Payment from foreign country

Save Share

This query is : Resolved

Quick Summary

If you're a proprietor receiving advance payments from overseas for exporting spices, you don't need to change your business structure. You should obtain an IEC code, register for GST, and submit a letter of undertaking to avoid GST on exports. While customs duty may apply, advance payments themselves are not subject to income tax. Only the profit earned on the export supply is taxable. It's advisable to record these advances as 'advance against supply' rather than a loan.

Nilesh Tambe

Nilesh Tambe (Querist)

11 July 2022 I am proprietor n will receive payment from foreign country in advance for purchasing spices from India n then sending spices in foreign country. What will be the tax consequences ,how should I do the transaction,should I change the constitution from proprietor to company, bcoz do you think changing constitution will help foreign party to rely on me more,plz reply

Thanks in advance

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

11 July 2022 No need to change the constitution.
Obtain IEC code and register with GST and submit letter of undertaking in GST portal so that no GST payable on exports.
Applicable customs duty payable.

Nilesh Tambe

Nilesh Tambe (Querist)

12 July 2022 N for receiving tat advance from foreign country will I be liable to pay income tax

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

12 July 2022 No need to pay income tax on advance received.
Only on supply profit earned on export is taxable under income tax.

Nilesh Tambe

Nilesh Tambe (Querist)

12 July 2022 Advance which I am going to receive is to be shown as loan or it will be treated as income n so will be liable to income tax

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

12 July 2022 Show it as advance against supply not as loan no income tax payable on a.