online shopping from international websites has tax implications. many buyers do not check them. the tax depends on the purchase type, the seller, and the delivery method.
in india, the goods and services tax framework governs these transactions. it applies to physical goods and digital services. knowing the tax rules helps avoid surprise costs at delivery.
gst on goods from abroad
gst rates for online products are the same as offline. the rate depends on the product category. not the purchase channel. cross-border purchases have an extra customs component.
import igst. indian customs collects igst on imported goods. unless the seller charged igst at checkout. igst is calculated on the duty-inclusive value. this includes freight, insurance, customs duty, and surcharge. the tax base is larger than the item price.
customs duty reduced in 2026. the union budget 2026 cut customs duty on personal imports from 20% to 10%. effective april 1, 2026. this applies to most dutiable goods. exceptions include cars, alcohol, tobacco, printed books, and items needing an import licence.
common imports include electronics, kitchen appliances, gaming accessories, cameras, car accessories, toys, sneakers, apparel, watches, gourmet food, beauty products, and sporting goods.
duty-free allowance. indians returning from overseas can bring goods worth up to ₹75,000 duty-free. increased from ₹50,000 in budget 2026. liquor remains capped at 2 litres per passenger.
social welfare surcharge. a new surcharge of 10% on total customs duty payable partially offsets the duty reduction.
valuation inclusions. the assessable value includes container costs, packing, freight, insurance, and certain royalties. landing charges are no longer added notionally. actual costs apply.
practical caution. global platforms collect import fees upfront. often above statutory rates. some platforms collect 30-40% of the product and freight cost as an import fee deposit. without clarity on the exact duty paid.
tcs on e-commerce
under section 52 of the cgst act, e-commerce operators like amazon and flipkart collect tax collected at source at 0.5% on net taxable supplies. the rate was reduced from 1% from july 10, 2024.
tcs applies only to taxable supplies. exempt or nil-rated goods attract no tcs.
multiple operators. where more than one operator is involved, the one collecting consideration pays tcs.
digital services and oidar
oidar services include streaming, cloud computing, online education, digital subscriptions, and gaming.
foreign providers. from october 1, 2023, india removed the gst exemption for foreign oidar providers. they now charge igst at 18% for services to individuals and government.
foreign providers must register under gst regardless of turnover. they must appoint a resident authorised signatory with a valid pan.
reverse charge for b2b. indian businesses receiving oidar services from foreign providers must pay igst under reverse charge and comply with gst filing.
cross-border service exports. 2026 change
the finance act 2026 removed clause (b) of section 13(8) of the igst act. it previously deemed the place of supply for intermediary services to be the supplier’s location in india.
what changed. earlier, intermediary services to foreign clients did not qualify as exports. the place of supply was deemed india. the amendment shifts the place of supply to the recipient’s location. these services now qualify as zero-rated exports.
impact on importers. services from foreign intermediaries now attract gst under reverse charge. input tax credit can be claimed. this affects sectors where input tax credit is restricted, like hospitality, travel, airlines, and petroleum.
transition. the amendment is prospective. only invoices raised on or after march 30, 2026, qualify for zero-rated treatment.
frequently asked questions
1. what is the customs duty on personal imports in 2026?
reduced from 20% to 10%, effective april 1, 2026. a 10% social welfare surcharge on total customs duty partially offsets the relief.
2. do i pay gst on online purchases from foreign websites?
yes. igst applies to imported goods. customs collects igst unless the seller charged it at checkout. for digital services, foreign providers charge 18% igst on b2c transactions.
3. what is tcs on e-commerce purchases?
e-commerce operators collect 0.5% tcs on net taxable supplies through their platforms. collected from sellers and deposited with the government.
4. how does the 2026 amendment affect intermediary service providers?
before the amendment, intermediary services to foreign clients did not qualify as exports because the place of supply was deemed to be india. with the removal of clause (b) of section 13(8), the place of supply now follows the recipient’s location. this allows such services to be treated as zero-rated exports, making them more competitive globally.
5. what should businesses watch out for when receiving services from foreign intermediaries?
services from foreign intermediaries now attract gst under reverse charge. input tax credit can be claimed against this. however, sectors where input tax credit is restricted—such as hospitality, travel, airlines, and petroleum may face higher costs. the amendment applies only to invoices raised on or after march 30, 2026.
