An Indian company paying for overseas software, cloud storage or consulting services may soon have to report these transactions through a tighter goods and services tax (GST) system. It comes as the government moves to extend e-invoicing to imported services and purchases from unregistered suppliers under the reverse charge mechanism.

The proposal, recommended by the 57th GST Council, applies to businesses with an annual turnover of ₹5 crore or more. For imported services, Indian businesses already have to issue self-invoices in the applicable reverse-charge mechanism because overseas suppliers do not issue Indian GST invoices. The proposed expansion could require companies to change how they document and report these purchases.

Alongside the e-invoicing expansion, the council has proposed a mechanism to correct tax liability and input tax credit (ITC) reported in GST returns, potentially from the April 2027 return period. The revised mechanism will be placed in the public domain for a time-bound consultation, with finance minister Nirmala Sitharaman authorised to approve changes based on stakeholder feedback.

The council said the changes would reduce differences between tax liability reported by businesses and the ITC they claim, helping reduce demand notices and system-generated intimations arising from such mismatches. The proposals could also increase compliance requirements as GST moves towards greater use of the Invoice Management System (IMS), which allows buyers to accept, reject or keep supplier invoices pending for review.

Source: The Economic Times