,000
To RCM IGST Input A/cβΉ1,80,000
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GST on Foreign Consultancy Services –
Time of Supply
βοΈ Section 13(3), CGST Act 2017
Time of supply is the earlier of: (1) date of payment, or (2) sixty days from invoice date. If neither is determinable, date of entry in books of account applies.
| 1 Date of Payment β date on which payment is made to the foreign consultant |
| 2 60 Days from Invoice Date β if payment is not made within 60 days |
| 3 Date of Entry in Books β fallback when neither above event is determinable |
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GST on Foreign Consultancy Services-
Reporting in GSTR-3B & Claiming ITC
Step 1 β Report Liability in Table 3.1(d)
Table 3.1(d) β Inward supplies liable to reverse charge
Report the taxable value and IGST payable on the foreign consultancy service here.
Report the taxable value and IGST payable on the foreign consultancy service here.
Step 2 β Claim ITC in Table 4(A)
Table 4(A) β Eligible ITC β All Other ITC
Claim βΉ1,80,000 IGST paid under RCM as ITC in the same period. Net cash outflow = Nil for eligible businesses.
Claim βΉ1,80,000 IGST paid under RCM as ITC in the same period. Net cash outflow = Nil for eligible businesses.
ITC Eligibility
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β
Generally ITC Eligible
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π« ITC Blocked / Review Needed
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β
Net Impact: For most businesses with ongoing output IGST liability, the RCM GST paid is immediately recovered as ITC in the same month β making the effective cash outflow nil.
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TDS under Section 195 β A Separate Compliance
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Critical misconception: “GST paid under RCM means no TDS is required.” This is incorrect. GST and Income Tax are entirely separate compliances. Paying IGST under RCM does not discharge TDS obligations.
βοΈ Section 195, Income-tax Act 1961
Whenever a payment is made to a non-resident and the amount is chargeable to tax in India, TDS implications must be independently evaluated. The obligation arises regardless of GST compliance.
Key Questions Before Remittance
| 1 Is the consultancy fee taxable in India under the Income-tax Act, 1961? |
| 2 Does the applicable DTAA provide relief or a reduced rate? |
| 3 Is withholding tax (TDS) applicable, and at what rate? |
| 4 Has a Tax Residency Certificate (TRC) been obtained? |
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Professional advice from a qualified CA should be obtained before every foreign remittance to evaluate Section 195 applicability and applicable DTAA benefits.
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GST on Foreign Consultancy Services:
Form 15CA and Form 15CB
Foreign consultancy payments frequently require compliance under Rule 37BB of the Income-tax Rules, 1962 through Form 15CA and Form 15CB, which must be filed before the remittance is made.
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π Form 15CA
Online Declaration by RemitterFiled online on the Income-tax portal by the Indian company before making the payment. Certifies the nature and taxability of the remittance. |
ποΈ Form 15CB
CA Certificate
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Concurrent Compliance β GST + Income Tax
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Penalty Alert: Failure to file Form 15CA/15CB before remittance can attract a penalty of βΉ1,00,000 per default under Section 271-I of the Income-tax Act.
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GST on Foreign Consultancy Services:
Documents to Maintain
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βConsultancy Agreement / Contract
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βEngagement Letter
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βForeign Consultant’s Invoice
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βBank Remittance Advice
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βSWIFT Confirmation
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βFIRC (Foreign Inward Remittance)
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βForm 15CA filing acknowledgement
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βForm 15CB (where applicable)
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βRCM Self-Assessment Working
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βGSTR-3B filings (all periods)
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βITC Register Entries
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βTax Residency Certificate (TRC)
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GST on Foreign Consultancy Services :
Common Mistakes to Avoid
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1
No GST on invoice = No GST liability
Wrong β Indian company must self-assess and pay IGST under RCM regardless of foreign invoice content.
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2
Paying RCM but forgetting ITC
ITC must be separately claimed in Table 4(A) of GSTR-3B β it does not auto-credit.
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Ignoring Section 195 / TDS
RCM GST payment does not replace TDS. Both are independent β evaluate Section 195 separately.
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Remitting without Form 15CA/15CB
Form 15CA must be filed before payment. Post-facto filing is not permissible.
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No consultancy agreement
Absence of proper agreement makes it difficult to defend nature of payment during assessments.
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Wrong tax period for RCM
RCM must be discharged in the correct period per Section 13(3). Wrong period attracts interest @18% p.a.
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GST on Foreign Consultancy Services : Pre-Payment Compliance Checklist
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Complete Before Every Foreign Consultant Payment
- Verify and execute the consultancy agreement
- Determine place of supply (confirm it is India)
- Calculate RCM / IGST liability @18% on consultancy fee
- Deposit IGST via electronic cash ledger by GSTR-3B due date
- Report in GSTR-3B Table 3.1(d) in the correct tax period
- Claim eligible ITC in Table 4(A) of the same GSTR-3B
- Evaluate TDS applicability under Section 195
- Check applicable DTAA provisions β obtain TRC from consultant
- Obtain Form 15CB from CA where required
- File Form 15CA on the income-tax portal before remittance
- Retain all documents β invoice, SWIFT, agreement, 15CA/15CB
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Legal References
Section 2(11), 5(3), 7(4), 13(2) β IGST Act 2017 β’ Section 13(3), 16, 17(5) β CGST Act 2017 β’ Notification No. 10/2017-Integrated Tax (Rate) β’ Section 195 β Income-tax Act 1961 β’ Rule 37BB β Income-tax Rules 1962 β’ Section 271-I β Penalty for non-filing of Form 15CA/CB
Section 2(11), 5(3), 7(4), 13(2) β IGST Act 2017 β’ Section 13(3), 16, 17(5) β CGST Act 2017 β’ Notification No. 10/2017-Integrated Tax (Rate) β’ Section 195 β Income-tax Act 1961 β’ Rule 37BB β Income-tax Rules 1962 β’ Section 271-I β Penalty for non-filing of Form 15CA/CB
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Frequently Asked Questions for GST on Foreign Consultancy Services
π―GST on Foreign Consultancy Services :Β Key Takeaways
Foreign consultancy services trigger simultaneous obligations under two different laws. Here is what every Indian business must remember:
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πIGST is payable under RCM by the Indian company β the foreign consultant does not charge Indian GST
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πReport in GSTR-3B Table 3.1(d) in the same period as the time of supply per Section 13(3)
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π°Claim ITC in Table 4(A) the same month β for eligible businesses, net cash impact is nil
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β οΈRCM GST payment does NOT eliminate TDS u/s 195 β both are separate, mandatory compliances
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πObtain Form 15CB and file Form 15CA before every foreign remittance β penalty βΉ1L per default
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ποΈMaintain agreement, invoice, SWIFT, GSTR-3B filings, Form 15CA/CB and ITC records for audits
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This article is for general informational purposes only and does not constitute legal, tax or professional advice. Readers should consult a qualified Chartered Accountant or tax advisor for guidance specific to their transactions.