GST on website and app development in India: what you actually pay

The rate and the SAC code

Every service in India has a SAC (Services Accounting Code) that goes on the invoice. Building a website, a mobile app or custom software falls under heading 9983, "other professional, technical and business services", and the specific code most developers use is 998314, IT design and development services. The GST rate on it is 18%.

A few related services sit under neighbouring codes but at the same 18% rate:

• 998313: IT consulting and support services, used for things like an IT audit or ongoing support.
• 998315: hosting and IT infrastructure provisioning, used for hosting and server management.
• Domain names and third-party software subscriptions (Shopify, paid plugins) are billed by those companies with their own GST.

CGST + SGST or IGST: which one you see

Which tax lines appear on your invoice depends on where you and the developer are registered, not on where the work is done.

The total is the same either way. Here is how our own published website packages work out for a client in West Bengal:

Can you claim the GST back?

If your business is GST-registered under the regular scheme and the website or app is used for your business, the GST on the developer’s invoice is normally available as input tax credit (ITC). In practice that makes the 18% a cash-flow item rather than a cost.

For the credit to go through, three things need to be right:

• Your GSTIN and legal name are on the invoice exactly as registered.
• The developer actually files the invoice in their GSTR-1, so it shows up in your GSTR-2B.
• The invoice has the SAC code, place of supply and the tax split.

If you are unregistered or on the composition scheme, you cannot claim ITC, so the 18% is a real cost. Budget for the total, not the base price.

Clients outside India: zero-rated exports

Under the IGST Act, a service counts as an export when the supplier is in India, the client is outside India, the place of supply is outside India, payment is received in convertible foreign exchange (or in rupees where the RBI allows it), and the two are not just branches of the same company.

An export is a zero-rated supply. Most developers file a Letter of Undertaking (LUT) once a financial year on the GST portal and then invoice foreign clients without charging IGST. Without an LUT, the developer pays IGST and claims a refund later, which ties up cash.

What a correct invoice looks like

Before you pay, check the tax invoice has:

1. 1The developer’s legal name, address and GSTIN.
2. 2Your name, address and GSTIN (if registered).
3. 3Invoice number and date.
4. 4SAC code (for example 998314) and a plain description of the work.
5. 5Place of supply (your state).
6. 6Taxable value, the tax rate and the CGST/SGST or IGST amounts.
7. 7The total in figures and words.

Many businesses also deduct TDS from payments to developers under the Income-tax Act. Whether and at what rate depends on how the payment is classified and on your own turnover, so check with your accountant before the first payment.