By Naraway
In this article
In 2017-18, India collected Rs 80 crore of GST from overseas companies selling online services to Indian users. By 2023-24 the figure was Rs 2,675 crore, more than 33 times as much.
Part of that growth is a bigger market. Most of it is a wider net. Two changes in October 2023 turned a narrow rule for automated downloads into a tax on almost any service delivered over the internet.
Sources: India Briefing; CNBC-TV18 via Angel One.
What Changed in October 2023
Until then, a service only counted as OIDAR if it was "essentially automated" with minimal human intervention. An online course with live tutors or a design tool with human review could argue it was outside. That test was removed by the Finance Act 2023.
The same change ended the exemption for services sold to government bodies and to individuals for non-business use. From 1 October 2023, the question is no longer whether a person was involved in delivering the service. It is whether the service reached an Indian user over the internet.
How GST Decides a Customer Is Indian
The law does not rely on what the customer says. A recipient is treated as being in India if any two of these signals point there and do not contradict each other:
- The address the customer uses on the internet
- The country that issued the card used to pay
- The customer's billing address
- The IP address of the device used
- The country of the customer's bank account
- The country code of the SIM card
- The location of a fixed landline used for the service
Source: Section 13, IGST Act, via India Briefing.
For a product with millions of users, that test is applied to every sale. Pricing, checkout and invoicing have to carry the data that proves which side of the line each customer falls on.
Consumers and Businesses Are Taxed Differently
| Indian customer | Who pays the GST |
|---|---|
| Consumer, or a business not registered for GST | The overseas supplier: registers, charges 18% IGST, files monthly |
| Business registered for GST | The Indian business, under reverse charge |
Most software companies have both kinds of customers, often on the same price page. The supplier is expected to tell them apart, usually by the customer's GST number, and to treat the two groups differently on the invoice.
The Enforcement Is Moving to Payments
By May 2025, 574 overseas companies had registered as OIDAR suppliers, among them Canva, Udemy, Blackboard and OVH. India's GST intelligence directorate was reported at the same time to be targeting unregistered sellers in online education, cloud software, AI tools, design services, cloud storage and digital advertising. Its reported methods: asking large Indian companies which foreign platforms they pay, collecting transaction data from banks and RBI, and pressing payment processors such as Razorpay, Cashfree and Pine Labs to block payments to unregistered sellers.
Why the Tax Is Worth Paying
The 18% is collected on a market that pays online at a scale few others match: 24.07 billion UPI payments in September 2026 and 1.11 billion internet subscribers. For a software business, India is often the largest market by users and one of the fastest-growing by revenue.
Registration itself is a short form. What takes judgment is the rest: which products and plans count as OIDAR, how mixed consumer and business customers are separated, what the invoice must carry, and what to do about sales already made before registering.
Part of Naraway's research series India Market Entry in 2026.
In short
OIDAR (online information and database access or retrieval) services are services delivered over the internet, such as software, cloud storage, streaming, online courses and digital advertising. An overseas supplier selling them to Indian consumers must register for GST through Form REG-10, charge 18% IGST and file Form GSTR-5A by the 20th of every month, with no turnover threshold. Sales to GST-registered Indian businesses are taxed under reverse charge instead. OIDAR collections rose from Rs 80 crore in 2017-18 to Rs 2,675 crore in 2023-24.
- OIDAR GST collections rose from Rs 80 crore (2017-18) to Rs 2,675 crore (2023-24).
- 574 overseas companies, including Canva and Udemy, were registered as OIDAR suppliers by May 2025.
- Since 1 October 2023, the 'minimal human intervention' test is gone and the government exemption has ended.
- A customer is treated as Indian if two of seven signals, such as card, IP address or SIM, point to India.
- Enforcement now runs through payments: processors were reported to be pressed to block unregistered sellers.
Sources
Frequently Asked Questions
What is OIDAR under GST?
Services whose delivery is mediated by information technology over the internet or an electronic network, under Section 2(17) of the IGST Act. Since 1 October 2023 the service no longer has to be essentially automated with minimal human intervention.
Do foreign SaaS companies need GST registration in India?
Yes, if they sell to Indian consumers or other unregistered recipients. They register through Form GST REG-10 and pay 18% IGST. There is no turnover threshold.
What return does a foreign OIDAR supplier file?
Form GSTR-5A, by the 20th of the following month.
Who pays GST when an Indian business buys foreign software?
The Indian business, under reverse charge, if it is registered for GST.
How does GST decide that a customer is in India?
The customer is treated as being in India if any two non-contradictory signals point there, from: the address used on the internet, the card's country of issue, the billing address, the device's IP address, the bank account, the SIM's country code and a fixed landline.
