GST and software procurement: getting input credit right

Software and cloud services purchased for business use attract GST, and registered businesses can generally claim input tax credit against it. The mechanism is not complicated, but credit is regularly lost on avoidable invoice defects.

This article is general information about procurement practice, not tax advice. Your accountant or tax adviser should confirm the treatment for your specific circumstances.

What the invoice must carry

For input credit to be claimable, the tax invoice needs to correctly show your GSTIN, your registered legal name and address as they appear on the registration, the supplier's GSTIN, the HSN or SAC code, and the tax split — CGST and SGST for an intra-state supply, IGST for inter-state.

The two that most often go wrong are the GSTIN and the legal name. A GSTIN supplied verbally and transcribed incorrectly, or a trading name used where the registered legal name was required, will both cause a mismatch when the credit is reconciled.

Supply the details once, correctly

The practical fix is to provide your GSTIN and registered legal name in writing at the point of enquiry rather than at the point of invoicing. It gets recorded against your account and appears correctly on every subsequent invoice, rather than being re-entered per order.

We ask for it on the enquiry form for this reason, and it is optional — nothing about the quotation depends on it.

Direct international purchases

Buying software directly from an overseas publisher's website usually produces an invoice that does not carry your GSTIN and is not in a form that supports a domestic input credit claim. The reverse charge mechanism may apply, which is a different and more involved treatment.

Purchasing through a domestic supplier produces a standard GST invoice and avoids that complication entirely. For organisations buying at any scale, that administrative difference is often worth more than a small price difference on the licence itself.

What to check on receipt

Read the first invoice from any new supplier properly: GSTIN correct, legal name correct, tax split correct for the supply type, HSN or SAC present. Errors caught on the first invoice are corrected once. Errors caught at the end of the quarter are corrected across every invoice in it.