ChatGPT has become a go-to assistant for millions in India — from coders and content writers to legal and financial professionals. But with all this usage, a crucial question arises: How much tax is OpenAI, the company behind ChatGPT, paying in India?
The short answer: Almost none.
Let’s understand why.
OpenAI Is Earning from India, But Not Paying Corporate Tax Here
When an Indian startup or individual uses ChatGPT — whether through a subscription to ChatGPT Plus or API integration — the payment goes to OpenAI’s US entity.
Now here’s the catch: OpenAI does not have a registered office, employees, server infrastructure, or any physical presence in India. In tax terminology, this means no “permanent establishment” (PE) in India.
As per current tax treaties and the Income Tax Act, a foreign company is only liable to pay income tax in India if it has a PE here. Since OpenAI has none, it doesn’t have to pay income tax on revenue earned from Indian users.
No Corporate Tax, But GST Applies Under Reverse Charge
Even though OpenAI doesn’t collect taxes directly from users, there is still a tax implication — for the Indian user.
Under the reverse charge mechanism (RCM) in GST, when an Indian business avails a service from an unregistered foreign entity (like OpenAI), the recipient of the service must pay 18% IGST on the payment.
So, if your company subscribes to ChatGPT Plus for ₹1,850 per month, you must self-assess and deposit 18% GST (~₹333) with the government. This amount can be claimed as input tax credit (ITC) if the service is used for business purposes.
But OpenAI itself is not paying GST to the Indian government, since it has not registered under Indian GST laws — a step that would only be triggered if it crosses a certain revenue threshold or sets up a local presence.
What Is the Estimated Revenue from India?
There are no public disclosures of country-wise revenue by OpenAI. However, industry estimates suggest that India is among the top five countries in terms of ChatGPT usage.
If we assume:
- 2 lakh Indian subscribers to ChatGPT Plus
- ₹1,850 monthly subscription fee
- 15,000 developers using APIs monthly
OpenAI could be earning over ₹100–150 crore per year from India, and growing rapidly.
Despite this, due to outdated tax rules and lack of local presence, this revenue escapes India’s corporate tax net entirely.
Why Hasn’t the Law Caught Up?
The concept of “permanent establishment” was designed for a traditional, physical business model. A factory, office, warehouse — these were the signs of economic activity.
But in today’s digital world, companies like OpenAI, Netflix, Meta, and others can earn significant revenue from Indian users without any local footprint.
India did introduce an Equalisation Levy in 2016 — a 6% tax on online advertising revenues earned by foreign digital companies. But this levy does not currently cover subscription-based AI tools or API usage.
Efforts at the OECD level to create a global framework for taxing digital companies are ongoing, but progress has been slow.
What Might Change Soon?
In 2025, India constituted a committee to review AI-related copyright and regulatory frameworks. While the focus was initially on content, legal experts say taxation may soon become part of the discussion.
Possible actions India may take:
- Amending the definition of PE in the Income Tax Act to include significant digital presence.
- Mandating GST registration for foreign AI companies earning over a threshold from Indian users.
- Introducing a Digital Services Tax 2.0 in the upcoming Budget to widen the coverage of cross-border tech services.
India has also been participating in global tax discussions under the OECD’s Pillar One and Two frameworks, which aim to allocate taxing rights based on digital presence, not just physical establishment.
Implications for Indian Businesses and Startups
If you’re an Indian business using ChatGPT or other foreign AI tools:
- You must pay 18% IGST under reverse charge if OpenAI is unregistered.
- You can claim Input Tax Credit if used for business purposes.
- You are not required to deduct TDS, as OpenAI does not have a PE in India.
If OpenAI sets up a branch or server in India in the future, both corporate tax and GST implications will apply.
Conclusion
ChatGPT is being used extensively in India — but OpenAI is not paying any corporate income tax in the country. This is not tax evasion, but a consequence of how digital tax rules lag behind real-world business innovation.
The only tax currently linked to ChatGPT usage in India is 18% GST under reverse charge, which is paid by the Indian user — not by OpenAI.
As AI adoption grows and revenue inflows into India increase, policymakers are likely to introduce tax reforms to plug these gaps. Until then, companies like OpenAI will continue to benefit from Indian users without sharing a part of that revenue with the Indian exchequer.
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