GST Rates in India 2026: Updated List of Tax Slabs

The standard GST rate in India is 18%, and that is the rate foreign companies need to plan for whenever they buy professional, technical, or back-office services from an Indian provider. India runs a destination-based Goods and Services Tax, and after the 2025 reform the working bands are 0%, 5%, 18%, and 40%. Almost every service a global employer touches in India falls into the 18% slab.

That said, the rate itself is only half of the question. What actually determines whether you pay 18% in practice is who supplies the service, where the law treats the service as being supplied, and whether the engagement satisfies the export of services test.

This guide walks through how the GST rate structure works as of 2026, when 18% lands on foreign payers, and how the common hiring models compare.

If your priority is full-time talent rather than project work, you can read our companion guide on hiring employees in India alongside this one.

What is the GST rate in India?

India's GST has four working bands: 0% for essentials and exempt items, 5% for select goods and lower-priority services, 18% as the standard rate for the majority of goods and services, and 40% for sin and luxury categories.

For foreign companies, the only band that matters in day-to-day operations is 18%, because that is the rate applied to professional services, software services, support functions, marketing, consulting, and most other categories a global employer would procure from India.

GST is collected in two main forms:

1. CGST and SGST, applied together on intra-state supplies inside India
2. IGST, applied on inter-state supplies and on cross-border transactions where one party sits outside India

When a foreign company is invoiced by an Indian provider for a taxable supply, the tax that appears is IGST at 18%. The split between CGST and SGST is an internal Indian accounting detail and has no impact on the foreign payer.

From our experience helping foreign companies engage Indian talent, the 18% number tends to be misread in two ways. Some teams assume it never applies because they pay from abroad in USD or GBP. Others assume it always applies and absorb a cost they did not need to bear. The right answer depends on the legal place of supply, which is where the rules in Section 13 of the IGST Act come in.

What changed in India's GST rates in 2025 and 2026?

The 56th GST Council meeting set out a simplified rate structure known as GST 2.0, which took effect on September 22, 2025. The old 12% and 28% slabs were largely retired and their items moved into 5% or 18%.

A new 40% band was introduced for a narrow set of luxury and demerit categories. The standard 18% rate stayed where it was and continues to be the default for most goods and most services.

The second change is more specific to cross-border engagements. Section 157 of the Finance Act, 2026 omitted Section 13(8)(b) of the IGST Act. That clause used to pin the place of supply of intermediary services to the location of the Indian supplier.

The result was that Indian agents and facilitators serving foreign clients were charged 18% GST even though their customer sat outside India. With that clause gone, a genuine intermediary serving a foreign recipient may now follow the default recipient-location rule and potentially qualify as an export.

Two cautions are worth keeping in mind:

• The precise commencement date is set by CBIC notification. Industry coverage points to March 30, 2026, but the operative date for any specific cross-border supply should be confirmed against the CBIC commencement notification before relying on the new treatment.
• The substance test for what counts as an intermediary, set out in Section 2(13) of the IGST Act and clarified in CBIC Circular 159/15/2021, has not changed. A contract label does not override the facts of the engagement.

Crucially, the change only helps narrow situations: genuine, pure facilitation work for a foreign client where nothing in the engagement is consumed inside India. Where the substance of the work is the development or servicing of the Indian market, the change does not move the result. Those supplies remain taxable on ordinary place-of-supply principles because the economic benefit is realised in India.

When does the 18% GST rate apply to foreign companies?

18% IGST attaches whenever a service supplied by an Indian provider is legally treated as supplied inside India. In practice, that happens in three buckets: the work is physically performed in India, the work develops or serves the Indian market on the foreign company's behalf, or the foreign company has a taxable presence in India that is the real recipient of the service.

Companies often underestimate the first bucket. A consultant flying in to run training, an engineer performing on-site installation, or a tester working on goods that sit in India will all be treated as supplying services in India under Section 13(3) of the IGST Act. The fact that the invoice carries a foreign address and is paid in USD does not change that. The same logic applies to inspection, repair, physical testing, and any work where the physical presence of the supplier or the goods anchors the supply to Indian territory.

