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Saswata Chatterjee (Student)     24 July 2021

Demand on foreign income

A company is involved in export for software maintainance service internationally and earns revenue in foreign currency. Now this service is exempted in the rule of gst. Now a demand from the council has been raised on the exhange gain on revenue. Is it vaible? or is there any defending argument that can be raised against this demand because as per my knowledge as a practitioner exchange gain on services rendered outside india doesn't attract gst.
Need some guidance urgently.


 12 Replies

Sourav

Sourav (Student)     24 July 2021

Yes foreign exchange gain should be reported as per FEMA ACT as per companies act

Export of services are exempt from GST
Saswata Chatterjee

Saswata Chatterjee (Student)     24 July 2021

It is actually not a domestic income. The company is exporting service and raising a bill say about 10 dollars and is also receiving 10 dollars. now on fluctuations of rate there might be some exchange gain or loss. FEMA Act is applicable only if my main area of business is Foreign Currency Exchange. But its a software company exporting services outside India. So why would FEMA act be applicable in GST?
99rajendra

99rajendra   24 July 2021

In my view what ever gain earned, due to the reason of currency fluctuations, occurred in India and may be treated as taxable turnover.

go through the Section 7 of CGST Act.
Saswata Chatterjee

Saswata Chatterjee (Student)     24 July 2021

But as per CGST Rule 34, the exchange rate prevailing at the time of supply will be used for tax invoice purpose. There is no liability to pay the GST on any gain due to exchange rate fluctuation.
99rajendra

99rajendra   24 July 2021

Rule 34 of CGST rules covers determination of value of supply, Section 7 of CGST covers Scope of supply. Here the gain may be occurred as per the rule. The question is, it is Taxable or not.
As per Section 7 of CGST what ever the gain received due to the reason of exchange of foreign currency with Indian currency and what ever gain received in India.

This is only my view.
Sourav

Sourav (Student)     25 July 2021

Agree with above comment
Saswata Chatterjee

Saswata Chatterjee (Student)     25 July 2021

That exchange gain is for Forex Companies where the main area of business is currency exchange and there the gain is taxable at a rate of 0.18% according to CGST act. But in my case its a software company exporting services outside India. Its exempted income under CGST act.
99rajendra

99rajendra   25 July 2021

There also exchange gain, here also exchange gain. what is the difference. There are no any difference taxation laws based on the business.
Saswata Chatterjee

Saswata Chatterjee (Student)     25 July 2021

The difference is the invoice value, date of invoice, place of supply. if that is the case of exchange gain then infosys, wipro, tcs all will have to pay gst now for foreign services. then exporting of services will be having gst henceforth. its not just exchange gain that we have for currency exchange am talking about Sir.
99rajendra

99rajendra   25 July 2021

I will accept that dominant nature of the supply is exempted from tax. Then how we have to treat exchange gain. Is it mixed supply or composit supply? Both definitions are not matching the transaction.
Saswata Chatterjee

Saswata Chatterjee (Student)     25 July 2021

There is the confusion sir... and i have to defend that on Monday.... so am a little confused
CA Altamush Zafar

CA Altamush Zafar (GST Consultant)     25 July 2021

When you are exporting services you raise a export invoice.

The invoice has to be raised in INR for GST filing purposes. If you have taken correct exchange rate while generating invoice and have filed the same then there is no tax on exchange gain.

Even if you have taken wrong exchange rate then also there is no GST on exchange gain but due to the fact hat services are intangible the department is always apprehensive when have you actually provided services. They mostly link it with payment.

So one has to be careful with that. always generate proper invoice and file them.

And if you have LUT then there is no GST whatsoever.

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