Skip to content

Direct and Indirect Taxation · Introduction to GST Law

Import of Services as Inter-State Supply under IGST

Updated 10 October 2026 · Fact-checked

Import of services means a supplier outside India provides a service to a recipient in India, with the place of supply in India. Section 7(1)(b) makes it a supply, and it is an inter-State supply, so IGST applies. Who pays is set by the IGST Act and notifications: usually the business recipient under reverse charge.

Understand Import of Services and Its Treatment as Inter-State Supply

Start with the basic idea. GST is charged on supply. Section 7(1)(a) of the CGST Act covers supply made for consideration in the course or furtherance of business. Section 7(1)(b) adds one special case: import of services for a consideration, whether or not in the course or furtherance of business. So a service imported from abroad is a supply even if the importer is not a business and uses it for personal purposes, provided there is consideration.

Now compare this with domestic supplies. Under the Act, the words "in the course or furtherance of business" limit most supplies. For imported services, that limit is removed. This is the key point examiners test. But be careful: Section 7(1)(b) only decides that the import is a supply. Who must pay the tax is decided by the IGST Act and notifications issued under it, not by Section 7.

The supplier is outside India, so for an ordinary import the tax is not collected from them. The liability is placed on the Indian recipient under reverse charge, and this applies to a recipient who receives the service for business purposes. That recipient pays IGST to the Government and, if registered and eligible, claims input tax credit. A private individual who imports a service for personal use is not simply taxed under reverse charge. Check the IGST Act and notifications for that case.

There is an important exception. For online information and database access or retrieval services (OIDAR) supplied from outside India to a non-registered person in India, the foreign supplier pays the tax and must register.

It is also treated as an inter-State supply. Because the supplier is outside India and the recipient is in India, the supply crosses State lines by deeming. Hence the tax is IGST, not CGST plus SGST. The IGST Act defines import of services as supply where the supplier is outside India, the recipient is in India and the place of supply is in India. The detailed place of supply rules sit in the IGST Act.

Registration is a related point. Section 24 of the CGST Act requires registration of persons who must pay tax under reverse charge, whatever the usual threshold. Section 24 also separately requires registration of persons outside India supplying online information and database access or retrieval services to a person in India other than a registered person. Do not confuse the two cases.

Key rules to remember

Import of services as supply
Import of services for a consideration = supply, whether or not in the course or furtherance of business
This is Section 7(1)(b) of the CGST Act. Consideration is still needed.
Conditions of import of services
Supplier outside India + Recipient in India + Place of supply in India
All three must be met under the IGST Act. If any one fails, it is not an import of services.
Nature of supply
Import of services = inter-State supply, so IGST applies
CGST and SGST are not charged on it.
Who pays
Business recipient in India pays IGST under reverse charge, as the IGST Act and notifications provide
Registration is compulsory for persons liable to pay tax under reverse charge (Section 24(iii) CGST Act). For OIDAR supplied to a non-registered person in India, the foreign supplier pays and must register (Section 24(xi) CGST Act).
IGST payable
IGST = Value of imported service × IGST rate ÷ 100
Use the rate applicable to that service and the value of supply as per the valuation rules.

How to solve Import of Services and Its Treatment as Inter-State Supply questions

Use this order for any question on imported services.

  1. 1Identify the supplier's location, the recipient's location and the place of supply. Check all three conditions of import of services.
  2. 2Check there is consideration. If there is none, test whether a Schedule I activity applies. Otherwise it is not a supply.
  3. 3Note that business purpose is not required for an import of services to be a supply under Section 7(1)(b).
  4. 4Classify it as an inter-State supply and name the tax as IGST.
  5. 5Decide who pays. If the service is OIDAR supplied to a non-registered person, the foreign supplier pays and registers under Section 24(xi). Otherwise, for a business recipient, the Indian recipient pays under reverse charge and registers under Section 24(iii). For other cases, follow the IGST Act and notifications.
  6. 6Find the value of supply, including any taxable add-ons given, and apply the stated IGST rate.
  7. 7State the final tax and the person liable. Mention input tax credit if a registered recipient is eligible.

Quickest way: Three-check shortcut

When to use it: Use it for short 2-mark MCQs and quick 14-mark sub-parts where you must decide fast.

  1. Check: foreign supplier, Indian recipient, India as place of supply. If yes, it is an import of services.
  2. If yes, write: supply under Section 7(1)(b), inter-State supply, IGST.
  3. Name the payer: business recipient under reverse charge, or the foreign supplier for OIDAR to a non-registered person.
  4. Multiply the value by the rate. No CGST or SGST split.

Common mistakes in Import of Services and Its Treatment as Inter-State Supply

  • Charging CGST and SGST on imported services

    Students apply the domestic intra-State rule by habit.

