New GST Rate for IT Services in India: Software Development, Support & More
The Information Technology (IT) sector is the backbone of modern India, covering everything from software development to cloud hosting and tech support. But how does GST (Goods and Services Tax) apply to these services? In this blog, we’ll explain the GST rate for IT services in India, what qualifies as an IT service, and how businesses in this space can manage their tax obligations.
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New GST Rate on IT Services in India
The Government of India is updating GST rates effective after 22 Sep 2025. Below are the expected new GST rates for key IT service categories (no compensation cess).
| IT Service | SAC Code | New GST Rate | Remarks |
|---|---|---|---|
| IT consulting & support | 998313 | 18% | Helpdesk, troubleshooting, installation & configuration |
| IT design & development (custom software, integrations) | 998314 | 18% | Custom builds, implementation, enhancements |
| Hosting / IT infrastructure & network management (incl. cloud/managed services) | 998315 | 18% | Data centre, hosting, infrastructure provisioning & NOC |
| IT education & training (corporate / non-certifying) | 998316 | 18% | Commercial trainings; recognised degree/board programs follow education exemptions |
| Other IT services (data storage/processing, misc.) | 998319 | 18% | Use when not specifically covered above |
Note: Under the prevailing two-tier approach for many goods/services, IT services historically taxed at 18% are expected to remain at 18%. Exports of services and supplies to SEZs are zero-rated (LUT/bond or IGST with refund). Cross-border electronically supplied services (OIDAR) to customers in India are taxable in India and may require simplified GST registration for foreign providers. Final applicability is subject to CBIC/GST Council notification.
SAC Classification and New GST for Software & IT Supplies
Software may be treated as goods or services depending on how it is supplied. Use the correct HSN/SAC and apply the expected New GST Rate accordingly.
| Type of Software Supply | HSN/SAC | New GST Rate | How It’s Treated |
|---|---|---|---|
| Packaged “off-the-shelf” software supplied on physical media | HSN 8523 | 18% | Goods (recorded media) |
| Electronically supplied software / SaaS subscriptions | SAC 998314 / 998315 | 18% | Service (electronically supplied / hosting, development, provisioning) |
| Software maintenance & support (AMC) | SAC 998313 | 18% | Service (consulting/support) |
Tip: If a contract bundles development + hosting + support, classify by the principal supply. For cross-border supplies, verify place-of-supply and export conditions before tax application. The above are expected rates post–22 Sep 2025 and may be updated by final notifications.
Are IT Services Taxable Under GST?
Yes, most IT services are fully taxable under GST, and the standard rate is 18%.
IT services fall under SAC Code 9983 – Information Technology Services, which includes:
- Software development
- IT consulting
- Cloud-based solutions
- Data processing and hosting
- Technical support and maintenance
- System integration services
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Old GST Rate for IT Services in India
(Old GST Rates – Applicable Until 21st September)
| IT Service | SAC Code | GST Rate |
|---|---|---|
| Software development (customized) | 9983 | 18% |
| IT consulting services | 9983 | 18% |
| Cloud hosting (SaaS, IaaS) | 9983 | 18% |
| Tech support and maintenance | 9983 | 18% |
| Data storage or processing services | 9983 | 18% |
Old GST on Software – Product vs Service
| Type of Software | GST Rate | Category |
|---|---|---|
| Off-the-shelf (boxed/downloadable) software | 18% | Treated as goods (HSN Code 8523) |
| Customized software development | 18% | Treated as service (SAC 9983) |
| Software as a Service (SaaS) | 18% | Treated as service |
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Export of IT Services – Is GST Applicable?
No! Export of services (to clients outside India) is zero-rated under GST.
- Exporters must register under GST
- File LUT (Letter of Undertaking) to export services without paying GST
- Or pay GST and later claim refund
This benefits freelancers, SaaS businesses, and IT firms serving overseas clients.
Input Tax Credit (ITC) for IT Companies
Yes, businesses offering IT services can claim Input Tax Credit on:
- Office rent and utilities
- Software tools and licenses
- Internet and hosting services
- Marketing/advertising spend
- Subcontractor invoices
Proper billing and GST-compliant invoices are required to utilize this benefit.
I am a Fellow Chartered Accountant (FCA) and LLB graduate with 10 years of experience in corporate auditing, taxation, and financial consulting. My expertise includes corporate audits, income tax planning, HSN code classification, and GST rate advisory. Through my blogs and articles, I aim to simplify corporate taxation, auditing, and GST compliance, making financial matters more accessible for professionals and business owners.
Frequently Asked Questions
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What is the gst rate for it services in India?The standard GST rate is 18%, applicable to all core IT services.
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Is GST applicable on software development?Yes. Customized software development is considered a service and taxed at 18%.
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Are software subscriptions (SaaS) taxable?Yes. SaaS and cloud services are treated as IT services and taxed at 18%.
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Can IT companies claim Input Tax Credit?Absolutely. GST-registered IT companies can claim ITC on their business expenses like rent, internet, marketing, and subcontractors.
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Do freelancers offering IT services need to pay GST?Yes, if their turnover exceeds ₹20 lakh (₹10 lakh in NE states). They must register and collect 18% GST on their invoices.
