Last reviewed: 25 September 2026. SaaS accounting looks simple until you hit deferred revenue, export invoicing, multi-currency gateway settlements and investor-grade MRR reporting. Getting it right keeps your GST clean, your P&L accurate and your diligence smooth. This guide covers GST on SaaS and exports, revenue recognition, MRR, Stripe/Razorpay reconciliation and the MIS investors expect, with a worked journal and a payout reconciliation.
At a glance
GST and export invoicing
Domestic SaaS attracts GST (generally 18%). Sales to overseas customers can be zero-rated exports - invoiced without GST under a Letter of Undertaking - but only if all five conditions in section 2(6) of the IGST Act are met:
- you, the supplier, are located in India;
- the customer is located outside India;
- the place of supply is outside India - for SaaS sold to a business abroad, section 13 of the IGST Act generally puts it at the customer's location;
- payment is received in convertible foreign exchange, or in Indian rupees wherever RBI permits; and
- you and the customer are not merely establishments of the same person - so billing your own overseas branch does not qualify.
Miss one and the invoice needs IGST. Get the LUT and documentation right to avoid GST leakage or refund delays.
Export-proceeds checklist
- LUT filed on the GST portal for the financial year before the first export invoice.
- Invoice carries the LUT reference and the export wording; report it in GSTR-1 as an export without payment of tax.
- Bank evidence: the inward-remittance advice or FIRA for each receipt, mapped to the invoices, and the electronic realisation certificate where your bank or DGFT issues one.
- Realisation: under the FEMA (Export and Import of Goods and Services) Regulations, 2026, in force from 1 October 2026, service export value must be realised within 15 months of the invoice date, or 18 months where invoiced in rupees. Track unrealised invoices monthly.
- SOFTEX: ask your authorised dealer bank whether your model needs a SOFTEX declaration; banks treat subscription SaaS differently from one-off software exports.
Revenue recognition and deferred revenue
Subscription revenue is earned over the service period, under Ind AS 115 for Ind AS companies and AS 9 for the rest. An annual plan billed upfront is recorded as deferred revenue and released to the P&L each month. Recognising it all upfront overstates revenue and creates diligence problems later.
Worked journal: a USD 1,200 annual plan
A US customer buys an annual plan of USD 1,200 on 1 April 2026 and pays through Stripe the same day. The rate that day is ₹83.00, so the plan is booked at ₹99,600.
| Date | Entry | Debit (₹) | Credit (₹) |
|---|---|---|---|
| 1 April 2026 | Stripe clearing account Dr / Deferred revenue Cr | 99,600 | 99,600 |
| 30 April 2026, and each month-end | Deferred revenue Dr / Subscription revenue (export) Cr | 8,300 | 8,300 |
| 30 September 2026 position | Revenue recognised ₹49,800; deferred revenue ₹49,800 | - | - |
The deferred revenue stays at the rate on the day the money came in; it is not revalued at each month-end, because it is an obligation to provide service, not an amount payable in dollars.
Gateway settlements
Stripe, Razorpay and similar gateways deduct fees and settle net, often across currencies and with a delay. Book gross revenue, then gateway fees, GST on those fees and FX differences separately, and reconcile each settlement to the underlying invoices. GST on the fee is charged on the invoice if the gateway bills you from an Indian entity, and payable by you under reverse charge if it bills from abroad; either way it is normally available as input tax credit.
Worked reconciliation: one Stripe payout
| Line | USD | Rate | ₹ |
|---|---|---|---|
| Gross charges to customers (booked at the charge-date rate) | 10,000 | 83.20 | 8,32,000 |
| Less: Stripe fees | (300) | 83.20 | (24,960) |
| Net balance in the Stripe account | 9,700 | 83.20 | 8,07,040 |
| Payout received in the bank | 9,700 | 83.00 | 8,05,100 |
| Exchange loss on conversion | - | - | 1,940 |
| GST on fees at 18% (reverse charge if billed from abroad; ITC claimed) | - | - | 4,493 |
The check is simple: ₹8,32,000 less ₹24,960 less ₹1,940 equals the ₹8,05,100 in the bank. The GST line does not touch the payout; it sits in the GST returns as a liability and a matching credit.
