I am starting a new business in India with a foreign partner in Canada. My partner will provide products and services to Indian individuals (NRIs) and companies in Canada and I will source these customers for him and do the initial paper work in India. Final goods and services will be provided by my partner in Canada.
In terms of payment, we can have two mechanisms. One method is that the customer pays everything to my partner in Canada and my partner reimburses for my work. Other option is that I collect payments for all the goods and services provided to customer, deduct my portion of payment and transfer the rest to my partner in Canada.
The second option gives me full control of payments and it leaves no possibility of customer or partner default; however would like to understand from experts which is a better structure from taxation perspective. Can I claim service tax exemption in method one as I would be servicing a foreign client (my partner in Canada) from India, essentially export of services.
CAclubindia
