GST Reverse Charge Mechanism (RCM) for Hostinger Purchases and Resale in India – Accounting & Tally Prime Implementation Guide

Indian businesses frequently purchase hosting, cloud, and digital services from overseas providers such as Hostinger. When these services are imported into India and later resold to Indian customers, GST compliance becomes critical, especially under the Reverse Charge Mechanism (RCM).

This Knowledge Base article explains:

• Who is liable to pay GST

• Why GST is not charged by Hostinger

• How RCM applies to import of services

• How to record purchases and sales correctly in Tally Prime

• How GST flows through GSTR-1 and GSTR-3B

This guide is written for accountants, IT service resellers, auditors, and GST practitioners.

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Technical Explanation: GST on Import of Hosting Services

1. Nature of Transaction

• Hostinger is a non-Indian (overseas) service provider

• Hosting services fall under Import of Services

• Place of supply = India

• Recipient (you) is GST-registered

2. Legal Provision

Under Section 5(3) of the IGST Act, import of services is notified under Reverse Charge Mechanism (RCM).

Result:

• Supplier (Hostinger) → Does NOT charge GST

• Recipient (You) → Pays IGST under RCM

• Same IGST → Eligible for Input Tax Credit (ITC) after payment

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GST Responsibility Matrix

Transaction Stage	GST Charged By	GST Paid By	GST Type
Purchase from Hostinger	❌ No	✅ You	IGST (RCM)
Sale to Indian Customer	✅ Yes	✅ You	CGST+SGST / IGST

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Use Cases

Use Case 1: IT Company Reselling Hosting

• Purchase hosting from Hostinger

• Resell hosting to SMEs in India

• Charge 18% GST on invoices

• Adjust ITC from RCM against output GST

Use Case 2: AMC / Web Agency

• Bundles hosting + support

• Hosting component purchased overseas

• GST compliance maintained via RCM

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Step-by-Step Implementation in Tally Prime

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PART A: Purchase Booking (Hostinger – RCM Applicable)

Step 1: Create Expense Ledger (Hosting Charges)

Gateway of Tally → Create → Ledger

Field	Value
Ledger Name	Hosting Charges – Hostinger
Group	Indirect Expenses
GST Applicable	Applicable
Type of Supply	Services
SAC	998315
Taxability	Taxable
GST Rate	18%
Reverse Charge	Yes
Eligible for ITC	Yes

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Step 2: Create Supplier Ledger (Hostinger)

Field	Value
Ledger Name	Hostinger
Group	Sundry Creditors
Registration Type	Overseas
GSTIN	Not Applicable

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Step 3: Record Purchase Voucher

Gateway → Vouchers → F9 (Purchase)

Dr  Hosting Charges – Hostinger    10,000
    Cr  Hostinger                 10,000

Do NOT manually add GST lines.
Tally auto-calculates IGST under RCM.

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Step 4: Pay GST under RCM

Gateway → Create Challan

• Tax Type: IGST

• Nature: Reverse Charge

• Payment Mode: Cash Ledger

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Step 5: Claim Input Tax Credit

After payment:

• IGST paid under RCM appears as ITC

• Available for set-off against output GST

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PART B: Sale to Indian Customers (Normal GST)

Step 6: Create Sales Ledger

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Step 7: Record Sales Voucher

Example: Sale Value ₹15,000

Dr  Customer A/c                17,700
    Cr  Hosting Services – Sales 15,000
    Cr  CGST @9%                 1,350
    Cr  SGST @9%                 1,350

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GST Set-Off Example

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GST Return Reporting

GSTR-1

• Only sales invoices reported

• Hostinger purchase not reported

GSTR-3B

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Common Issues & Fixes

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Security & Compliance Considerations

• Preserve foreign invoices for audit

• Maintain RCM payment challans

• Ensure accurate SAC classification

• Reconcile ITC vs Output GST monthly

• Keep vendor marked as Overseas

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Best Practices

• Create separate ledgers for RCM expenses

• Do not mix RCM and non-RCM purchases

• Pay RCM GST within the same return period

• Regularly verify GSTR-3B auto-populated values

• Maintain monthly RCM reconciliation sheet

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Conclusion

When purchasing hosting services from overseas providers like Hostinger and reselling them in India:

• GST on purchase is payable by the recipient under RCM

• GST on sale is payable by you as supplier

• RCM GST must be paid first, then claimed as ITC

• Proper ledger configuration in Tally Prime ensures error-free GST compliance

Correct handling of RCM protects businesses from penalties, audit issues, and ITC reversals, while keeping GST filings accurate and compliant.

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