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Reverse charge on foreign cloud hosting, explained

Why paying a cloud host outside India makes you liable for the GST yourself under reverse charge, what import of service means in practice, and what it costs.

When an Indian business buys hosting from a provider outside India, the tax does not disappear because the invoice is in dollars. It moves. Under the reverse charge mechanism the recipient — you — becomes liable to account for the GST that the foreign supplier did not charge.

Plenty of teams discover this at their first audit rather than at their first invoice. This page explains the mechanism plainly. It is general information, not tax advice; confirm your own position with your accountant.

What reverse charge means

Forward charge: you pay the supplier, who collects the GST and remits it. Reverse charge: the foreign supplier charges no GST, so you compute it, pay it and report it yourself.

In an ordinary domestic supply, the supplier charges GST, collects it from you, and pays it to the government. Forward charge.

Where the supplier is outside India and the recipient is a registered person in India, that flow inverts. The supply is an import of service. The foreign supplier charges you nothing for tax, and you are required to compute the GST yourself, pay it, and report it in your own returns.

The rate is the same rate that would have applied domestically. Hosting is a taxable service at 18%, so the reverse charge liability is 18% of what you paid.

The part that surprises people

Reverse charge is usually revenue-neutral in the end — you pay the tax, and where the spend is a business input you claim it back as credit. So the money mostly nets out.

What does not net out is the work, and three things about it are worth knowing:

You pay first, claim later. The liability is discharged in cash. You cannot set it off against existing credit at the point of paying it. So there is a real, if temporary, cash outflow every period in which you buy foreign hosting.

It is a per-period obligation, not a one-off. Every month you pay a foreign provider is a month you compute, pay, and report the reverse charge. A recurring subscription creates a recurring compliance task.

Missing it is not neutral. If the liability is not discharged in the correct period, interest runs on it. The credit does not retroactively cancel the interest. This is the specific way a “cheaper” dollar-billed host becomes more expensive than its sticker price.

Self-invoicing

Because the foreign supplier issues no GST-compliant document, the recipient generally has to raise a self-invoice for the import in order to have a document supporting the credit. That is an additional record to generate and retain for every such supply.

Your accountant will have a process for this. The point is that a dollar invoice from an overseas provider is not the end of the paperwork — it is the beginning of it.

The comparison, side by side

Foreign, dollar-billed host India-billed host
Who charges the GST Nobody — the invoice has none The supplier, on the invoice
Who pays it to the government You, under reverse charge The supplier
Cash timing Pay in cash now, claim credit after Credit against the invoice you already paid
Document supporting credit A self-invoice you raise The tax invoice you received
Per-period compliance work Yes, every period None beyond recording the invoice
Foreign exchange markup Yes, on your card None

Both routes can end up tax-neutral. Only one of them is also work-neutral.

How an India-billed host avoids all of it

None of the above applies to a domestic supply. The supplier charges the GST on the invoice, remits it, and reports it. You record the invoice and claim the credit. There is no import, no reverse charge liability, no self-invoice, and no cash-then-claim gap.

Voroa is an Indian supplier billing in rupees. Prices are shown excluding GST, 18% is added at payment, and a tax invoice is issued automatically with the supplier GSTIN, your GSTIN, and the tax split. Your hosting spend is a domestic input, treated like any other.

Moving from a dollar-billed host? You can apply for migration credits: up to Rs 10,000 set against your Voroa bills, granted by hand after a person reads your application.

Last updated August 31, 2026