Somewhat likely. While SaaS and software are taxable in India, for businesses based there it has a higher threshold than some other jurisdictions, making it less likely you’ll become liable.
Based in India: The current sales tax threshold in India is INR 2,000,000 (~$27,000). For small and medium businesses, the threshold is higher at INR 10,000,000 (~$136,000). Based outside of India: There isn't a threshold, you’re liable for sales tax from your first sale.
Yes. You owe tax for the sale of cloud software subscriptions to customers in India.
Yes. You owe tax for the sale of software downloads to customers in India.
Yes. You owe tax for the sale of eBooks to customers in India.
Yes. You owe tax for the sale of digital downloads to customers in India.
The tax authority in India requires you to have a local tax agent in order to register for sales tax. This means it’s on your company to find (and pay for) a reputable representative.
In order to register in India, you’ll also have to provide a lot of information about your business. For example, you could be asked to submit all of the transactions processed over the last twelve months. As this can be an extremely difficult, even impossible, task, you really need a tax agent that understands your business well enough to effectively liaise with the tax office.
😬🌶️🌶️ It's complicated
Filing frequency: Monthly
The main issue affecting the filing and remittance process in India is that you need to be able to identify which of the 36 states or territories your customers are buying from, in order to break down your tax payments correctly.
To do this, you need to build this logic into your checkout flow or buyer data collection (which can put a burden on your engineering team) or have an internal system that helps you work out how your sales across India are split.
😩🌶️🌶️🌶️ It's crippling to the business / person
You really don’t want to get tax compliance wrong in India, as the consequences can be pretty crippling for businesses.
For mistakes, including late filing, you’ll receive a daily fine plus interest on the amount due – which can quickly add up if you have significant sales to customers in India.
For more serious tax offenses like not paying enough tax, the penalty is 10% of the tax amount due (minimum INR 10,000) – this increases to a 100% penalty and potential jail term for those caught evading their tax responsibilities altogether.
Registering for GST in India
😬🌶️🌶️ It's complicated