1. Can a newly formed Pvt Ltd company in india deal with a foreign company in UK and provide services in the field of media product distribution and marketing for the foreign company in India? The foreign company, which has got a global tender awarded to it for the supply of mags and newspapers to an airline will pay a fee or margin to the new company against this service. So, this new company will deal with many local companies for execution of jobs on behalf of the foreign company. 2. The foreign company is directly not able to invoice to the airline and get paid. The invoice will be raised by the new Pvt Ltd company against the airline company based on the invoice details provided by the foreign company. Hence, the payment will first come to the new company, which will send the due payment to the foreign company in foreign currency after keeping its own margin. 3. Can this new company be paid in India against some other similar services in India as well as outside India by a foreign company against an invoice raised by the new company? 4. What are the Taxes to be paid and applicable rates as well as exemptions?
1. Yes, the new Indian company can provide these services to foreign company. However, it will have to comply with transfer pricing regulations in India and will have to justify the arm's length nature of the transaction. It's important to know who is going to negotiate the pricing with Indian airline companies
2. that's ok subject to point 1
3. Yes
4. GST will be paid on supply of magazines and corporate income tax @22% on profit made
1. Yes. Transfer pricing provisions will not apply unless company in India and foreign company in UK are associated enterprises at the time of entering into a transaction. Draft a proper service agreement with the UK company in respect to scope of services and consideration.
2. Either there should be a tripartite agreement between you, foreign company and airline or separate agreements with each. The invoice raised by you to the airline will be completely treated as an income in your hands though you will make payment to UK co. after deducting margin. If the tender is in the name of foreign company then how can Indian company raise an Invoice. For amount to be paid to UK, either it should be supported by an invoice from the UK co. or an agreement. As UK company will generate income from India, you will be required to deduct TDS subject to DTAA provisions. UK co. should apply for PAN in India and file the ITR.
3. Yes but subject to nature of services and agreements.
4. Newspaper is exempt from GST. On mags, you need to check the rate. If the agreement with airline is for the supply of mags and newspapers then the threshold for GST registration is Rs.40 lacs. Income tax rate would be 22%.
Dear Sir,
Hope you are doing well !!
1. Yes, a newly formed Pvt Ltd company in India can deal with a foreign company in UK and provide services in the field of media product distribution and marketing for the foreign company in India subject to transfer pricing rules and regulations.
2.It is ok. You can go ahead with the said arrangements.
3. Yes.
4.Income tax would be 22% on profit made.
As per GST Law, there is no GST payable on Newspaper.
So the rate of GST payable on Newspaper is nil rate.
GST would be applicable on supply on magazines.
Hello,
1. Yes. It might be covered under an agency/commission-based agreement. Transfer pricing might apply since the foreign company has substantial influence in deciding the prices and terms of supply bu the Indian company.
2. It would be allowed as per the agreement between the Indian and foreign company and Tender providing entity and the foreign company.
3. Yes.
4. GST and Income Tax.
I hope that this answer satisfies your requirements.
Regards,
CA Hunny Badlani
1. Yes surely it can. It will be normal business transaction.
2. So you will be providing services to air line & Receive remuneration for that. For products provided to you contract can be executed & remuneration can be duly paid.
3. Yes surely it can. There is no limitation on business which you can do.
4. Since you will be earning F.X so it can be counted as export services & your product will be zero rated ( GST)
5. For Income tax you will be taxed @ 25%. But if you can bring printing of Mags & newspaper which are to be distributed under the new company then you can blur the nature of your company & convert it to manufacturing cum service company instead of Plain service based company. ( New income tax rates for manufacturing company fixed by GOI is 15%.)
Now you need to do your calculation & see what are other pro's & con's.
Regards,
Yes the company can do business with foreign company. But you need to define the service and type of contract because the Indian company wont be supplying any service to such airline it would be just collecting money on behalf of such foreign company so you would just be providing service as recovery agent.
You need to draft a contract mentioning all the conditions with foreign company i.e. your magin and all such things and then you might be able to recover money on their behalf may be.
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Thank you.
