• How to pay taxes on foreign income gained for technical services?

- I work remotely in india for a technical company in singapore. I received payment for my services in SGD remittance in my account. 

- My total receipts would be around 38 lakhs in current financial year (2021-2022).

- Do i need to get a GST number (As i read somewhere that gst registration is mandatory for foreign exports irrespective of income limit). Also gst is zero rated for foreign exports?

- If i will get gst registered now so can i issue backdated invoices to my client (service taker). Is it something legal and financial feasible, since gst is zero so gst penalty will be zero for late gst registration.

- Can i avail section 44ADA for this case to pay tax on 50 percent of income?

- Also do i need to have actual 50 percent expenses to use section 44ADA, what if i don't have 50 percent expenses, can i still avail presumptive tax scheme?

- Please clarify the process of filing and saving tax for above scenario.
Asked 5 months ago in Income Tax

Hi

 

GST registration is mandatory once you cross the threshold of 20 lacs in a financial year. After getting registered under GST you can apply for letter of undertaking and export services without payment of GST since it is a zero rated supply.

 

You can opt for presumptive taxation scheme under section 44ADA. There's no requirement to have actual expenses as 50%.

 

We may discuss the issues further in detail.

Lakshita Bhandari
CA, Mumbai
5638 Answers
763 Consultations

5.0 on 5.0

Treatment under the GST Act

Services provided from India to a client located outside India is treated as Inter-state supply of services. In such cases, GST registration is mandatory after crossing threshold limit of Rs. 20 lacs in a financial year. In your case, all conditions specified for export of services are fulfilled therefore services provided by you shall be treated as "export of services". Under the GST Act, export of services is treated as "zero rated supply".

 

- As total receipts would exceed Rs. 20 lacs in a current financial year 2021-22, it is mandatory for you to obtain GST registration. Firstly check on which date you crossed the limit of receipts of Rs. 20 lacs. From that date you were liable to obtain GST registration within 30 days.

- After obtaining GST registration, file LUT to avail the benefit of export without payment of taxes.

- Obtain FIRC (Forsign Inward remittance certificate) from the banks against each receipt from foreign company.

- There should be proper agreement with the foreign company covering all substantial clauses

- Invoices should be raised with a proper format for export of services before each payment 

- As your turnover is less than Rs. 5 cr, you can opt to file quartrely GST returns.

- You can claim the refund of unutilized input tax credit. 

 

Treatment under the Income Tax Act

Section 44ADA is available to sepcified professionals. Such professionals are clearly mentioned in the Act. As you have mentioned you are providing technical services which is a broad term. Please mention the exact nature of services provided by you.

 

In any case, pay advance tax for the current financial year income (AY 2022-23)

For saving income tax, you should go for investments and payments u/s 80C, 80CCD(1B), 80D etc. If you having housing loan you can avail the benefit of deduction of interest on housing loan.

 

Ensure proper tax treatment on gains/losses arising from the timing difference between issue of invoice and actual receipt of sale consideration.

 

For detailed discussion, you may opt for phone consultation.

Vivek Kumar Arora
CA, Delhi
4408 Answers
527 Consultations

5.0 on 5.0

Dear Sir,

 

In reference to your query, you are providing consulting services to an entity located outside India, and accordingly the same would be classified as export of services subject to satisfaction of the specified conditions.

Further the limit for registration is INR 20 Lakhs, although in case of exports the limit is 0, i.e. registration is required from the 1st transaction itself. Nonetheless, in your case since your receipts are 38 Lakhs, you are required to take registration.

Yes your understanding is correct, however in order to not pay any taxes you would also need to apply for an LUT (letter of undertaking) and file your GST returns accordingly, otherwise you would need to pay GST from your own funds, however you would full refund of the same after a few months.

 

In reference to back dated invoices, this is not at all a suggested exercise. It is not at all legal. Also your client is not concerned or affected by your registration as he is located outside India and therefore not bound by Indian Laws.

On the contrary, it would be advisable for you to take registration ASAP, and afterwards you can upload your invoice details. Even though tax is not payable, however as mentioned above, and LUT is to be executed to claim that benefit. Also just because there is no financial outgo, does not absolve from penal consequences for non compliance. We can but hope for no scrutiny by the department. Howsoever, if at all any notice is issues the same can be defended.

 

In reference to Income Tax provisions, it is assumed that you qualify for claiming the said benefit u/s 44ADA by providing the specified services.

 

Actual expense of 50% is not a mandate and on the contrary the same is a relief being provided that if a person opts under this section, then he need not maintain any books of accounts under Income tax provisions, and it would be deemed that he has expenses to the tune of 50%. Hence, if your expenses are less, then this section will give you a bonus. Actual expenditure is not relevant for this section.

 

Hope the above serves your purpose.

Please advise in case of any further clarification.

 

Thanks & Regards,

CA Aditya Dhanuka.

https://www.linkedin.com/in/aditya-dhanuka-69824451/

Aditya Dhanuka
CA, Kolkata
52 Answers
2 Consultations

5.0 on 5.0

Yes GST registration is mandatory. 

No back dated invoice is permitted.

You can opt for 44ADA 

Vidya Jain
CA, Kolkata
974 Answers
55 Consultations

4.8 on 5.0

Yes you have already crossed the threshold limit for GST and you should have already taken GST registration but it's never too late you can still get registration.

 

You can issue late invoice for upto 30 days.

Also it's not by default zero rate of GST for providing services outside India one need to fulfil some conditions and then only export outside India are not liable for GST payment.

 

It is advisable to have actual expense.

 

I would recommend to have a phone consultation to discuss all this in length as well are already handling such freelancer professional who are providing services outside India.

 

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
4008 Answers
64 Consultations

5.0 on 5.0

Hello,

 

Yes, GST registration and compliances would be required in your case. You would be required to submit LUT after registration and file returns accordingly for supplying export services without payment of GST.

Yes, you can avail Section 44ADA Presumptive Taxation. Not mandatory to have 50% actual expenses.

I hope this answer satisfies your requirements. For a detailed resolution of your query, you can contact us directly at badlaniassociates at Gmail or take a phone consultation.

 

Regards,

CA Hunny Badlani

Badlani & Associates

Hunny Badlani
CA, Madhya Pradesh
2593 Answers
15 Consultations

5.0 on 5.0

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