Investor-grade MIS
Maintain MRR/ARR, churn, deferred revenue, gross margin, CAC and runway - reconciled monthly to your accounts - so the metrics you present to investors tie back to your books. Mismatches between the billing system and the ledger are a common diligence red flag.
Founders with a US parent or overseas customers
Many SaaS founders flip to a Delaware parent, often through Stripe Atlas, and keep the team in an Indian subsidiary. That brings a second set of questions: the intercompany service agreement and its transfer pricing, FEMA reporting of the investment into India, and GST on sales the US entity makes to Indian consumers, which are OIDAR services requiring the overseas entity to register and pay IGST. Our foreign subsidiary accounting, CFO and FEMA support covers the Indian side, and we keep the books of the overseas entity too through outsourced accounting for foreign firms.
Frequently asked questions
Is SaaS subject to GST in India?
Yes. Domestic SaaS supplies attract GST (generally 18%). Exports of SaaS to overseas customers can qualify as zero-rated supplies, allowing you to export without tax under a LUT or claim a refund of input tax credit.
How do I invoice overseas SaaS customers?
As an export of services under a Letter of Undertaking (LUT) without charging GST, provided all five conditions in section 2(6) of the IGST Act are met: you are located in India, the customer is outside India, the place of supply is outside India, payment is received in convertible foreign exchange or in rupees where RBI permits, and you and the customer are not merely establishments of the same person.
Can an export customer pay in Indian rupees?
Yes, where RBI permits it. Section 2(6) of the IGST Act accepts payment in rupees wherever permitted by the Reserve Bank, and RBI's export framework allows rupee invoicing and settlement through the permitted routes. Keep the bank's documentation showing the route used, because the export benefit depends on it.
What is MRR and why track it?
Monthly Recurring Revenue is the normalised subscription revenue per month. It is the key SaaS metric for investors and for revenue recognition, and should reconcile to your books and billing system.
How is subscription revenue recognised?
Subscription fees are recognised over the service period, not upfront, under Ind AS 115 or AS 9 depending on which framework applies to you. Annual plans collected in advance are recorded as deferred revenue and released monthly, which matters for accurate P&L and diligence.
How do Stripe and Razorpay settlements affect accounting?
Payment gateways deduct fees and settle net, often across currencies and with a lag. You must book gross revenue, gateway fees, GST on those fees and FX differences correctly, reconciling each payout to the invoices it covers.
Do I need to handle TDS or TCS on gateway or platform fees?
If you sell through an Indian e-commerce operator, that operator deducts TDS on your sales under section 393(1), Table S.No. 8(v) of the Income-tax Act, 2025 (old 194-O). Whether you must deduct TDS on gateway fees that are netted from your payouts is a question on which practice varies; take a documented view with your adviser for your specific flow rather than assuming either answer.
Our US parent sells the product to Indian consumers. Is there GST?
Yes. Online services supplied from outside India to Indian consumers who are not registered for GST are OIDAR services. The overseas entity has to register under the simplified scheme and pay IGST itself. Sales to GST-registered Indian businesses are taxed under reverse charge in the customer's hands instead.
What MIS should a SaaS startup maintain?
MRR/ARR, churn, deferred revenue, gross margin, CAC and runway - reconciled monthly to the accounting system - so the numbers you show investors match your books.
What are common SaaS accounting mistakes?
Recognising annual revenue upfront, ignoring deferred revenue, booking net (after gateway fees) instead of gross, and mismatches between the billing system and the general ledger.
We set up GST-compliant export invoicing, deferred-revenue accounting and investor-ready MIS, for Indian SaaS companies and for their overseas parents.
SaaS GST Revenue AccountingVirtual CFOAccounting for overseas businesses & firmsTalk to CA Somesh Chandak & Associates - we run SaaS accounting, GST and MIS for startups.
WhatsAppLinkedInSchedule a callDisclaimer: This article is for general guidance only and is not a substitute for advice on your specific facts and the latest law. Exchange rates and fee levels in the examples are illustrative. Please consult before acting.