Service tax in India

[Anant L]

Hi Juvy Ann, 

As per the GST Law, clarifications, circulars posted by CBEC and allied authorities mandates GST registeration if the Sale Crosses even "INR 1 (One Rupee)" leave alone $16, if those sales is outside the Home state to any other state or Union Territory or Exports per se. (India has 29 states and 7 union territories).

I'm confriming all these after having long discussions with Assistant Commissioner GST, Khardah Kolkata North Commissionerate; Assistant Commissioner GST Migrations, Shantipally; GST Seva Kendra, Faqs distributed by Government and analysis of GST Law, CBEC Circulars dated 07/07/2017 & 04/08/2017.

By Billings I meant Invoicing. 

There are many Tech Firms back here, who have opted out of the Refund Mechanism by the means of Letter Of Undertaking or Running Bond (Including Bank Guarantee = 15% of Bond Value; Bond Value = Total Tax Liability at given point of time till Bank Realisation).

So, if any freelancer who is exporting services to ANY Person/Organisation/Individual is compulsory to register under GST. So there are two ways to get refund or save taxes altogether.

Juvy Ann the Refund mechanism you are suggesting are from Pre GST Era which was again for Merchant & Goods Exports. Export of Services was EXEMPT (now Zero Rated with Refund/Document System) form any taxes altogether prior to GST Law. Only Service Tax Return was required to be filed, and not on all cases.

Case 1 - If no Letter of Undertaking or Bond is Opted  -- Refund Mechanism

'A'  - Freelancer   (Service Provider)   (Providing services from Kolkata, WB, India)
'B Inc' - Contractor (Service Receiver)    (Received Services at NY, NY, USA)

Contract Amount = $1000

UpWork Invoice Date = 08-08-2017    (Contract Complete Date here)

GST Rate =  18%

So, GST Invoice for Service Provider's record and for client will be -- Service Amount + 18% GST = $847 + 152.54     [back calculation $1000 x (100/118), here $1000 is the GST Inclusive Gross Amount]

   So GST 18% = $152.54     -- Converted at CBEC Rate in INR (available on CBEC Site - Google CBEC Exchange Rate)

   This, GST Amount of $152.54 has to be disposited with the Governement by 20th of Succeeding Month i.e. here September 20th.

   Since the clients are from Abroad, and Basic Taxation rule is not taxes to be exported "A" can now claim Refund after 7days of Filing monthly Return of  "GST 1".

   Out of the total Refund Amount 90% will be sent directly to Bank instantly in next 7 days from Request, rest 10% will be cleared after manual check in max 2 years.

The 90% Refund Process is done by automatic Route by GST 1 form submission and another application Online from GST Portal itself. 

Case 2 - If Letter of Undertaking or Bond Option is Opted --

'A'  - Freelancer   (Service Provider)   (Providing services from Kolkata, WB, India)
'B Inc' - Contractor (Service Receiver)    (Received Services at NY, NY, USA)

Contract Amount = $1000

UpWork Invoice Date = 08-08-2017    (Contract Complete Date here)

GST Rate =  18%

No taxes, no harrassment of so much calculation and only GST Returns have to be prepared with details of sales etc.

In both the cases, all Export of Services Providers are mandated to Keep copies of all invoices (Download UpWork's Invoice and make/keep one Invoice as per GST Format) and proof of Bank transfers (Bank Statement).

In respect of calculation of Taxable Income for both Under GST (Indirect Tax) & Income Tax (Direct Tax), taxable Income = Gross Amount including Any Fees or there of paid on it. So Upwork Fees/commission is included in the Gross Amount..

Guys, I hope this was very informative, tried to keep it as simple as possible. Please do contact me on private if any queries, I'll be more than willing to help anyone.

Regards,

Anant L.

[Ankit G]

Hi Anant,
One CA here tried to charge me 13000rs for this process. Is it compulsory all over India. I want to know the step by step process for much cheaper price without getting robbed. What will you recommend?

Regards

[Raju C]

For GST you dont have to register any separate business. Every individual doing business and profession is carrying on a proprietorship with same PAN card. So under Trade Name / Legal Name muse your own full name, that's the business name aswell.

I'll suggest you to consider contacting a Practitioner near you for registration. You may take help from family and friends who have registered.

For  freelancers carrying on Export of Services, government has mandated to pay 18% GST on all the billing by 20th of the succeeding month. And claim refunds after 7days of GST Return. Too cumbersome.

To bypass that legislation, exporters with Turnover less than 1Cr (INR) have to submit a Running bond in prescribed format with 15% Bank Guarantee along with other docs. this will allow export of services without payment of GST.

The running bond proccess is hardship of one time but better than regular timely payments and refunds.

Regards https://caknowledge.com/