GST Guide for Agencies in India
Manage subcontractor billing, optimize your Input Tax Credit (ITC), and structure compliant invoices for domestic and global clients.
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Understanding Input Tax Credit (ITC) for Agencies
Agencies rely heavily on external software tools, cloud computing servers, and freelance contractors. Under Indian GST law, you can claim Input Tax Credit (ITC) on all legitimate business inputs.
How ITC Math Works:
- Outward GST: You invoice a client for ₹1,00,000 + 18% GST (₹18,000 tax collected).
- Inward GST: You paid a subcontractor ₹40,000 + 18% GST (₹7,200 tax paid) and a SaaS tool ₹10,000 + 18% GST (₹1,800 tax paid). Total Inward GST = ₹9,000.
- Net GST Liability: Outward GST (₹18,000) − Inward GST (₹9,000) = ₹9,000 payable to the government.
Frequently Asked Questions
How does Input Tax Credit (ITC) work for agencies?
Agencies can offset the GST they collect from clients against the GST they pay to subcontractors, software vendors, and rent. For example, if you collect ₹18,000 GST but paid subcontractors ₹10,000 GST, you only need to pay the remaining ₹8,000 to the government.
What is the GST rate for agency services?
Creative, software development, marketing, PR, and advertising agencies are billed at a standard rate of 18% GST (SAC code 9983).
Do agencies charge GST on foreign clients?
Exporting services is zero-rated (0% GST) provided you file a Letter of Undertaking (LUT) beforehand. Note that payments must be received in convertible foreign exchange (like USD, EUR, GBP) within the legally specified timelines.