GST on Services Bought From Abroad in ERPNext: Reverse Charge, Self-Invoice and ITC (2026)

I am Manoj at MithTech, a team of Frappe specialists in Bengaluru. The code below is from India Compliance v16.10.1 and ERPNext v16.50.0, read on 13 October 2026.

What counts as an import of services under GST?

Three things must all be true (IGST Act s.2(11)):

1. The supplier of the service is located outside India.
2. You, the recipient, are located in India.
3. The place of supply of the service is in India.

Typical bills: a software subscription, cloud hosting, online ads, an overseas freelancer's design work. Any one condition can fail. A supplier with a branch in India may be located in India. A service performed abroad may have its place of supply abroad. Read the entity on the bill, not the brand.

Imported services are inter-State supplies (s.7(4)). So the tax is IGST, never CGST plus SGST.

Skimmable summary: an import of services needs a foreign supplier, an Indian recipient and an Indian place of supply. The tax is IGST.

Who pays the GST: you or the foreign supplier?

Usually you, if you hold a GSTIN. Reverse charge on import of services means the recipient pays: section 5(3) of the IGST Act lets the Government move the tax to the recipient by notification. Entry 1 of notification 10/2017-Integrated Tax (Rate) does that for any service supplied by a person in a non-taxable territory to anyone other than a non-taxable online recipient.

Online services have their own definition. OIDAR means online information and database access or retrieval services (s.2(17)). It lists advertising on the internet, cloud services, software and digital data storage. Since 1 October 2023 the test is whether delivery is mediated by information technology over the internet or an electronic network and the nature of the service makes its supply impossible to ensure without information technology (s.2(17), as amended by Act 8 of 2023, s.160, which removed 'essentially automated and involving minimal human intervention'). Also since 1 October 2023 a non-taxable online recipient is any unregistered person who receives OIDAR in India (s.2(16)). The test is registration, not whether the buyer is a consumer or a business. A person registered only to deduct tax at source (CGST Act s.24(vi)) counts as unregistered (Explanation to s.2(16)). Two cases follow.

You have no GSTIN: the foreign supplier pays. Section 14(1) makes the supplier liable for the IGST on OIDAR sold to a non-taxable online recipient, and s.14(2) makes it register under the Simplified Registration Scheme. Entry 1 of notification 10/2017 leaves a non-taxable online recipient out, so reverse charge under s.5(3) does not fall on you. That holds for an unregistered company buying SaaS, cloud or online ads as much as for a consumer. Registering and paying is the supplier's duty, whether or not the bill shows an Indian GSTIN. If you register later, the registered case that follows applies to you.

You have a GSTIN: you pay. A registered business, other than one registered only to deduct tax at source, is not a non-taxable online recipient, and entry 1 has no exception for a supplier that holds an Indian registration. On those words an OIDAR bill to you falls under entry 1, and you pay. The Rules agree: since 1 October 2023 table 5B of FORM GSTR-5A lists OIDAR supplies to registered persons as tax they pay on reverse charge basis (notification 51/2023-Central Tax).

Pick your case below. The tool computes no tax. It names who pays, the documents, the ERPNext settings and the return tables.

Reverse charge. It is yours. Entry 1 of notification 10/2017 has no exception for a supplier that holds an Indian registration, and s.14 makes the supplier liable only for OIDAR sold to a non-taxable online recipient, which a registered business is not. The Rules say the same. Rule 64, as substituted by notification 51/2023-Central Tax from 1 October 2023, has an OIDAR provider file FORM GSTR-5A for supplies "to a non-taxable online recipient ... or to a registered person other than a non-taxable online recipient". Table 5B of that form is for supplies to registered persons "on which tax is to be paid by the said registered persons on reverse charge basis", and it lists the recipient's GSTIN and the taxable value. Table 7 of the form takes the supplier's tax liability from tables 5, 5A, 5D and 5E, not from 5B.

