Correct GST return amount for Invoice in USD

Correct GST return amount for Invoice in USD

Hello,

I recently started doing freelancing for a US based client. Please consider the following scenario for the invoice of USD 3000 that was cleared by the client through a payment processor that charges a flat fee of USD 29 with zero markup:

Invoice Amount - USD 3000 (1)
Exchange Applied - 84.0742 (2)
Invoice Amount (#1 * #2) - INR 2,52,222.60 (3)
Payment Gateway Fee (USD 29 * #2) - INR 2,438.15 (4)
GST on Payment Gateway Fee (18% of #4) - INR 438.87 (5)
Amount Received by me (#3 - (#4 + #5)) - INR 2,49,345.58

The FIRA that I received mentions the following and doesn't mention about the fee:

Payment Amount - USD 3000
Credited Amount - INR 2,49,345.58

I have the following questions:

1) What invoice amount should I report in my GST return? Should it be the amount calculated before the fee i.e. INR 2,52,222.60 or should it be the amount that I received in my bank account that is mentioned on FIRA i.e. INR 2,49,345.58?

2) Is the 18% GST on the Payment Gateway Fee i.e. INR 438.87 eligible for ITC?

3) What amount should be I report in my income tax return at the end of financial year as my professional income INR 2,52,222.60 or INR 2,49,345.58?

Please advise. Thanks in advance!

Asked 2 months ago in GST

1) Invoice Amount for GST Return

For the GST return, report the gross invoice amount before the deduction of any fees, as this is the actual value of the services provided to your client. Thus, the amount to report would be:

INR 2,52,222.60 (calculated by multiplying the invoice amount of USD 3000 by the exchange rate of 84.0742).

This figure reflects the full export value before the payment gateway fee, which is just an intermediary cost and not directly associated with the client’s payment for your service.

2) Eligibility of GST on Payment Gateway Fee for ITC

Yes, the GST paid on the Payment Gateway Fee (INR 438.87) is eligible for Input Tax Credit (ITC) because the gateway fee is an expense incurred during the course of providing export services. You can claim this amount as ITC when filing your GST return.

3) Amount to Report in Income Tax Return

For income tax purposes, report the actual amount credited to your bank account as your professional income, as this is the amount that effectively represents the income received from the export service after all deductions:

INR 2,49,345.58

This reflects the net income received after deducting the payment processor fee and related GST, aligning your reported income with the actual funds received.

Shubham Goyal

CA, Delhi

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1) INR 2,52,222.60

2) Yes

3) Under gross receipts INR 2,52,222.60 and expenses INR 2,438.15

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Vivek Kumar Arora

CA, Delhi

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Thanks for the responses!

The responses for question #3 are different. Please clarify whether INR 2,49,345.58 or INR 2,52,222.60 be reported in the income tax return. What is the exact and correct definition of gross receipts - the money received in the bank or the invoiced amount?

Looking forward to the expert guidance to my doubt.

Asked 2 months ago

1) Definition of Gross Receipts:

Gross receipts for income tax generally refer to the total amount invoiced for services provided, regardless of intermediary fees or deductions.

In this case, INR 2,52,222.60 (the full invoice amount) is your gross receipt.

2) Reporting in the Income Tax Return:

Report INR 2,52,222.60 as your gross professional income under gross receipts.

Then, you can separately show the Payment Gateway Fee (INR 2,438.15) as a business expense, as well as any GST on it, if applicable.

Shubham Goyal

CA, Delhi

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Talk to Shubham Goyal NOW!

1) Reporting Invoice Amount in GST Return

For your GST return, you should report the gross invoice amount before the deduction of fees, i.e., INR 2,52,222.60. This represents the total value of the service you provided, not the net amount received after the payment gateway’s fee. Since the payment gateway fee is an expense, it does not reduce the value of the services provided.

2) Eligibility for Input Tax Credit (ITC) on GST for Payment Gateway Fee

Yes, the GST of INR 438.87 on the payment gateway fee is eligible for Input Tax Credit (ITC), provided you have a proper tax invoice from the payment gateway showing the GST component. This can be claimed as ITC since it’s a business-related expense tied directly to the receipt of payment for your services.

3) Reporting Income in Income Tax Return

For your income tax return, you should report the gross invoice amount (INR 2,52,222.60) as your professional income, as this reflects the actual value of services you provided. The payment gateway fee (INR 2,438.15) should be treated as a business expense in your income tax return, effectively reducing your taxable income.

In summary: