Hosting Prices, Bill Drivers and 2026 Rules
GST on web hosting and cloud services: 18%, reverse charge on foreign providers, OIDAR and TDS
18% GST on hosting and cloud in India, reverse charge on foreign providers, OIDAR, the end of equalisation levy and TDS under section 393.
Hosting and cloud infrastructure services are generally taxed at 18% GST in India. An Indian provider charges it on the invoice (CGST + SGST within your state, IGST from another state), and a registered business normally claims it back as input tax credit. If you buy from a provider outside India, the invoice usually has no Indian GST: a GST-registered buyer pays 18% IGST itself under reverse charge, while an unregistered buyer is dealing with an OIDAR supply on which the foreign provider should charge GST. The equalisation levy no longer applies to these payments, and TDS questions now sit under the Income-tax Act, 2025. This guide explains each layer with illustrative sums. It is general information, not tax advice, and part of the hosting pricing overview.
GST by who bills you
| Who bills you | GST position (general) | Input tax credit |
|---|---|---|
| Indian provider, your state | 9% CGST + 9% SGST on the invoice | Usually available to a registered business using it for taxable supplies |
| Indian provider, another state | 18% IGST on the invoice | Usually available |
| Indian billing entity of a global cloud | GST on the invoice like any Indian supplier | Usually available; check your GSTIN and place of supply are correct |
| Provider outside India, you are registered | Import of services: you pay 18% IGST under reverse charge | Usually available, after paying the tax in cash |
| Provider outside India, you are not registered | OIDAR supply to a non-taxable online recipient; the provider should charge GST | Not applicable |
Hosting and IT infrastructure provisioning are generally classified under services accounting code heading 9983 (other professional, technical and business services). Confirm the classification and rate for your exact supply on the CBIC GST site; domain registration, software licences and hardware bought with hosting may be separate supplies.
Reverse charge on foreign cloud bills
When a registered business imports a service, it is the recipient who pays IGST under reverse charge. In practice:
- Convert the foreign invoice to rupees at the applicable rate.
- Report the tax in GSTR-3B for the month and pay it in cash (as generally understood, existing credit cannot be used to pay reverse-charge tax; confirm with your CA).
- Claim the same amount as input tax credit in the same return if eligible.
- Keep the invoice and payment proof, and issue the self-invoice that the GST law generally expects a registered recipient to raise for a reverse-charge supply; check the current CBIC provisions.
Worked example (illustrative). A registered company receives a $1,200 monthly cloud invoice from a supplier abroad. At an illustrative ₹88 per dollar, the value is ₹1,05,600. IGST under reverse charge = ₹1,05,600 × 18% = ₹19,008, paid in cash in GSTR-3B. If eligible, ₹19,008 is claimed back as credit, so the net GST cost is nil, but the cash is out for the month. Use the GST and forex calculator to see the peak outflow.
OIDAR for unregistered buyers
Online information database access and retrieval (OIDAR) services include cloud and online services supplied over the internet. When the buyer in India is not registered, the foreign supplier is the person liable to pay IGST (section 14 of the IGST Act) and is expected to take a single registration in India under the simplified registration scheme for overseas OIDAR suppliers. The definitions were widened by section 160 of the Finance Act, 2023, in force from 1 October 2023 (Notification No. 28/2023–Central Tax of 31 July 2023): the words "essentially automated and involving minimal human intervention" were removed from the OIDAR definition in section 2(17) of the IGST Act, and a "non-taxable online recipient" in section 2(16) now means any unregistered person receiving OIDAR services in India, whatever the purpose. If you are unregistered and see GST on a foreign provider's invoice, this is why. If you later register, update your billing profile with your GSTIN so the supply is treated as business-to-business.
Input tax credit conditions
Credit generally requires a valid tax invoice (or proof of reverse-charge payment), receipt of the service, use for business, the supplier's filing reflected in your GSTR-2B for domestic suppliers, and payment within the allowed time. Blocked credits and personal use reduce it. Ask your CA if hosting serves both exempt and taxable activities.
Equalisation levy: no longer applicable
The 2% equalisation levy on e-commerce supplies by non-residents was withdrawn from 1 August 2024, and the 6% levy on online advertising services from 1 April 2025. Payments for cloud or hosting to foreign providers made after those dates do not attract equalisation levy. Earlier periods may still matter for old disputes; ask your CA.
TDS on hosting payments
From 1 April 2026, TDS provisions sit in section 393 of the Income-tax Act, 2025, which replaced the 1961 Act. Two situations differ:
- Indian provider. Whether TDS applies, and at what rate, depends on how the payment is characterised: for example, fees for technical services (2%), professional fees or royalty (10%), with a ₹50,000 threshold for those categories, or contract payments. Hosting characterisation is debated; agree it with your CA and the provider.
- Foreign provider. Payments to non-residents may need TDS if the income is taxable in India, considering the tax treaty with the provider's country. The Supreme Court's 2021 ruling in Engineering Analysis Centre of Excellence is widely read as holding that payments for end-user software licences were not royalty under the treaties considered, but cloud contracts differ on facts and later rulings and law changes may matter; read the judgment with your adviser. Take professional advice; forms for remittances may also be needed by your bank.
Putting it together: a sample month
Illustrative. A registered firm pays an Indian VPS host ₹4,000 + 18% GST (₹720) and a foreign cloud $300 (₹26,400 at an illustrative ₹88) by card with a 3.5% markup (₹924).
| Item | Cash out | Credit back (if eligible) |
|---|---|---|
| VPS invoice | ₹4,720 | ₹720 |
| Foreign cloud bill + card markup | ₹27,324 | – |
| Reverse-charge IGST (₹26,400 × 18%) | ₹4,752 | ₹4,752 |
| Total | ₹36,796 | ₹5,472 |
Net cost after credit: ₹31,324, of which ₹924 is the card markup (itself often carrying GST charged by the bank).
Related guides
For the forex side of a foreign bill, see USD vs INR billing. Prepaid commitments raise their own GST and accounting questions; see on-demand, reserved and spot pricing.
FAQ
Is hosting taxed at 18% after the 2025 GST rate changes?
IT and hosting services generally remained at 18% after the September 2025 rate rationalisation. Confirm on CBIC for your supply.
Do I need to charge GST if I resell hosting to clients?
If you are registered and resell hosting as part of your service, your invoice to the client carries GST. Place of supply rules apply for export clients.
Can I claim credit for GST on a foreign cloud bill paid by personal card?
Credit needs the business to be the recipient and the reverse-charge tax paid by the business. Keep the account in the business name.
What happens if I forget reverse charge?
You may owe the tax with interest. Correct it in the next return and ask your CA about the credit.
Sources
- CBIC GST — rates, reverse charge and OIDAR provisions
- GST Council — meeting recommendations
- Income Tax Department — Income-tax Act 2025 and TDS
- e-Gazette of India — official notifications
