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Indian Client : TDS And GST Implication. Gross up ? Percentage? and so on.

Active Member
Avant R Member Since: Sep 18, 2017
1 of 9

Hello,

 

We are a firm based in India and we have a very dense workflow culture through upwork. We spend about 20,000USD on foreign payments through upwork per month.

 

However we have been told by our chartered accountants, that we need to collect the (Indian PAN Card - if that is not available then No Permanent establishment certificate (NO PE Certificate) and form 10F) from the party we are paying to in order to get 20.6% TDS. If no document is provided at all we have to incur TDS of 40%.

If we are also able to provide PAN then 10%

 

So under these circumstances, we reached out to upwork through their support chat to get upwork itself to fill form 10F and NO PE since upwork is the party we pay to and they in return distribute it among the developers through (escrow / hourly payments) so on and so forth.

 

However upwork responded to our request saying the following : 

"unfortunately as per advise, Upwork is not allowed to sign any documents related to tax issues since there is no requirements from our government."

 

So now since there was such a strong disregard from upwork's end, I believe other Indian clients must have faced similar issues in Indian Tax system, so we wanted to know what work-around or way out is there for an Indian client getting services from foreign nationals without Indian PAN card through upwork.

Community Guru
Juvy Ann P Member Since: Oct 29, 2015
2 of 9

Avant R wrote:

Hello,

 

We are a firm based in India and we have a very dense workflow culture through upwork. We spend about 20,000USD on foreign payments through upwork per month.

 

However we have been told by our chartered accountants, that we need to collect the (Indian PAN Card - if that is not available then No Permanent establishment certificate (NO PE Certificate) and form 10F) from the party we are paying to in order to get 20.6% TDS. If no document is provided at all we have to incur TDS of 40%.

If we are also able to provide PAN then 10%

 

-- The PAN card does not fall under the platform's responsibility since we non-US citizens filled-out the W-8BEN form prior to receiving our earnings.  We confirmed, upon submission of the form, that we do not file for taxes in the US and this is quite self-explanatory.

 

So under these circumstances, we reached out to upwork through their support chat to get upwork itself to fill form 10F and NO PE since upwork is the party we pay to and they in return distribute it among the developers through (escrow / hourly payments) so on and so forth.

 

However upwork responded to our request saying the following : 

"unfortunately as per advise, Upwork is not allowed to sign any documents related to tax issues since there is no requirements from our government."

 

So now since there was such a strong disregard from upwork's end, I believe other Indian clients must have faced similar issues in Indian Tax system, so we wanted to know what work-around or way out is there for an Indian client getting services from foreign nationals without Indian PAN card through upwork.

 

--There seem to be such options as having a Foreign Inward Remittance Certificate (FIRC) derived from wire transfer transactions and go for zero-rated GST (although in essence, GST is not for small-time suppliers of goods and services) in which case you will still need to be GST-registered or to have direct-to-local bank transactions documented in the form of a bank statement.  Tax deductions may include UW service fees and LFT or direct-to-local bank transaction fees.  These do not get reflected in the bank statement so what is taxable is the figure that is on the bank statement.

 

--As for the PAN card, the W-8BEN is sufficient enough to serve the purpose.  The platform is not our client.  The Permanent Account Number (PAN) card is best for overseas contract workers and their clients.

 

References:

 

Central Board of Excise and Customs, Department of Revenue, Ministry of Finance, Government of India.  (2017). GST – CONCEPT & STATUS – As of 3rd June, 2017.  Retrieved August 29, 2017, from http://www.cbec.gov.in/.

 

What is pan card and why it is required, use of PAN, pAN card for foreign citizens. (2017). GSTINDIA.CO.Retrieved 19 September, 2017 from http://gstindia.co/.

 

 


 

Active Member
Avant R Member Since: Sep 18, 2017
3 of 9

-There seem to be such options as having a Foreign Inward Remittance Certificate (FIRC) derived from wire transfer transactions and go for zero-rated GST (although in essence, GST is not for small-time suppliers of goods and services) in which case you will still need to be GST-registered or to have direct-to-local bank transactions documented in the form of a bank statement.  Tax deductions may include UW service fees and LFT or direct-to-local bank transaction fees.  These do not get reflected in the bank statement so what is taxable is the figure that is on the bank statement.

 

--As for the PAN card, the W-8BEN is sufficient enough to serve the purpose.  The platform is not our client.  The Permanent Account Number (PAN) card is best for overseas contract workers and their clients. 

 

 

So as per this what exactly are you suggesting? Can you be a bit more specific? 

How much tax must we pay exactly ? 
As per our CA The  tax implication is as follows: 

TDS GST Implications.png

 

So as per this we incur a tax of 58% on any payment we make if no documents provided by developer. 

 

We want to know exactly what %age tax we must pay as per what you are suggesting.

Active Member
Amol P Member Since: Oct 10, 2017
4 of 9

I am also facing the same issue. No solution found till now. 

 

@Avant did you get the solution on this?

Ace Contributor
Soumya N Member Since: Jun 22, 2015
5 of 9
 
Community Guru
Prashant P Member Since: Sep 29, 2015
6 of 9

Call them.  With such a large $volume, they may listen more carefully and understand you rather than sending a canned response by some front line help desk person.

Active Member
Ashish K Member Since: Feb 16, 2019
7 of 9

Hi @Amol, @Avant,

 

Did you get the resolalution for this, please can you share?

 

My CA is also saying the same, it seems now upwork is too costly to continue if we have to pay this much of tax. 

Active Member
Rishabh P Member Since: Apr 22, 2019
8 of 9

Hey Ashish,

 

Were you able to find a resolution? Or did you have to pay 58% as stated by Avant?

Active Member
Bhavesh H Member Since: Mar 25, 2017
9 of 9

I think wire transfer is the solution because NEFT transaction is covered under GST (18%). Currently it looks, wire transfer as payment method is the only solution.

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