{"id":8582,"date":"2025-02-02T17:01:56","date_gmt":"2025-02-02T17:01:56","guid":{"rendered":"https:\/\/www.caindelhiindia.com\/blog\/?p=8582"},"modified":"2025-02-02T17:18:06","modified_gmt":"2025-02-02T17:18:06","slug":"gst-refund-eligible-if-exporter-receiving-payment-via-paypal","status":"publish","type":"post","link":"https:\/\/www.caindelhiindia.com\/blog\/gst-refund-eligible-if-exporter-receiving-payment-via-paypal\/","title":{"rendered":"GST refund eligible if exporter receiving payment via Paypal"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-5342\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2023\/02\/GST-Tax-Evasion-instances.jpeg\" alt=\"GST Tax Evasion instances,\" width=\"841\" height=\"442\" srcset=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2023\/02\/GST-Tax-Evasion-instances.jpeg 310w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2023\/02\/GST-Tax-Evasion-instances-300x158.jpeg 300w\" sizes=\"(max-width: 841px) 100vw, 841px\" \/><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69dbb35d5cfd3\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69dbb35d5cfd3\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.caindelhiindia.com\/blog\/gst-refund-eligible-if-exporter-receiving-payment-via-paypal\/#GST_refund_eligible_on_freelancers_businesses_exporting_digital_services_HC\" title=\"GST refund eligible on freelancers &amp; businesses exporting digital services : HC \">GST refund eligible on freelancers &amp; businesses exporting digital services : HC <\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.caindelhiindia.com\/blog\/gst-refund-eligible-if-exporter-receiving-payment-via-paypal\/#Freelancers_businesses_exporting_digital_services\" title=\"Freelancers &amp; businesses exporting digital services\">Freelancers &amp; businesses exporting digital services<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.caindelhiindia.com\/blog\/gst-refund-eligible-if-exporter-receiving-payment-via-paypal\/#Receiving_Payments_via_PayPal\" title=\"Receiving Payments via PayPal:\">Receiving Payments via PayPal:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.caindelhiindia.com\/blog\/gst-refund-eligible-if-exporter-receiving-payment-via-paypal\/#In_summary\" title=\"In summary:\">In summary:<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"GST_refund_eligible_on_freelancers_businesses_exporting_digital_services_HC\"><\/span><span style=\"color: #000080;\"><strong>GST refund eligible on freelancers &amp; businesses exporting digital services : HC <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Under (Afortune Trading Research LLP v. Additional Commissioner (Appeals I),[W.P. No. 2849 of 2021, Madras High Court (2024)] decided on 16.02.2024, the ruling by the Madras High Court is a major relief for freelancers and digital service exporters using PayPal or similar intermediaries. It essentially confirms that receiving export proceeds in INR, as long as the intermediary initially received them in convertible foreign exchange, does not disqualify an exporter from claiming GST refunds.<\/p>\n<p>This could have significant implications for businesses offering digital services internationally, especially freelancers, IT firms, and consultancy services that frequently use PayPal and similar gateways. It reinforces the need for tax authorities to interpret GST laws in harmony with FEMA regulations, acknowledging the realities of modern cross-border trade.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Freelancers_businesses_exporting_digital_services\"><\/span><span style=\"color: #000080;\"><strong>Freelancers &amp; businesses exporting digital services<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Key takeaways for freelancers and businesses exporting digital services:<\/p>\n<ol>\n<li>GST Registration: Required even if turnover is below the threshold, as exports are zero-rated. To export services without paying IGST, a Letter of Undertaking must be filed. Taxpayer invoices should mention \u201cExport of Services\u201d and contain your GSTIN, the buyer\u2019s details, and the currency of the transaction. Use the correct HSN code for digital services (9983 or relevant SAC).<\/li>\n<li>FEMA (Manner of Receipt and Payment) Regulations, 2016 under Regulation 3(3) explicitly allow authorized dealers to accept export proceeds from a 3rd party, not necessarily the buyer, as per RBI guidelines.Routing via an intermediary (like PayPal) does not invalidate an export transaction u\/s\u00a0 2(6) of the IGST Act, 2017. Freely convertible foreign exchange must be initially received before being converted to INR; taxpayers must ensure compliance with FEMA.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"Receiving_Payments_via_PayPal\"><\/span><span style=\"color: #000080;\"><strong>Receiving Payments via PayPal:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol start=\"4\">\n<li>Purpose Code: Select a purpose code under &#8220;Software and Information Technology Services,&#8221; such as P0805 (Software &amp; Other IT Services). PayPal does not issue a Foreign Inward Remittance Certificate. Instead, get a Bank Realization Certificate from your bank.<\/li>\n<li>Export under LUT vs. IGST Payment: If you furnish a Letter of Undertaking, you can export without paying IGST. If you don\u2019t have an LUT, you must pay IGST upfront and then claim a refund.<\/li>\n<li>Eligibility for ITC Refunds: Exporters can claim refunds on accumulated Input Tax Credit used in providing the exported service.<\/li>\n<li>Claiming Input Tax Credit (ITC) Refund: You can claim a refund of GST paid on inputs, input services, and capital goods used for exports. File RFD-01A (Refund Application) on the GST portal. Declare export supplies in GSTR-1 (monthly) and GSTR-3B. we must require Supporting documents, i.e. Export invoices, LUT\/Bond, PayPal receipts, and GST filings should be well-documented<\/li>\n<li>PayPal Transactions: Payments received via PayPal are valid for export status if PayPal initially received the amount in convertible foreign exchange. Taxpayer required to maintain records of PayPal transactions, conversion rates, and credited INR amounts. And Reconcile payments with export invoices and GST taxpayers required to maintain documentation like export invoices, PayPal receipts, and bank statements to support refund claims.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"In_summary\"><\/span><span style=\"color: #000080;\"><strong>In summary:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>This decision aligns GST compliance with modern digital business models, ensuring that the role of intermediaries like PayPal does not create unnecessary tax hurdles. and that foreign exchange, does not disqualify an exporter from claiming GST refunds. This judgment is an important relief for service exporters relying on payment intermediaries like PayPal. It clarifies that as long as the initial receipt of payment is in convertible foreign exchange, the subsequent conversion into INR does not disqualify the transaction from being considered an &#8220;export of services&#8221; under GST law.<\/li>\n<li>This judgment aligns GST refund eligibility with RBI\u2019s foreign exchange rules, offering significant relief to exporters using global digital payment platforms.<\/li>\n<li>Would you like assistance in drafting an LUT application or preparing GST refund documentation?<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>GST refund eligible on freelancers &amp; businesses exporting digital services : HC Under (Afortune Trading Research LLP v. Additional Commissioner (Appeals I),[W.P. No. 2849 of 2021, Madras High Court (2024)] decided on 16.02.2024, the ruling by the Madras High Court is a major relief for freelancers and digital service exporters using PayPal or similar intermediaries. &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[144],"tags":[922],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/8582"}],"collection":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/comments?post=8582"}],"version-history":[{"count":3,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/8582\/revisions"}],"predecessor-version":[{"id":8584,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/8582\/revisions\/8584"}],"wp:attachment":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/media?parent=8582"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/categories?post=8582"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/tags?post=8582"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}