    Fix: Import of services is inter-State supply. Always charge IGST.

  • Saying business purpose is needed for import of services

    Students remember Section 7(1)(a) and apply it everywhere.

    Fix: Section 7(1)(b) says import of services is a supply whether or not in the course or furtherance of business.

  • Treating import of services as supply without consideration

    The words 'whether or not business' are misread as 'whether or not consideration'.

    Fix: Consideration is still required. Only the business link is waived.

  • Naming the wrong person as liable to pay IGST

    Students assume either that the supplier always pays or that the recipient always pays, and they treat 'is a supply' as 'recipient pays'.

    Fix: Section 7(1)(b) only makes the import a supply. For an ordinary import the business recipient pays under reverse charge (register under Section 24(iii)). For OIDAR to a non-registered person the foreign supplier pays (register under Section 24(xi)). Check the IGST Act and notifications.

  • Applying the rule when the place of supply is outside India

    Students ignore the third condition and see only a foreign supplier.

    Fix: Check the place of supply. Import of services needs it to be in India.

Worked examples

Example 1

Rahul Traders, Pune, registered under GST, hires a Singapore firm for market research. The firm charges ₹8,00,000, with the place of supply in India. IGST rate on the service is 18%. Find the IGST payable and the person liable.

Show the solution
  1. Supplier is in Singapore, outside India. Recipient is in India. Place of supply is in India.
  2. So it is an import of services, which is a supply under Section 7(1)(b) with consideration of ₹8,00,000.
  3. It is an inter-State supply, so IGST applies.
  4. IGST = ₹8,00,000 × 18% = ₹1,44,000.
  5. Rahul Traders receives the service for business, so it pays this under reverse charge.

Answer: IGST of ₹1,44,000 is payable by Rahul Traders under reverse charge. No CGST or SGST applies.

Example 2

Meera, a resident individual not in business and not registered, pays a US firm ₹2,50,000 for a personal online course. Assume the course is an online information and database access or retrieval (OIDAR) service. Place of supply is India and the IGST rate is 18%. Is it a supply under Section 7(1)(b), and who pays the IGST?

Show the solution
  1. Supplier is outside India, Meera is in India, place of supply is in India. So it is an import of services.
  2. Consideration of ₹2,50,000 is paid.
  3. Section 7(1)(b) covers import of services whether or not in the course or furtherance of business, so Meera's personal purpose does not make it a non-supply.
  4. It is an inter-State supply, so IGST applies.
  5. IGST on the value = ₹2,50,000 × 18% = ₹45,000.
  6. Who pays is set by the IGST Act and notifications, not by Section 7. For OIDAR supplied to a non-registered person in India, the foreign supplier pays the tax and must register under Section 24(xi) of the CGST Act. Meera is not charged under reverse charge.

Answer: Yes, it is a supply under Section 7(1)(b) and an inter-State supply. IGST is ₹45,000, payable by the US firm as the OIDAR supplier, not by Meera. If the service were not OIDAR, the liability would depend on the IGST Act and notifications.

Exam tips

  • For MCQs, remember the key words: Section 7(1)(b), consideration, whether or not in the course or furtherance of business.
  • Always write the three conditions of import of services before computing tax.
  • Write 'IGST' and 'reverse charge' in the answer. Examiners award marks for naming both.
  • Quote Section 24(iii) for registration of a person liable under reverse charge, and Section 24(xi) for a foreign OIDAR supplier to a non-registered person.
  • Show the working: value × rate = tax. Step marks depend on it.

Practice questions from Introduction to GST Law

Import of Services and Its Treatment as Inter-State Supply in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Import of Services and Its Treatment as Inter-State Supply: frequently asked questions

Is import of services taxable under GST?

Yes. Section 7(1)(b) of the CGST Act makes import of services for a consideration a supply, whether or not it is in the course or furtherance of business. It is taxed as inter-State supply, so IGST applies.

Who pays IGST on import of services?

For an ordinary import, the business recipient in India pays under reverse charge, since the supplier is outside India. A person liable under reverse charge must register under Section 24(iii) of the CGST Act. For OIDAR supplied to a non-registered person in India, the foreign supplier pays and registers under Section 24(xi).

Why is import of services an inter-State supply?

The supplier is outside India and the recipient is in India, so the law treats the supply as inter-State. This is why IGST is charged and CGST and SGST are not.

Does a non-business importer pay IGST on imported services?

Not automatically. Section 7(1)(b) makes the import a supply even if it is not in the course or furtherance of business, but it does not say who pays. That is decided by the IGST Act and notifications. For OIDAR supplied to a non-registered person, the foreign supplier pays.