GST Compliance Guide for Foreign Companies with India Operations — 2026
India's Goods and Services Tax (GST), introduced in July 2017, unified the country's fragmented indirect tax system. For foreign companies with India operations — whether manufacturing, services, or e-commerce — GST compliance is a significant operational requirement. This guide covers registration, monthly obligations, export zero-rating, and the 2026 updates.
GST Registration: When Is It Mandatory?
An Indian entity must register for GST if its annual aggregate turnover exceeds INR 40 lakh (INR 20 lakh for service providers, INR 10 lakh for special category states including northeastern states, J&K, Himachal Pradesh, and Uttarakhand). Registration is mandatory from the first day the threshold is crossed — there is no grace period.
Irrespective of turnover, registration is mandatory for entities that: make inter-state supplies, supply through e-commerce operators, are liable to pay under reverse charge mechanism, or supply goods/services in a state from outside that state.
For foreign companies with Indian subsidiaries that provide services to overseas clients (software exports, BPO, KPO), voluntary registration is advisable even below the threshold — registration is required to claim LUT (Letter of Undertaking) for zero-rated exports without paying GST upfront.
The Monthly GST Compliance Calendar
GSTR-1 (by 11th of following month): Summary of outward supplies (sales and service invoices). For companies with turnover below INR 5 crore, quarterly GSTR-1 filing under the QRMP scheme is an option.
GSTR-3B (by 20th of following month): Summary return covering both outward supplies and input tax credit. Net GST liability (output tax minus ITC) is paid at this stage.
GSTR-9 (by 31 December for the previous financial year): Annual return consolidating all monthly GSTR-1 and 3B data.
GSTR-9C (by 31 December): Reconciliation statement and certification, required for entities with annual turnover above INR 5 crore, signed by a Chartered Accountant.
Zero-Rating of Export Services — The LUT
Services exported from India (IT services, consulting, BPO) are "zero-rated" under GST — the supplier does not collect GST on the export invoice and is entitled to claim full input tax credit on inputs used for the export service. To avail zero-rating without paying GST upfront, the exporter must file a Letter of Undertaking (LUT) on the GST portal at the beginning of each financial year (1 April). The LUT is a declaration that the exporter undertakes to complete the export and receive foreign currency payment within the prescribed time.
Without a valid LUT, the exporter must pay integrated GST (IGST) at the applicable rate on export invoices and then claim a GST refund — a cash flow burden. Filing the LUT is a day-one requirement for any service exporter.
E-Invoicing Requirements (2026)
E-invoicing is now mandatory for all GST-registered entities with annual turnover above INR 5 crore. Under e-invoicing, B2B invoices must be reported to the Invoice Registration Portal (IRP) before they are issued to customers. The IRP assigns an Invoice Reference Number (IRN) and QR code. Non-compliant invoices are treated as invalid for ITC purposes — meaning your customers cannot claim input tax credit on invoices that were not e-invoiced.
Common GST Mistakes by Foreign-Owned Indian Entities
- Not filing LUT before April 1 — resulting in cash flow drain on export invoices
- Incorrect ITC claims on inputs used for exempt or non-business purposes
- Missing GSTR-1 deadlines causing customer ITC issues
- Wrong GST rate applied to software services vs software product supply
- Not registering in all states where supply is made (multi-state registration requirement)
- Delayed e-invoicing causing customer complaints and ITC denial
Is your India entity's GST compliance up to date?
Shardhan's GST team manages end-to-end GST compliance for Indian subsidiaries of foreign companies. Contact our GST practice.