• Foreign Direct Investment

I am an Indian merchant exporter trading TABLEWARE buying from manufacturer and exporting the same to various countries under LUT. One foreign buyer wants to invest in dies to get customised TABLEWARE (plates & bowls). 

Will manufacturer of tableware invoice the merchant exporter for moulds and then exporter will invoice to foreign buyer of the moulds?

Will the manufacturer have to charge GST in its invoice?

Will the exporter have to charge IGST in its invoice?

Will this transaction be treated as FDI?
Asked 5 years ago in GST

Hi,

- Moulds will be designed as per the design of foreign buyer and they will not be supplied to anyone i.e. exporter and foreign buyer. Manufacturer will just give services for designing of that moulds. There will no physical supply of the moulds and sharing of technology for designing of moulds to anyone.

- Manufacturer will get the order from you and you get the order from the foreign buyer.Principally, manufacturer should invoice you and charge GST on it and you need to invoice foreign buyer without GST as you are holding LUT but it will increase the cost in the hands of foreign buyer if you deal in export only.

- I don't think it would be treated as FDI. What is the amount foreign buyer is putting in?

Thanks

Vivek Kumar Arora
CA, Delhi
4825 Answers
1030 Consultations

5.0 on 5.0

Hi,

- Simply you need to show it as revenue and any income arise to you due to foreign currency fluctuation it should go to foreign currency fluctuation account. It will be export income. You can contact your bank branch about this remittance.

Thanks

Vivek Kumar Arora
CA, Delhi
4825 Answers
1030 Consultations

5.0 on 5.0

Hi,

Hope you are doing well !!

Yes, manufacturer of tableware will invoice the merchant exporter for moulds and then exporter will invoice to foreign buyer of the moulds.

Yes, the manufacturer will have to charge GST in its invoice.

No, there is no need as exporter is having LUT. It will be treated as part of cost.

No, this transaction will not be treated as FDI

Thanks & Regards,

Payal Chhajed

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Hi,

The foregin currency remittance will be treated your export income.

You will be required to show the same in your ITR as a foregin income.

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Hi,

Please find below response to your queries 

1. Yes

2. Yes the manufacture will have to charge GST

3. NO. Since the exporter has LUT.

4. this transaction will not be treated as FDI.

Regards,

Nikhil.

Nikhil Khanna
CA, Mumbai
1429 Answers
19 Consultations

4.8 on 5.0

Hi,

1. Yes.

2. Yes.

3. No.

4. No.

 

 

 

Karishma Chhajer
CA, Jodhpur
2450 Answers
29 Consultations

5.0 on 5.0

So basically if the foreign buyer wants to invest in moulds it's better to get the buyer pay for moulds directly rather than you becoming a moderator, because in that you will be required to give an explanation about the transaction. Even if you become the moderator I don't think you would be required to charge GST because foreign buyer is the actual owner of the mold and you are just paying on his behalf so you are working like his agent so I don't think GST needs to be paid on this transaction. Whatever GST needs to be paid that the mould maker will recover from foreign buyer.

 

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

Thank you

Naman Maloo
CA, Jaipur
4265 Answers
96 Consultations

5.0 on 5.0

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