The second bucket is the one global employers most often misread, because it does not depend on anyone setting foot in India. Whenever an Indian person is engaged to develop or serve the Indian market on behalf of the foreign company, the work is, in substance, consumed in India and attracts 18% GST. The next section walks through the engagements where this comes up most often.

Which India-facing engagements attract 18% GST?

If the economic benefit of the work is realised in the Indian market, the export shelter is lost. The examples below are the ones we see most often. They are illustrative rather than exhaustive, and any comparable India-facing activity should be assumed taxable until checked with a qualified Indian tax adviser:

• Selling to Indian customers: Engaging an Indian person to generate and close sales of the foreign company's products or services to customers in India. Soliciting orders, negotiating, and facilitating the sale is agency or intermediary activity, historically taxable in India at 18%. Pure, own-account market advice or strategy can still be an export; soliciting orders is where it tips over.
• Servicing or supporting Indian customers: Account management, customer success, or customer support directed at the foreign company's Indian customers. Because the service is consumed by customers in India, it is treated as supplied in India and attracts 18% GST. This covers most "we'll handle your India customers" arrangements.
• Building an Indian vendor network or supply chain: Identifying, vetting, onboarding, and managing Indian vendors, or identifying Indian suppliers to supply the foreign parent. This is classic commission-agent and facilitation activity, historically taxable in India at 18%. A genuinely substantive own-account deliverable, such as an independent due-diligence or sourcing report produced for the company rather than arranging the supply as an agent, can change the analysis, but the default for facilitation is GST.
• Legal drafting for India-related contracts: Drafting or advising on contracts that govern the foreign company's dealings with Indian customers, vendors, or operations. Where the output is for use and consumption in India, this is treated as an India-facing supply on which 18% GST applies, even though the instructing client is abroad.
• Other India-facing engagements: The same logic extends to any work whose benefit lands in the Indian market. Market entry and regulatory or compliance support for operating in India, recruiting or talent sourcing in India, on-the-ground operations or logistics coordination, debt collection or receivables follow-up from Indian parties, distributor or channel management in India, and on-site delivery or training performed in India all fall on the same side of the line.

The common thread across all of these is that the work develops or serves the Indian market for the foreign company. The economic benefit is realised in the Indian market, so India taxes the service. The foreign address on the invoice does not move the place of supply, and a foreign entity with no Indian GST registration generally cannot recover the 18% as input tax credit, which makes it a real cost. When in doubt, ask where the benefit of the work is consumed. If the answer is India, plan for 18%.

When can Indian services be zero-rated for a foreign company?

Under Section 2(6) of the IGST Act, an Indian service supplier can treat a supply to a foreign client as a zero-rated export only when all five conditions are satisfied at once: the supplier is in India, the recipient is outside India, the place of supply is outside India under the Section 13 rules, payment is received in convertible foreign exchange, and the supplier and recipient are not merely branches of the same legal entity.

Conditions one, two, and four are usually easy to meet. The condition that breaks most often is the place of supply. If Section 13 places the supply inside India, the export claim collapses and 18% applies on the invoice. The fifth condition matters in a narrower set of cases: under Section 8 of the IGST Act, an Indian branch and its overseas head office are treated as the same legal person, so a branch billing the head office cannot be an export. A separate Indian subsidiary is a different legal person and its supplies to a foreign parent can qualify, which is confirmed by CBIC Circular 161/17/2021-GST.

For Indian freelancers and small services companies doing remote, own-account work for a foreign client, zero-rated status is operationally available through the Letter of Undertaking route, which lets them invoice at 0% without paying IGST upfront. This is the standard mechanism for genuine remote work delivered to a foreign client. If you want a primer on how this looks when paying individuals directly, our guide on hiring and paying contractors in India walks through the practical mechanics.

How does GST work when foreign companies pay Indian contractors?

When a foreign company pays an Indian freelancer or independent contractor directly, the Indian individual is the supplier and the GST analysis sits with them. For remote-delivered work such as software development, design, content, digital marketing, or consulting performed from India for a client abroad, the default rule places the supply outside India and the supply can be a zero-rated export. Once the contractor crosses the GST registration threshold of ₹20 lakh of annual turnover, registration becomes mandatory and they need to file a Letter of Undertaking to invoice at 0% without paying IGST upfront. Contractors below the threshold are not required to register, in which case no GST is charged at all on their invoices.

