GST on Cross-Border Services: Import of Services and Reverse Charge Explained
When an Indian subsidiary pays its foreign parent for services, GST applies under reverse charge, the Indian entity, not the foreign parent, is responsible for paying it.
When an Indian subsidiary receives services from its foreign parent or another overseas group entity, management fees, IT services, brand licensing, this is treated as an "import of services" under GST and is subject to reverse charge mechanism (RCM): the Indian recipient, not the foreign supplier, is responsible for calculating and paying the applicable GST directly to the government, rather than the foreign entity charging GST on its invoice.
This trips up foreign parent companies structuring intercompany service agreements without India-specific tax input, the invoice from the parent doesn't include GST, but the Indian subsidiary still owes it, and needs to self-assess and pay it as part of its own GST compliance, with the ability to then claim it back as input credit in most cases, making it largely cash-flow-neutral if handled correctly, but a compliance gap if missed.
Any intercompany services agreement between a foreign parent and Indian subsidiary should be reviewed specifically for GST reverse-charge treatment before finalizing the pricing and invoicing structure, not after the first cross-border invoice has already been processed.