New GST Rate for IT Services in India: Software Development, Support & More
- The new GST rate for IT services in India remains at 18% for categories like software development, IT consulting, and cloud hosting.
- Exports of IT services are zero-rated, meaning they are not taxed under GST if proper registration and documentation are done.
- Software can be taxed as goods or services depending on how it is supplied, with off-the-shelf software being treated as goods and SaaS as a service.
- IT companies can claim Input Tax Credit on business expenses like office rent, software tools, and marketing if they have GST-compliant invoices.
- Freelancers in IT must register for GST and collect 18% tax if their annual turnover exceeds ₹20 lakh, or ₹10 lakh in Northeast states.
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 |
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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) |
Type of Software Supply
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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% |
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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.
