Commission fee

Income Tax:

Income tax on your earnings is based on the nature of  person and he respective residential status. If assessee in this case is a firm registered in India, then global income is taxable, hence the tax on your commission fee has to be paid along with your regular income taxes. There is no separate taxablity for this type of income as this would be considered as earned in India, irrespective of the client location as the firm is registered in India. 

Convert your income in foreign currency into Indian Rupees by using the State Bank of India telegraphic transfer buying rate (TTBR) of the last day of the month before the month in which income is due.

If TDS has been deducted on your income you are allowed to take credit of such taxes. For this purpose, reference has to be made to the relevant Double Tax Avoidance Agreement (DTAA) of the country where such income has been earned. India has entered into DTAAs with several countries. DTAA makes sure that a taxpayer is not doubly taxed for the income earned outside the country of residence. Since income may be taxed at source i.e. from the place it originated and is also usually taxable in the country of residence, the DTAA makes sure that the taxpayer is not adversely impacted. The taxpayer is also allowed to take credit of TDS deducted.

• While taking TDS credit, make sure you are referring to the correct DTAA. Under DTAA, there are two methods to claim tax relief – exemption method and tax credit method. By exemption method, income is taxed in one country and exempted in another. In tax credit method, where the income is taxed in both countries, tax relief can be claimed in the country of residence.
• If no DTAA exists between the 2 countries, you may still be able to get tax credit on foreign taxes paid. You may need an expert to assist you.
• Taking benefit of a DTAA involves obtaining a Tax Residency Certificate (TRC) that helps identify and certify your tax residency status to make sure the correct DTAA has been applied. This is inline with the tax laws in India.

If you have earned foreign income on which TDS or any form of tax has been deducted, you may need help from an expert to obtain a TRC and make sure correct DTAA is applied, so you can take credit for the foreign tax deducted.

GST:

Based on the facts provided, this falls under "intermediary services" u/s 2(13) of GST act. Further place of supply will be location of supplier of services (intermediary's location). per sec 13(8). Place of supply is essential to note, as it is the one of the key parameter to identify a service as "export" service. 

In this instance, though the services may be provided for a foreign client, the place of supply is still in India (if the firm is registered in India) as in case of intermediary services place of supply will be the location of supplier of service vide section 13(8).

Hence CGST and SGST should be charged on the invoice. 

Disclaimer: The above views and the opinion expressed or implied are based on the knowledge of the author and the individual/Firm/company is advised to take due care and judgment before taking any decision.

You need to pay income tax on same showing it as your business income and you can claim various expense against same.

Secondly you cannot take benefit of 44AD.

As far as GST is concerned you need to pay 18% GST and cannot claim refund as it won't fulfill the condition of export of service.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Hi

Under GST, you need to get registered once your turnover crosses 20 lacs in a year. Post registration, you need to charge 18% GST on such commission. There would be no refund.

For income tax purposes, you may consider it as a business income and deduct all expenses directly relatable to earning such income. Slab rates shall apply.

We may discuss the issues further in detail over a phone consultation.

- The nature of service provided by you is defined as Intermediary under the GST Act. In case of intermediary, the place of supply is the location of the supplier where he is registered under GST. Therefore you will be liable to pay GST on the commission earned by you. Threshold limit for registration is Rs.20 lacs. There should be a proper documentation to justify this service. Draft a comprehensive agreement and also raise invoices as per the agreement. GST rate would be 18%, mention it separately in the agreement otherwise commission earned will be treated as inclusive of GST. The question for refund arises in case of export. In your case, place of supply is the location of the supplier therefore it can not be treated as export. Avail ITC to pay GST liability and remaining through bank.

- Under Income tax, you are required to maintain proper of books of accounts for income and expenses. Financial statements will be prepared and tax will be payable on the net profit earned during the year. If you are acting as a sole proprietor, slab rates will apply otherwise flat rate will be applicable. Maintain proper records to justify your claim.

Dear Sir,

Hope you are doing well !!

You will be liable to obtain GST once the turnover crosses the threshold limit of Rs. 20 lacs.  If you register for GST now then you need to charge 18% on the fees charged by you. This would be the GST tax liability and no refund can be claimed back.

You can treat the same as business income and claim all the expenses related business.

It is advisable to take a phone consultation for detailed discussion.

Hello,

Since you are providing intermediary services, the place of supply of such services would be the location of the service provider, i.e. India in your case, and therefore, it won't be considered as Export Services. GST @18% would be payable on such a supply of service.

Under Income Tax, being a resident of India, your global income would be taxable income in India. You can declare the commission under the Business head and claim eligible expenses against the income. Proper books of accounts would be required to be maintained. Being a sole proprietorship firm, the net income would be taxable at slab rates. Any tax deducted by the foreign company while making the payment of your commission in a foreign country would be available as a foreign tax credit against the income tax liability in India.

I hope this answer satisfies your requirements.

Regards,

CA Hunny Badlani

Hi

This will be considered as businesses income and same will be chargeable under the head business and profession.

Gst registration is required  when your turnover crosses 20 lacs and chargeable @ 18%.