This clean treatment holds only while the contractor's work is genuinely their own service to the overseas company and is not aimed at the Indian market. The moment the contractor is, in substance, selling to Indian customers, servicing them, sourcing Indian vendors, or drafting India-facing contracts, the analysis flips into the India-facing bucket discussed above and 18% applies, regardless of foreign billing.

Two further things go wrong in practice. The first is that contractors under the GST threshold do not register at all, then cross it and suddenly add 18% to invoices retroactively or pass on accumulated tax in price negotiations. The second is misclassification: a contractor relationship that looks economically like employment can be reclassified by Indian authorities, which carries its own GST and labour-law consequences. We have covered these dynamics in our piece on cross-border contractor payment risks in India.

One pattern we've consistently noticed is that foreign payers assume their treasury is fully outside Indian GST because they only ever send money out. That is broadly correct on outflows, but the reverse-charge mechanism described later in this guide can pull GST liability back into the relationship in specific situations. Mapping where the legal recipient sits, and where the work is consumed, is the safer way to think about this than where the payment originates.

How does GST apply when a foreign company uses an EOR or Indian services provider?

When a foreign company engages an Indian services company or an Employer of Record, the Indian entity is the legal supplier and carries the GST analysis. The outcome depends on what the Indian entity is actually supplying, and the two routes deserve to be looked at separately.

Routing the work through an Indian consulting or services company

For an Indian consulting company doing genuine remote, own-account work for a foreign client (back-office, technical, content, design, or online consulting), the supply can be a zero-rated export under the standard test. If the consulting company sub-contracts an Indian freelancer, the freelancer's domestic invoice carries 18% GST, but the consulting company recovers that as input tax credit, so the chain is GST-neutral end to end.

Where the underlying work is India-facing (any of the engagements in the previous section), the export shelter does not apply. The consulting company should charge 18% GST on the full value of its invoice to the foreign company, because the underlying service is consumed in India and routing it through an Indian intermediary does not change the place of supply.

Routing the work through an Employer of Record

An EOR is a different supply in character. What the EOR delivers to the foreign company is its own integrated service of engaging, paying, and managing a worker in India. That service is delivered in India, so the EOR's invoice to the foreign company carries 18% GST on the full invoice value, not only on a separately-stated management or platform fee. Section 15 of the CGST Act treats the value of supply as the price paid or payable, and the pure-agent exclusion under Rule 33 applies only where the supplier is genuinely passing through specified third-party costs as an agent. An EOR's wage payments to its own employees are not pure-agent reimbursements; they are the EOR's own cost of delivering the integrated service it sells to the foreign client, which is why the 18% attaches to the whole invoice and not just to the markup.

The treatment is the same regardless of how the EOR engages the underlying worker. Whether the person is taken on as the EOR's employee or as a contractor of the EOR, the foreign company is buying the EOR's service and is not employing the person itself. The worker's own employment or contractor status is internal to the EOR and does not change the GST character of the EOR's supply to the foreign company.

It is worth separating two things that often get conflated. Salaries paid by the EOR to Indian employees are not a supply under GST at all. Wages are handled through Indian payroll and TDS, outside the GST regime entirely. The 18% GST attaches to the EOR's service fee billed to the foreign company, not to the wage payments going to the underlying workers in India.

Many global teams still prefer the EOR route over a direct contractor model or a quick subsidiary setup despite the GST cost, because the EOR holds Indian GST registration, files Indian returns, absorbs the day-to-day labour and tax compliance work, and gives the foreign company a single Indian counterparty for the whole engagement. The 18% GST is a real cost that a foreign payer without an Indian registration generally cannot recover, so it should be settled at contracting and budgeted into the all-in cost of the engagement. To see how this compares with setting up your own legal vehicle, our guide on understanding the risks of permanent establishment goes deeper into why a poorly structured local presence can pull a foreign company into India's tax perimeter.

What is the reverse charge mechanism, and when does it affect foreign payers?

