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GST LIABILITY ON COMMISSION INVOICE(USD) RAISED TO A FOREIGN COMPANY

NPS WALIA (CEO) (38 Points)

28 January 2020

GST LIABILITY ON COMMISSION INVOICE(USD) RAISED TO A FOREIGN COMPANY

We are a pvt. ltd. company based at NCR.

We have to raise invoice to a foreign company for the sales/service commission charges for the agreed amount.

The foreign company shall pay us the agreed amount (in USD) as per our invoice through RTGS-Bank mode.

Is their any GST liability on our company in this transaction?

what is the correct way to execute the legal compliance and related documentation.

Kindly advise.

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7 Replies

Anup Agarwal (1184 Points)
Replied 28 January 2020

In your case you are exporting service to USA.
you can avail benefits of Zero rated supply (i.e. export)
File LUT (Letter of Undertaking) through GST Portal before raising such invoice.

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NPS WALIA (CEO) (38 Points)
Replied 28 January 2020

No, we are not exporting service .

We are infact representing the foreign company in india and marketing on their behalf.

We are entitled for the commission margin being the difference between import Purchase order of buyer India (USD) and dealer price list )(discounted).

We shall raise invoice on supplier (foreign company) for the differential amount being our comission/service charges.

Can this be treated as export service?

Anup Agarwal (1184 Points)
Replied 28 January 2020

As per Section 2 of IGST Act - Definition of Export of service-

If
a. Supplier is in India
b. Recipient is outside India.
c. Consideration received in foreign Currency or in INR (if permitted by RBI)
d. Supplier and Recipient are real distinct.

Export of service shall be there.

As you are providing Marketing Services to the foreign company. It shall be Export of service.
you can avail export benefits for the service you have provided.

Further if we see it through another angle of dealer discount-

As this incentive is under contract that it will be provided on the basis of Dealer price- import price, then it will be treated as Discount only for which you can raise a debit note without impact of GST.

NPS WALIA (CEO) (38 Points)
Replied 28 January 2020

Thank you for your prompt and informative response.

Please further clarify..

Although, we are marketing in behalf of foreign company but the end user ( the buyer of foreign company) is in India.

What shall be considered as the place of service..

End user (India buyer)

Supplier (foreign company.

We get paid by the foreign company.

Scope of service includes..

Arrange for PO from end user to foreign company.

Consultancy to end user before sales and installation/training after sales.

Payment follow-up on behalf of foreign company.

Market update) analysis report to foreign company.

How is the situation now..

Are we still export service providers?

Sorry for being a devil's advocate :)

Anup Agarwal (1184 Points)
Replied 28 January 2020

Dear Walia,

As per your information now picture is totally clear.

you are providing intermidiatary services to the foreign company, as an agent of the foreign company.

And As per Section 13(8) Place of supply of services shall be Location of supplier. Hence your company can not avail export benefits on the services you are supplying.
Place of Supply shall be the business place of your Pvt limited company.
Accordingly it shall not be Export of service.
You will raise invoice with Charging of CGST & SGST