VAT is charged in the country where the customer is, not where you are. US companies that sell to customers in the EU, the UK or other VAT countries may have to register, charge local VAT, file returns and keep records. The rules differ for business and consumer customers, and for digital services and physical goods. Registration thresholds vary by country and change, so confirm them for each market.
← Back to the complete guide: How to Set Up a Subsidiary in India from the USA
Key facts
| Where VAT is due | Generally where the customer is located or the goods are delivered |
|---|---|
| Business customers (B2B) | Often handled through the reverse charge, with the customer accounting for VAT |
| Consumer customers (B2C) | Seller commonly charges local VAT; digital services may use one-stop schemes in the EU |
| Compliance | Registration, invoicing rules, periodic returns and record keeping |
| India link | Our teams support VAT from India alongside accounting and tax |
| Thresholds | UK £90,000 for UK-established businesses and none for non-UK businesses; EU €10,000 micro-threshold for EU-established sellers only; Australia AUD 75,000; Canada CAD 30,000; Singapore SGD 1 million (overseas vendors also SGD 100,000 of B2C sales in Singapore); UAE AED 375,000 for resident businesses and none for foreign businesses. Thresholds change, so confirm before relying on them |
What US sellers need to know
VAT is a consumption tax. Sellers collect it from customers and pass it to the tax authority, after deducting VAT they paid on business costs. If you sell to customers in a VAT country, you may need to register there even without an office.
Selling to businesses and to consumers
| Customer | Typical treatment |
|---|---|
| Business customer | The place of supply is often the customer's country; the customer accounts for VAT through the reverse charge. Collect the customer's VAT number and keep proof. |
| Consumer | VAT is generally charged at the rate of the customer's country. Digital services sold to EU consumers can be reported through a one-stop scheme. |
| Physical goods | Import VAT, customs and local registration rules also apply |
How registration works
- Map where your customers are and what you sell.
- Decide in which countries registration is needed and whether a one-stop scheme can be used.
- Register and obtain the VAT number; appoint a fiscal representative where the country requires it.
- Set up invoicing and tax codes in your billing system.
- File periodic returns and keep records for the required period.
VAT and your Indian subsidiary
Indian GST is a separate tax. An Indian subsidiary that exports services may use the zero-rated export route under GST, and imports of services can attract reverse charge. Your overseas VAT position is managed separately and we align both in one compliance plan.
What this means for a US parent
- Check VAT before launching in a new country. Late registration can lead to back taxes and penalties.
- Make sure your billing system can capture the customer's country, VAT number and the tax charged.
Mistakes to avoid
- Waiting to register until a notice arrives.
- Treating all customers the same regardless of country and status.
- Not capturing the customer's VAT number for B2B sales.
- Mixing Indian GST and overseas VAT in one return.
How AU Corporate handles this
We support VAT registration, filing and advice for businesses selling abroad, alongside your India accounting and tax.
Related services: Global VAT services
Official sources
Rules on this page can be verified at the primary sources: Ministry of Corporate Affairs, Reserve Bank of India, Income Tax Department and the GST portal.
Frequently asked questions
Does a US company without an overseas office need to register for VAT?
A US company without an overseas office often needs to register for VAT if it supplies taxable goods or services to customers there. The rules and thresholds vary by country.
What is the reverse charge?
A mechanism where the business customer, not the seller, accounts for VAT on a cross-border supply.
Is there a single registration for EU digital sales?
The EU offers one-stop schemes that let eligible sellers report VAT on B2C digital sales through one return.
Is GST in India the same as VAT?
They are similar consumption taxes, but they are separate regimes with separate registration and returns.
What are the GST rates in India, and which rate applies to an Indian subsidiary?
GST in India has rates of 5%, 18% and 40%, plus 0% for exempt items, under the CGST Act, 2017 and IGST Act, 2017. Since 22 September 2025 the earlier 12% and 28% slabs have been largely removed. Most business services supplied by an Indian subsidiary, including IT and most professional services, attract the standard rate of 18%. Services exported to the US parent can be zero-rated if the conditions are met, such as the recipient being outside India and the payment arriving in foreign exchange.
What is the difference between a private and a public limited company?
A private company restricts the transfer of its shares, needs at least two directors and two members, and has lighter compliance. A public company needs at least three directors and seven members and faces more compliance. Most wholly owned subsidiaries use the private form.
When does the subsidiary need to register for GST?
An Indian subsidiary needs to register for GST when its aggregate turnover crosses ₹20 lakh for services (₹10 lakh in special category states), or earlier for certain supplies, or voluntarily (Section 22 of the CGST Act, 2017). Companies exporting services to a US parent often register early so they can claim input tax credit and refunds under the zero-rated export route.
How does GST apply to services the subsidiary provides to the US parent?
GST applies to services an Indian subsidiary provides to its US parent as zero-rated exports if the conditions are met (Section 16 of the IGST Act, 2017), such as the recipient being outside India and the payment arriving in foreign exchange. The subsidiary can supply under a letter of undertaking without paying GST and claim refunds of related input credit. Intermediary services are treated differently.
Why does a private company need two shareholders, and how does a wholly owned subsidiary meet this?
A private limited company must have at least two members. In a wholly owned subsidiary, the second share is usually held by a nominee or another group entity on behalf of the parent, and the beneficial ownership is declared as the Companies Act requires.
What registrations does the company need after incorporation?
Depending on the business: GST, provident fund, ESI, professional tax, state shops and establishment registration, and an import-export code if you trade goods. Some can be applied for through SPICe+, and others follow once you hire or start billing.
What are the VAT registration thresholds for selling services abroad from India?
The UK threshold is £90,000 for UK-established businesses but none for non-UK businesses, and the EU €10,000 micro-threshold applies to EU-established sellers only. Australia is AUD 75,000, Canada is CAD 30,000, Singapore is SGD 1 million (plus SGD 100,000 of B2C sales for overseas vendors), and the UAE is AED 375,000 for resident businesses with no threshold for foreign businesses.
Related guides
Incorporation Process for a US-Owned Indian Subsidiary, Step by Step
The eight steps to incorporate a wholly owned subsidiary in India from the USA: forms, order of steps, typical 4 to 6 week timeline and first 90 days.
Read the guide →Compliance Calendar for an Indian Subsidiary: What Is Due and When
The recurring compliance of an Indian subsidiary: monthly, quarterly, annual and event-based filings under company, tax, GST, FEMA and labour law.
Read the guide →Ten Mistakes US Companies Make When Setting Up in India, and How to Avoid Them
The ten most common and costly mistakes US companies make when setting up an Indian subsidiary, and how to avoid each. Includes a pre-filing checklist.
Read the guide →Sources
Last updated 14 October 2026. General information only, not legal or tax advice. Indian rules change often; confirm current requirements before acting.