Clarity on payment in foreign currency to foreign contractor executing Turnkey Contract in India

[rakesh kumar]

Sir , My clarification is related to payment in Turnkey contract to be executed in India by Foreign Company . The contract will be a Work contract under GST regime .The Customer is an Indian customer and he would be required to make payment to the foreign contractor.For execution of the project – the foreign contractor shall set up a “Project office” in India [Liaison office or Branch may not work in the current fact pattern].The foreign contractor shall be supplying a turnkey project to the customer wherein the contractor shall buy all equipment/services and then resell/rebill to Indian customer.The payment is to be made in India – as the foreign contractor would use the money to pay off the foreign/other vendors. The invoices shall be raised from the Project office of the foreign contractor in foreign currency. I require following clarification:

1. As it is a work contract and invoices will be raised from project office located in the Rajasthan (India), where contract is to be executed . Whether Foreign contractor can raise invoices in foreign currency under work contract ( Any relevant circular of RBI in this regard )
2. Whether Customer has to full fill certain formalities for releasing the foreign currency payment under work contract .

AI Summary

Foreign currency invoicing for India-based turnkey contracts raises FEMA compliance and remittance formalities for customers. Whether a foreign contractor executing a turnkey work contract in India through a locally established project office may raise invoices in foreign currency from that project office, and whether the Indian customer must comply with FEMA, RBI or banking formalities to release foreign currency payment under the work contract.