Export sales and treatment of commission
This query is : Resolved
15 August 2017
An assessee taking apparel orders from UK (or any other foreign country) and placing that order to a factory in India.
For example am booking an export order with UK buyer for $1.00 and placing that order with Indian factory for $0.95. The factory will manufacture and exports the goods to the UK buyer.
Since the factory is the exporter all the government benefits like drawback are enjoyed by the factory for their price of $0.95
The payment term will be DP Substitution (DP - Documents Against Payment) routed thru my bank. That means the factory will submit their export documents to their bank let's say "A" Bank. And the "A" bank will send those documents to my bank let's say "B" Bank. Since the term is substitution, in my bank we are substituting their invoice price from $0.95 to $1.00 and send to buyer. On receipt of payment from buyer our bank will dispose $0.95 to the factory who is second beneficiary and remit the balance $0.05 in our account.
Based on this, request you to clarify the following,
1) Is it required to register us under GST
2) If yes what is the tax structure for us
For example am booking an export order with UK buyer for $1.00 and placing that order with Indian factory for $0.95. The factory will manufacture and exports the goods to the UK buyer.
Since the factory is the exporter all the government benefits like drawback are enjoyed by the factory for their price of $0.95
The payment term will be DP Substitution (DP - Documents Against Payment) routed thru my bank. That means the factory will submit their export documents to their bank let's say "A" Bank. And the "A" bank will send those documents to my bank let's say "B" Bank. Since the term is substitution, in my bank we are substituting their invoice price from $0.95 to $1.00 and send to buyer. On receipt of payment from buyer our bank will dispose $0.95 to the factory who is second beneficiary and remit the balance $0.05 in our account.
Based on this, request you to clarify the following,
1) Is it required to register us under GST
2) If yes what is the tax structure for us
CA Suresh Jain
(Expert)
16 August 2017
The transaction does not seem to be a Commission transaction. It looks more of a merchant export even if all shipping docs. are in the name of Mfgr. exporter. You are inviting troubles apart from the Mfgr. has been losing some benefits. You should take help of some professionals
N Jain
group.blr@gmail.com
N Jain
group.blr@gmail.com
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