• GST and TDS related

- We operate a website from USA.
- The website is a marketplace that connects advice seekers with advisors.
- The customers are Indian customers that pay in INR.
- All advisors are located in India.
- Turnover of the website is more than Rs. 20 lakhs per annum.
- Company is incorporated in USA, run by US citizen, but in India it is an individual/proprietorship.

Questions:
1. Will company need to pay GST? If so, what %?
2. What will be the TDS we will need to deduct while paying the advisors?
3. Is there any way to opt out of GST, given that the website is run by a US citizen?
4. What will be the most suitable entity to form in India - proprietorship, LLP, Pvt Ltd?
Asked 5 days ago in GST from Delhi, Delhi
Hi,

Hope you are doing well !


1.Yes, company will have to pay GST @18%.

2.Withholding Tax/ TDS u/s 195 of the Income Tax Act, 1961 should also be deducted before making such payment by the Indian Resident.

Company will have to decduct TDS @ 10% u/s 194J .

No tds deduction shall be made under this section, if the sum payable during the financial year does not exceed Rs. 30,000.

3.No as such way.

4. Will get back to you shortly.

Thanks & Regards,
Payal Chhajed
Payal Chhajed
CA, Mumbai
286 Answers

5.0 on 5.0

Further, please Look into the DTAA between India and UK for taxation position in UK.
Payal Chhajed
CA, Mumbai
286 Answers

5.0 on 5.0

a) Yes as the service is rendered in India and amount is collected in India only, Rate is 18%.

b) TDS rate will 10% u/s 194J as the adviser is providing technical services, TDS will be deducted on each adviser whole gross pay exceeds to 30,000/- in a financial year.

c) As the company is registered in India under proprietorship, hence it's deemed to be treated as Indian branch of foreign company, hence whatever turnover raise from Indian Branch will come under purview of GST, turnover which is not raise from Indian Branch can be excluded from GST.

d) If one need to for bigger growth and legitimate way and safe guard itself in respect of business module, Company name and other aspect, than choose Pvt Ltd company.
Natasha Rajvaidya
CA, Bhopal
8 Answers

Not rated

Dear,

- Company is incorporated in USA, run by US citizen, but in India it is an individual/proprietorship. What you mean to say in India it is an individual/proprietorship?

Thanks
Vivek Kumar Arora
CA, Delhi
995 Answers
19 Consultations

5.0 on 5.0

First clarify the individual is Indian citizen or USA citizen ?

more over the services is rendered in the jurisdiction of Indian territory, more over the adviser ( Services provided by the individual which reside in Indian territory), hence GST is applicable
Natasha Rajvaidya
CA, Bhopal
8 Answers

Not rated

Dear Sir,

Please find below step wise responsos:

1. Yes, Company will be liable for GST @18%. Service receiver and service provider both are in India. Also amount is received in india. Section 9(i) of the income tax act, 1961will be applicable.

2.Company will require to deduct tds @10% u/s 194J. Threshold limit of RS.30000 is applicable to each payment separately.

3.There is no way to opt out of GST on the basis of US citizen.

4.As looking over the turnover, PVT LTD will be the most suitable entity.

Warm Regards,
Karishma
Karishma Chhajer
CA, Jodhpur
27 Answers

Not rated

1) Company is incorporated in USA and you are providing services under the company name in India then how the receipts can be credited into the account of an individual. Receipts should be credited into the company's current account and not into individual account. 

2) Company incorporated outside India so it is not an Indian company and I think place of effective management i.e. key management and commercial decisions are also taken outside India which results in to Non-resident status for the company in India for taxation purpose. 

3) Any income arising or accruing to non-resident company on account of business connection in India is taxable in India. Either open bank account in USA and receive payment from advise seekers in USA bank account or open a current account in India as a collecting agent for services rendered by the USA company.

Thanks
Vivek Kumar Arora
CA, Delhi
995 Answers
19 Consultations

5.0 on 5.0

Yes, any foreign company that supplies goods and/or services to recipients in India, but who has no fixed place of business or residence in India are mandatorily required to obtain GST registration.

In the CGST Act, a “non-resident taxable person” has been defined any person who occasionally undertakes transactions involving supply of goods or services or both, whether as principal or agent or in any other capacity, but who has no fixed place of business or residence in India. And Section 24 of the CGST Act, has mandated that non-resident taxable persons making taxable supply mandatorily obtain GST registration.
Natasha Rajvaidya
CA, Bhopal
8 Answers

Not rated

Hi,

Please refer the replies inline below:

1. Since the service is generating income with the Indian associated source, hence GST shall be applicable.
2. TDS shall be applicable under section 194J @10% as its a professional income for those advisors. However, limits prescribed under the law shall be applicable.
3. Indirect taxation (GST) is not on the income of an individual. Its a tax on the consumption of goods and services. Hence, there is no way to escape GST registration.
4. Proprietorship involves very less compliance as compared to other company structures. Also the registrations would not be so complex. In the other structures, various types of compliance as well as registrations would require documents to be verified by the Indian embassy present in UK or vice versa. From the point of view of investments etc. private limited is a better form as it is a structured and regulated form of an entity.