The reverse charge mechanism is the mirror image of the export rules. When an Indian person procures a service from a foreign supplier for business use, the Indian recipient is required to self-account and pay IGST at 18% on the import of services, under Section 5(3) of the IGST Act read with Notification No. 10/2017-IGST(Rate). This is one of the rules that catches foreign companies off guard, because it runs in the opposite direction to the standard export-of-services discussion.

Where this becomes relevant for a foreign payer is in any structure that involves an Indian entity inside the supply chain. If the foreign company has an Indian subsidiary, branch, or any taxable establishment, and that Indian entity is the recipient of a foreign service, the Indian side has a reverse-charge GST obligation. In practice this means software licences, intra-group management fees, group-level marketing services, and similar charges from the parent to the Indian subsidiary attract 18% IGST under reverse charge, which the Indian entity then claims as input tax credit where eligible.

If your structure is purely contractor-based or EOR-based and you have no Indian legal vehicle of your own, the reverse charge is generally not your problem. It becomes your concern at the point where you incorporate locally or set up a permanent establishment. In many cases, global employers realise this only after the subsidiary is live and the first audit query lands, which is why it pays to model the GST flows before incorporation.

How can global employers manage GST exposure on Indian engagements?

GST exposure on Indian engagements is mostly a structuring outcome. Where the underlying work is remote, own-account services delivered to a client abroad, the export framework keeps the engagement at 0%. Where the work is India-facing or routed through an EOR, 18% GST is a real cost that needs to be priced in. A few principles drive this in practice:

• Ask what the work is for, not just where it is delivered from: Remote output consumed abroad can be export. Anything developing or serving the Indian market is generally taxable at 18%.
• Characterise the role in the contract: State clearly whether the Indian party is providing its own service on a principal-to-principal basis or arranging supply between you and Indian customers. The own-account label, when supported by facts, protects export status. Avoid "arrange", "facilitate", or "on behalf of" unless that is genuinely intended.
• Separate distinct services into distinct agreements: Bundling facilitation with own-account support invites composite-supply treatment, which can drag the whole engagement into the 18% slab.
• Settle who bears any GST at the outset: Make the contract explicit about whether prices are GST-inclusive or GST-exclusive so that an 18% charge does not become a downstream dispute. Foreign entities without an Indian registration generally cannot recover the 18% as input tax credit, so it sits as a real cost.
• Document foreign exchange receipt: FIRC or e-FIRA records evidencing the recipient's overseas location protect the export position and any refund claim.
• Watch the reverse-charge direction whenever you have an Indian entity: Imports of services into India from the parent or other group entities trigger 18% IGST under reverse charge.
• Confirm the 2026 intermediary position for your specific structure: The omission of Section 13(8)(b) helps a narrow set of cases. Whether your engagement falls within that set should be confirmed with a qualified Indian tax adviser before relying on the change.

How Wisemonk helps global employers navigate GST in India

For most foreign companies hiring in India, GST is less of a tax question and more of a structuring question. The 18% standard rate is fixed, but whether it shows up on your invoices, and on what base, depends on how the engagement is set up. Wisemonk runs as an India-native EOR and Contractor-of-Record (COR) for foreign companies, which means the Indian compliance perimeter (GST registration, returns, statutory filings, and labour-law administration) sits with us rather than with you.

Your team in India is employed on Wisemonk's books, paid in INR, and onboarded under Indian labour law, while you receive a single, predictable monthly invoice in USD or another freely convertible currency. The 18% GST that applies to the EOR service is itemised on the invoice so there are no surprises, and we tell you up front what your all-in cost looks like before you sign.

From what we've seen across hundreds of cross-border setups, this is the cleanest way to run real teams in India without setting up your own legal vehicle and without the compliance overhead that comes with one. We also support contractor engagements through a Contractor-of-Record model where individual hiring is the better fit, and we work alongside foreign tax advisors to make sure the broader picture, including permanent establishment risk in India, is considered before any structural decision is made.

This guide is general information about Indian GST as it stands in 2026 and is not legal or tax advice. GST treatment is fact-specific and subject to ongoing legislative, regulatory, and judicial change. Foreign companies and their Indian counterparties should obtain advice from a qualified Indian tax professional before structuring or pricing any specific engagement.