GST on Inward Remittance

GST
1

I receive USD from a US company for services via bank remittance. To reduce the remittance cost, I am considering using XE. But XE will convert USD to INR and my bank will receive INR instead of USD. Will I still qualify for zero rated GST and pay nothing or I’ll have to pay 18% GST?

2

If you receive payments in USD from a US company for services provided, and you use a service like XE to convert USD to INR before the remittance is received by your bank in India, the GST implications are as follows:

  1. GST on Export of Services (Zero Rated):

    • When you provide services to a client located outside India (in this case, the US), and you receive payment in foreign exchange (USD), such services are considered exports under GST.
    • Export of services is typically zero-rated under GST, which means you do not have to pay GST on the services provided.
    • Zero-rated means the output (your services) is taxed at 0%, but you can claim input tax credit (ITC) on GST paid on inputs (if applicable).

  2. Conversion to INR and GST:

    • If you convert USD to INR using a service like XE before the remittance is received in your Indian bank account, the bank will receive INR, not USD.
    • The GST liability is determined based on the nature of the service provided and the fact that the payment was received in foreign exchange (USD).
    • As long as the service is considered an export under GST rules (service provided to a client located outside India), you qualify for zero-rated GST irrespective of whether the remittance is in USD or converted to INR before reaching your bank.

  3. Conclusion:

    • You should not have to pay 18% GST on the remittance received from the US company for services provided, assuming the services qualify as exports under GST rules.
    • Ensure that you maintain proper documentation and evidence of the export of services (such as contracts, invoices, proof of services provided, and proof of receipt in foreign exchange) to support your claim for zero-rated GST.
    • Consult with a tax advisor or GST expert to confirm your specific situation and ensure compliance with GST regulations.

In summary, converting USD to INR before receiving the remittance does not change the GST treatment if the underlying services qualify as exports under GST rules.

1 Like
3

Hello Vineet Did you got any concrete answer on this? i have similar question i got AUD from XE and its deposit INR via IMPS or NEFT! . Please reponse.

4

@ashakantasharma Thanks for your response. What you posted makes sense, but I found this

Please refer to P2 (iv) it states “the payment for such service has been received by the supplier of service in convertible foreign exchange”. However it does not clearly state if the “Bank” must receive the foreign currency or any 3rd party like XE will suffice. Technically I’ll be receiving INR but my client will be creating an XE account and sending the USD. Please provide an official source if possible.

@Mr_Zenish So far no concrete answer.