Thanks
Damini
Damini Agarwal
CA, Bengaluru
246 Answers
12 Consultations

5.0 on 5.0

Thank you. Below is my answer : 

1. GST shall be applicable @ 18% as income generating in India 

2. TDS shall be applicable under section 194J @10% as its a professional income for those advisors. 

3. One need to evalaute business and current payment model restructuring option for escaping GST . Detailed discussion required 

4. Private Limited or LLP is the better option from corporate governance, regulatory and investment perspective. Propertorship is not recommend in your business model. 

5. You also need to see applicability from transfer pricing perspective.
Ajit Kumar Jain
CA, Mumbai
10 Answers

Not rated

Hi

1.yes GST is applicable @ 18%
2. TDS to be deducted @ 10% under sec 194J when total payment in a year exceeds 30000 
3.No way to escape GST
4.Pvt limited co is better option.
Swati Agrawal
CA, Indore
407 Answers

5.0 on 5.0

Questions:
1. Will company need to pay GST? If so, what %?
yes, your company will be liable to pay gst (igst at rate of 18 %)
and your company will also have to take registration in india 
if company has not any fixed place of business then any person representative of the company in india is liable to register and pay gst in india.
if company has not any representative in india then company has to appoint any person as representative in india and register under gst and pay gst

( only in case of company provide service to any person registered under GST then only not liable to pay gst in india. ) 

2. What will be the TDS we will need to deduct while paying the advisors?

TDS will be deducted at the rate of 10 % u/s 94j for professional fees paid by you to advisors

3. Is there any way to opt out of GST, given that the website is run by a US citizen?

( only in case of company provide service to any person registered under GST then only not liable to pay gst in india. ) 

4. What will be the most suitable entity to form in India - proprietorship, LLP, Pvt Ltd?

foreign company has lowest tax liability in india for income tax for gst not effect any status of your company in india

Q. In India there is no employee but the bank account into which the online customer makes payment is an Indian bank account under individual’s name. 
ans. you can not accept any amount in the individual name account in indian in the name of company all the liabilities will be on the person who received any amount in his account for GST and Income TAx both. 

q. individual receiving payment in India bank account is the same person (US citizen) who has incorporated the company in USA.
ans. not any effect for both taxation 

Q. Thank you all for your valuable inputs. Now we need a competent CA to handle our GST/TDS/taxes and file all other tax returns regularly. Please contact us.

ans . we can feel free to contact us 
CA. Bhadresh Mevada
mobile : [deleted] (call withing 10.00 am to 7.00 pm only)
Bhadresh S Mevada
CA, Surat
34 Answers

Not rated

Dear Entrepreneur 

Thanks for writing us.

Hope you are doing Well

Please find below comprehensive analysis of your concerns:

As you are operating in India through ECommerce platform hence you are liable to register under GST, as section 24 of CGST act mandates compulsorily registration for every commerce operator. So in your case limit of 20 Lac will not be apply and you are required for registrations from very first day. Escaping GST liability would not be possible as you are operating through Indian professional/advisors and you are collecting revenue through Indian Bank Account.

As far as TDS liability Is concern you are required to deduct TDS on payment made to individual professional which will be subject to threshold limit. TDS will be deducted @ 10% u/s 194 J which have threshold limit of 30000. i.e. No deduction shall be made under this section, if the sum payable during the financial year does not exceed Rs. 30,000.

Please be noted that once you will register in India as a Pvt Ltd company then there will be further income tax liability on you and it will drastically decrease your profit.

Let me connect you on e-mail to help you for smooth tax compliances.

Hope you will find in order.
Varun Chawla
CA, Ghaziabad
67 Answers

5.0 on 5.0

Hi,

Please find below the responses to your queries:

1. Yes, Company will be liable for GST @18%. 
2. Company will require to deduct tds @10% u/s 194J. Threshold limit of Rs.30000 is applicable to each payment separately.
3.No
4.it is advisable to form a PVT LTD.
Regards,
Nikhil.
Nikhil Khanna
CA, Mumbai
830 Answers
4 Consultations

5.0 on 5.0

1. Yes, company will have to pay GST @18%.

2. Ideally TDS @10% should be deducted if professional fees during year is more than 30000. However, this provision is too harsh for an NRI and in practice I haven't seen NRI's deducting TDS 

3. Need to research on it.

4. Ideally, you should not open entity in India if you want to avoid income tax in India.
Abhishek Dugar
CA, Mumbai
3078 Answers
135 Consultations

5.0 on 5.0

OK
Bhadresh S Mevada
CA, Surat
34 Answers

Not rated

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