A bill with a GSTIN starting 99 and no IGST. This is the case the Rules expect: the supplier charges no tax and may note that reverse charge applies. You pay the tax, with the steps below. Two documents need care. The payment voucher is due whatever the supplier's registration (s.31(3)(g)). Whether you issue a self-invoice is a question for your CA, and the section on documents says why.

The IGST on top. If the bill charged IGST, that is the open part. CGST Act s.16(2)(aa) wants the supplier to have furnished the invoice in its statement of outward supplies, with the details communicated to you under s.37. CGST Rules r.59(1) leaves a person referred to in s.14 out of FORM GSTR-1, and table 5B has your GSTIN and the taxable value with no tax amount. Table 5B does not reach your GSTR-2B. Notification 12/2024-Central Tax of 10 July 2024 substituted that form, and its heading names the sources as FORM GSTR-1/IFF including e-commerce supplies, GSTR-1A, GSTR-5, GSTR-6 and import data from ICEGATE. GSTR-5A is not among them. Whether table 5B reaches your GSTR-2A we did not establish, and any later change to FORM GSTR-2B is for your CA.

The software. India Compliance classes an Overseas Purchase Invoice with only service rows as Import Of Service, a read-only field, whether or not Is Reverse Charge is ticked. That sends the credit to table 4(A)(2) (overrides/purchase_invoice.py, lines 158 to 169; utils/init.py, lines 592 to 605). It reads a GSTIN starting 99 as GST Category Overseas (utils/init.py, line 520, v16.10.1), and its pull request 4895 accepts both treatments. The software does not settle the IGST question.

Questions for your CA. If the bill charged IGST: may I take credit on it under s.16(2)(aa), or should I ask the supplier for a corrected bill? Does table 5B reach my GSTR-2A, and is FORM GSTR-2B still as it was after July 2024? In which GSTR-3B table would any such credit go? If it charged none: do I issue a self-invoice, and is the supplier's own invoice my credit document under Rule 36(1)(a) rather than (b)? Write the answers in your SOP.

Where is the place of supply for a foreign service?

Section 13 decides the place of supply because the supplier is outside India (s.13(1)). Its default is your location (s.13(2)), and for OIDAR too (s.13(12)). Most foreign bills follow the default. The exceptions move the place of supply to where the work happens:

If the place of supply is outside India, the bill is not an import of services and no Indian GST is due.

India Compliance does not model these exceptions. On a Purchase Invoice it sets the Place of Supply to the state of your company GSTIN, whatever you bought (utils/init.py, lines 702 to 711). For an Overseas supplier it takes the source state as 96, so the supply is inter-State (overrides/transaction.py, lines 646 and 647). If an exception puts the place of supply abroad, choose 96-Other Countries by hand and leave Is Reverse Charge off.

What changed for foreign agents and intermediaries in 2026?

This is the point on which the sources disagree.

Until recently s.13(8)(b) put the place of supply of intermediary services at the supplier's location. For an agent abroad that meant outside India, so no Indian GST. The copy of the Act we read (as on 23 May 2025) still lists it. Section 157 of the Finance Act 2026 omits it, as Grant Thornton reports, and EY India and Shahi and Co report the omission too. We did not read the Gazette text. The place of supply then follows the default in s.13(2): your location.

Commentators agree on that. They differ on the date. EY India dates the omission from assent on 30 March 2026. Grant Thornton reaches the same date by another route: section 157 has no separate commencement date, so the General Clauses Act applies it from assent. A note from Shahi and Co dated 2 April 2026 says the date is still to be notified. We found no commencement notification in the sources we could read.

For you: a commission or fee to a foreign agent, broker or sales intermediary may now be an import of services. Which service dates it covers is your CA's call. The tool above returns "ask your CA" for agents and does not pick a side. The definition of intermediary (s.2(13)) did not change. CBIC circular 159/15/2021-GST of 20 September 2021 says how to tell (paras 3.1 and 3.4). An intermediary arranges a supply between two other parties. It does not make that supply on its own account.

Which documents do you issue: the self-invoice and the payment voucher?

Two, and both are yours, with one carve-out for a supplier that holds an Indian registration.

