Only 8 of 120 Foreign Software Tools Issue GST Invoices — Here Is Why

An analysis of 120 foreign, dollar-billed software tools found that only eight issue a valid Indian GST invoice, while the remaining 112 do not. This is not vendor negligence but a structural feature of Indian tax law: when a registered Indian business purchases software from a foreign vendor, the transaction is treated as a service import under the Reverse Charge Mechanism (RCM). Under RCM, the foreign vendor has no obligation to charge or register for Indian GST; instead, the Indian buyer must self-generate an invoice, declare and pay 18% IGST, and then claim it back as input tax credit in the same GSTR-3B filing. Filed correctly, the net tax outflow is zero, but ignoring the obligation creates a real liability — unpaid IGST becomes recoverable with interest in an audit, and the forfeited input credit is lost permanently. Many startups unknowingly skip this cycle because no invoice arrives from the vendor, making the compliance gap invisible on bank statements.