Hello, I own a small brand in the USA, and most of my products are shipped from within USA (some from china too), my business solely a type of dropshipping model, where product does not enter into India. But, money does enter into India like - Customers Pays on Store(USD) -> Paypal(USD) -> Indian Bank account (INR)-> Payment to Supplier (USD) The rest amount is used for marketing on FACEBOOK & GOOGLE which charges GST. So the problem is, my input is getting accumulated, and since I am not selling in India, my output is always zero. The GST is eating up my margin (18% on ads is huge), so my main question is, Is there any way to get this into refund? by explaining to the government? Since dropshipping = out and out sale, CBDT has mentioned that input tax credit can be claimed, but haven't described claiming a refund on it. I only found a solution, that is to now incorporate into the different country! This GST thing is Killing Indian business.
Hi
Refund under GST is only applicable in cases of exports or under inverted duty structure.
Since you are dropshipping, it cannot be classified as exports-zero rated supplies.
Hence, refund is not possible unless you have some taxable supplies to utilise such ITC.
So, incorporating into different country is the only solution?
Dear Sir,
Hope you are doing well !!
Generally in drop shipping, GST is chargeable on profit element I.e. commission income.
No refund of ITC can be claimed back untill you are providing taxable supplies to utilize the same.
Either you can increase the price of product or incorporate in different country.
Hello,
Refund of GST is possible only in case of exports. Since your dropshipping model doesn't qualify as Export of goods, you won't be eligible for the refund of any ITC accumulated.
Incorporating in a different country might help.
I hope this answer satisfies your requirement.
Regards,
CA Hunny Badlani
As per the current tax rules in India, you won't be able to claim refund of such ITC in India. You may consider these as a part of your costs. Or in case you have any supplies in India, ITC can be utilized.
To claim/utilise the ITC, incorporating in different country is the only solution..