The self-invoice. A registered person liable under s.9(3) issues an invoice for services received from a supplier who is not registered (CGST Act s.31(3)(f)). For an import the charge is IGST Act s.5(3), not s.9(3), and IGST Act s.20 applies the CGST invoice provisions to integrated tax. A foreign vendor with no Indian registration is not registered. CBIC Circular 210/4/2024-GST, para 3.6, says so for imports from a related person abroad: issue the self-invoice and pay on reverse charge. We read s.31(3)(f) the same way for unrelated vendors. The vendor's own bill stays on file as support.

Section 31(3)(f) now says "within the period as may be prescribed". Those words came in with section 122 of the Finance (No. 2) Act 2024. Notification 17/2024-Central Tax, dated 27 September 2024, brings sections 117 and 122, among others, into force on 1 November 2024. Rule 47A, inserted by notification 20/2024-Central Tax of 8 October 2024 from 1 November 2024, sets the period: thirty days from the date of receipt of the supply. The rule names a person liable under s.9(3) or (4) of the CGST Act. For an import we read it across, as we read s.31(3)(f), through IGST Act s.20.

A supplier with a GSTIN starting 99. That supplier is registered under IGST Act s.14(2). Section 31(3)(f) asks for a self-invoice for services from a "supplier who is not registered", and its Explanation widens that only to a supplier registered solely to deduct tax at source (s.51). So whether you issue a self-invoice for such a bill, and whether the supplier's own invoice is then your credit document (Rule 36(1)(a) rather than (b)), is a question for your CA. The payment voucher is not in doubt: s.31(3)(g) does not turn on the supplier's registration.

The payment voucher. Issue it when you pay the supplier (s.31(3)(g)). Rule 52 lists its contents, ten items in the compilations we read: the supplier's name and address (and GSTIN if registered), a serial number, the date, the recipient's name, address and GSTIN, a description, the amount paid, the rate of tax, the amount of tax, the place of supply, and a signature or digital signature.

The number. Rules 46(b) and 52(b) cap the invoice and voucher numbers at 16 characters: letters, digits, dash and slash. India Compliance checks the Purchase Invoice name against that limit when Is Reverse Charge is on and there is no supplier GSTIN. It shows a message, not an error (overrides/purchase_invoice.py, lines 62 and 63). Keep your naming series short.

Credit depends on it. Rule 36(1)(b) names the s.31(3)(f) invoice as a document for claiming credit, subject to payment of the tax. Rule 36(1)(a) names an invoice issued by the supplier under s.31.

In ERPNext the Purchase Invoice is the self-invoice record, and it prints as a standard Purchase Invoice: check that print against Rule 46. India Compliance adds no payment-voucher document, so print it from the Payment Entry to the supplier and check that print against Rule 52.

When does the liability arise, and when can you claim the credit?

For reverse-charge services, s.13(3) of the CGST Act takes the earliest of three dates. IGST Act s.20(iii) applies it to integrated tax:

If none can be fixed, it is the date you enter the service in your books. For an associated enterprise abroad, it is the date you enter it or the date you pay, whichever is earlier.

Which of the second and third rows fits a foreign vendor is a reading question, and it is in the CA table for this post. The date to watch is the first. If you paid before you issued your invoice, the payment date is the earlier one.

ERPNext does not watch this for you. A Payment Entry to a supplier cannot carry GST rows (overrides/payment_entry.py, lines 85 to 89). So a payment made before you book the bill starts the liability in a month where ERPNext has recorded nothing. Book the bill in the month of the payment.

The return. The liability goes in GSTR-3B table 3.1(d). India Compliance fills it from Purchase Invoices with Is Reverse Charge ticked, by Posting Date (utils/gstr3b/gstr3b_outward_data.py, lines 127 and 145 to 158).

