GST on foreign company commissions below 20 lacs

Dear Rachit

You are not liable to pay GST on commission received directly from Foreign company as these are zero rated supplies (export of services) [refer sec 16 of the IGST Act]

Regards

CA Harsh Kumar Garg

harshgrg92@gmail.com

Hi,

Glad to reply for your Query.

as per my understanding you have already applied for LUT with GST authosrities and you get the same.

In that case there is no need to pay GST on your services as they are export services and for which we taken an exemption certificate from Authorities.

For lareday paid the amount also you can receive duty drawback

Regards

Kiran

Hi Rachit

There seems lot of misconceptions and lack of clear understanding of the law.

As you are providing intermediary service, the commission income that you are receiving cannot be considered as export of services. The place of provision of service in intermediary service is the place of service provider i.e. you. So there is no exports; no question of LuT.

You can raise invoice of the commission amount plus 18% GST and recover the same from the principal.

In case there is no commission for a particular period, you will have to file NIL returns. GST shall have to be paid for the month in which invoice is made OR payment is received- whichever is earlier.

Hi Rachit,

The service that you're providing to your Foreign Principal would constitute as Export of Services.

GST is not applicable in India for exports. Hence, all export supplies of a taxpayer registered under GST would be classified as zero rated supply. According to Section 16 of the IGST Act, zero rated supply means any of the following supplies of goods or services:

Export of goods or services or both;

Supply of goods or services or both to a Special Economic Zone developer

Supply of goods or services or both to a Special Economic Zone unit.

So, as per Section 16, you are not required to pay GST but you would still be required to file GST returns on a monthly basis.

What I understood from your description is that goods are supplied from A ( foreign co) to B (Indian co). You are C, a trade facilitator who receives commission from A in foreign currency.

If my understanding is correct, the above answer applies.

As you are exporting services as per igst act, exporting services are deemed to be supply in the course of inter state trade or commerceExports have been defined under “zero rated supply” meaning that tax rate on the export of goods and services will be zero. While one section is categorizing exports rate at zero, another section 3(5) states that transaction of export will be subjected to IGST, which is even zero rated supplies of services are subject to IGST,Any registered person availing the option to supply goods or services for export without payment of integrated tax shall furnish, prior to export, a bond or a Letter of Undertaking. This bond or Letter of Undertaking is required to be furnished in Form GST RFD-11 on the GST common portal. This form, GST RFD 11, will be filed with a bank guarantee equivalent to the amount of IGST, binding himself to pay the tax due along with the interest specified within a period of:

1 )fifteen days after the expiry of three months from the date of issue of the invoice for export, if the goods are not exported out of India; or

2) Fifteen days after the expiry of one year, or such further period as may be allowed by the Commissioner, from the date of issue of the invoice for export, if the payment of such services is not received by the exporter in convertible foreign exchange.

Also as service provider plz check eligibilty for Furnishing LUT or Bond, if you obtained certificate under LUT or Bond and mentioned in the invoice that supply is made in course of export and mentioned LUT no. in invoice you can issue without charging IGST in invoice or if you have charged then you can claim refund under igst rules. Plz check eligibility for LUT or Bond from GST act, contact with your bank for same.

Thank you

Dear Rachit,

It is an Export of services under GST for which undertaking was required to be submitted with the authorities, which you had complied with. Therefore there is no need to pay tax instead you can claim refund of ITC.

Please ask your consultant why you need to pay tax and ask him the relevant notification?

Regards

7060029944

Dear Rachit,

Please ignore my reply and CA Lakshmi is correct.

Regards

Sorry CA Lakshita Bhandhari is correct.

Dear Rachit

Export of goods/ services, in any, case, are not liable to GST if declaration is given. If declaration is not given, then you have to pay GST at first instance but after that you can claim refund of GST paid as export is tax free.

Hi Rachit,

Applicability of GST would depend on the place of Supply. If you're receiving payment from Foreign Company in USD then you're not liable for GST. But if you receive payment from the party in INR, then you would be liable for GST

Hi

Going by your case, Your are an intermediary to an foreign supplier who is supplying goods to India and paying you the commission For the intermediary case.

The case is covered under section 13 of IGST act, where it says place of supply of intermediary services is place where the supplier is located.

The place of supplier and place of supply is same and hence the same is treated as intra state supply and as the turnover is not exceeding 20 lakhs you are but required to register.

Thank you

Since your services fall under the category of intermediary services, place of provision of services will be place of service provider (I.e. India)

Hence, its not export of services and you need to charge GST on the commission amount.

Please feel free to call/ revert in case you need more clarity.

Thanks and regards

Abhishek Dugar

CA CS B.Com

Hi,

Given the situation above, it is clear that the revenues generated by you shall be treated as "Export of Services" within the meaning of Section 2(6) of IGST Act, 2017 because you satisfy all the conditions mentioned therein, which are as below:

1) Supplier of Service is located in India (you)

2) Recipient of Service is located outside India (Foreign Company supplying goods to India)

3) Place of supply of service is outside India (to the foreign company for generation of sales)

4) Payment is received in convertible foreign exchange (USD)

5) Supplier (you) and Recipient (Foreign Company) are two distinct entities

Hence, upon satisfaction of all the conditions above, the revenues generated by you shall be treated as revenues from export of services, which are "Zero Rated Supply" under Section 16 of IGST Act, 2017. As such, you are not at all liable to pay GST on any of your revenues.

Also, since you have mentioned that exception certificate is already issued to you in Nov. 2017 after you have hot yourself registered under GST (obviously), then in this case, it should be clear that you are not liable to pay GST.

However, GST Returns and compliance have to be regularly followed.

I hope your query is answered.

Regards,

CA. Sunny Thakral

You are not required to pay GST since your are providing services to a Foreign Company. Export of Services is a zero rated supply as per GST.