The credit. The main conditions:

• The tax is paid (s.16(2)(c)), from the electronic cash ledger. Credit can pay only output tax, and output tax excludes reverse-charge tax (IGST Act s.2(18), CGST Act s.2(82), s.49(3) and (4)).
• You hold the document, which is your self-invoice (s.16(2)(a), Rule 36(1)(b)), you have received the service (s.16(2)(b)) and you have filed the return under s.39 (s.16(2)(d)). For a supplier with a GSTIN starting 99, your CA names the document.
• The service is used in the course or furtherance of business (s.16(1)).
• It is not blocked by s.17(5): club membership, food and beverages, and the other listed items.
• You claim it by 30 November after the end of the financial year in which you issued your self-invoice, or before the annual return if that comes first (s.16(4); Circular 211/5/2024-GST, para 2.7). A late self-invoice means late payment of the tax, which draws interest (s.50(1)), and the circular says penal action under s.122 is possible.

You claim it in table 4(A)(2), Import of services. Instruction 5 of FORM GSTR-2B, as substituted by notification 12/2024-Central Tax, says the same: reverse charge credit on import of services is not part of that statement and is entered in table 4(A)(2) of FORM GSTR-3B. India Compliance classes the invoice as Import Of Service and sends it there (overrides/purchase_invoice.py, lines 158 to 169; utils/gstr3b/gstr3b_inward_data.py, line 25). Its ITC Claim Period defaults to the posting month (utils/itc_claim.py, lines 325 and 326), so liability and credit land in one return unless you change it. Nobody uploads this bill for you, so the reconciliation status reads Not Applicable.

A composition taxpayer still pays reverse charge, because IGST Act s.5(3) and entry 1 of notification 10/2017 apply to any registered recipient. It gets no credit (CGST Act s.10(4)). It does not file GSTR-3B for this. It reports the tax in the quarterly statement FORM GST CMP-08, in the row for inward supplies attracting reverse charge including import of services, and again in the annual FORM GSTR-4, table 4D (CGST Rules r.62(1)(ii)), due 30 June (proviso to r.62(1), notification 12/2024-Central Tax, from FY 2024-25). It pays the tax by debiting the cash ledger (r.62(2)). For a bill from a supplier with a GSTIN starting 99, the annual table is 4D (import of service), or 4B for a registered supplier: ask your CA. Check the forms against the current Rules, or ask your CA which return.

How do you record it in ERPNext?

These are the settings for GST on import of services in India Compliance, in the order you meet them.

The default template has two IGST rows, both built at 18%, the rate in India Compliance's default. Use the rate for your service, with its own template if it differs.

ERPNext posts a Deduct row as a credit (erpnext/accounts/doctype/purchase_invoice/purchase_invoice.py, line 1535, v16.50.0). India Compliance insists that the two rows cancel out. If they do not, the save stops with "Booked reverse charge is not equal to applied tax amount" (overrides/transaction.py, lines 1045 to 1114). It also refuses GST rows on a supplier with no GSTIN unless Is Reverse Charge is ticked (lines 411 to 416).

A worked example, as an illustration only. The numbers are round and the rate of 10 is assumed: it is not any real exchange rate. A bill of 1000 in the supplier's currency is 10000 in company currency. IGST at 18% is 1800.

The supplier is owed the bill value and nothing more. The 1800 sits in the RCM account until you pay the challan. Then the RCM account clears against the bank, and the Input Tax IGST balance is the credit you claim in 4(A)(2).

The rate follows rule 34(2) of the CGST Rules: the rate that generally accepted accounting principles give for the date of the time of supply. If that is your payment date and not your posting date, the rates can differ. ERPNext multi-currency setup covers how ERPNext picks and revalues the rate.

What does ERPNext leave to you?

India Compliance v16.10.1 does not do these. We read the source for each:

• Advance payments. A supplier Payment Entry rejects GST rows.
• The challan. There is no document for the cash-ledger payment.
• Automatic reverse charge for Overseas. The switch covers only Unregistered suppliers above a value threshold in GST Settings (overrides/transaction.py, lines 1589 to 1609).
• Place-of-supply exceptions and a separate self-invoice print. Neither exists.
• Documentation. The India Compliance page on purchase transactions does not cover import of services (checked 13 October 2026).

Two threads show the edges. In June 2026 a user could not move an RCM invoice's credit to a later month, and a maintainer said a newer release already allows it (discuss.frappe.io). The v16.10.1 code has no such lock. In December 2024 another user asked for a different pairing of Input and Output RCM accounts, and a maintainer replied that the workflow is not implemented (discuss.frappe.io).

How do you stop a foreign bill going in without the tick?

The silent failure is the missing tick. With no supplier GSTIN and Is Reverse Charge off, India Compliance loads no tax rows and the invoice saves with no GST (overrides/transaction.py, lines 902 to 913). Import invoices skip the "taxable item with no tax" check, so nothing warns you (lines 1893 to 1896). A client script that warns before save closes the gap. Run it as a warning for a month, then decide whether to block.

// Client Script, DocType: Purchase Invoice
frappe.ui.form.on('Purchase Invoice', {
  validate(frm) {
    const services_only = frm.doc.items.length > 0 &&
      frm.doc.items.every((i) => i.gst_hsn_code && i.gst_hsn_code.startsWith('99'));
    const abroad = (frm.doc.place_of_supply || '').startsWith('96-');
    if (frm.doc.gst_category === 'Overseas' && services_only && !abroad && !frm.doc.is_reverse_charge) {
      frappe.msgprint({
        title: __('Reverse charge not ticked'),
        indicator: 'orange',
        message: __('Overseas supplier, services only, place of supply in India. Tick Is Reverse Charge, or set the place of supply to 96-Other Countries and keep the proof.'),
      });
    }
  },
});

Two month-end checks complete it. List the Purchase Invoices from Overseas suppliers with Is Reverse Charge off. List the payments to Overseas suppliers dated before their invoice's posting month. The second list is where the time-of-supply problem hides.

How do you fix a foreign bill that went in without reverse charge?

If the return for its period is not filed, cancel or amend the Purchase Invoice, tick Is Reverse Charge and issue the self-invoice. If the return is filed, India Compliance shows a message when you point the ITC Claim Period at a filed month (utils/itc_claim.py, lines 338 to 351). The late liability carries interest under s.50, and how to report it is for your CA. Agree the route before you post anything. ERPNext GST return filing shows the GSTR-3B report you will check it against.

What is not covered here?

• Imported goods. They go through the bill of entry and customs, not reverse charge. See landed cost and FX.
• Ocean freight on imports, banking services to account holders and passenger transport. They follow their own rules (IGST Act s.13(8)(a) and s.13(10) for the last two).
• An SEZ supplier. India Compliance treats it as a domestic purchase, with GST charged by the SEZ unit (utils/init.py, lines 592 to 601).
• A buyer with no GSTIN, for anything but an online service. CGST Act s.24(iii) lists persons who are required to pay tax under reverse charge among those who must register, and IGST Act s.20(v) applies the registration provisions to integrated tax. An exemption may apply: entry 10 of notification 9/2017-Integrated Tax (Rate) exempts services from a provider in a non-taxable territory received by, among others, government bodies and individuals, for a purpose other than commerce, industry or any other business or profession, and an entity registered under section 12AA of the Income-tax Act, 1961 (as the notification printed it in 2019) for charitable activities. The Income-tax Act, 2025 took effect on 1 April 2026 and we did not check how the entry now refers to it. Notification 12/2023 replaced the entry's online-services proviso from 1 October 2023. Whether you must register, or the exemption applies, is for your CA. For an online service the supplier pays (s.14).
• Income tax on the payment. Withholding on payments to non-residents is a separate rule.
• The invoice fields. For what a tax invoice must carry, see GST invoice format.

More GST topics in ERPNext: the GST and tax guides.

FAQ: what do people ask most?

What should you do next?

List last quarter's foreign bills and test each for GST on import of services: the three conditions, the GSTIN on the bill and the payment date. Fix the supplier masters once, then book each bill as a reverse-charge Purchase Invoice in the month of payment.

The law is short. The recording is the part ERPNext leaves open.