Lesser inward Remitance for an export Invoice

[Shan S]

What should be done if the inward remittance received is less than the invoice amount raised for the export of services?

Additionally, if a third-party processor fee is charged for remitting the payment, will this affect the amount to be received under the filed LUT for without payment of tax (GST)? Is there any interest payable under GST, or can the fee be shown with the receipt of the remittance receipt as

supporting documentation?

For example, if the invoice is $1,000, but the fee is $100, resulting in $900 being remitted to the bank and reflected in the FIRC, what should be done about the $100 that was not received? Does the requirement to receive the full invoice amount within one year apply to the $100 shortfall in this case?

[YAGAY andSUN]

If the inward remittance received is less than the invoice amount raised for the export of services, the exporter needs to account for the shortfall appropriately in line with the applicable GST provisions. The invoice amount reflects the value of the export, and the export of services is generally considered a "zero-rated supply" under GST, which means no GST is levied on the export. However, there is a requirement to receive the full value of the export consideration within a specific time frame, typically within one year from the date of the invoice.

Regarding the third-party processor fee charged for remitting the payment, it does not affect the amount received under the Letter of Undertaking (LUT) for export without payment of tax. The export value is determined by the actual remittance received, i.e., the amount credited to the exporter’s bank account (which is $900 in your example). The $100 processor fee is considered a separate cost and should not be deducted from the value of the export when filing the LUT or calculating the GST-related obligations.

If there is a shortfall, such as the $100 in your example, the exporter needs to demonstrate that the full invoice amount is received within the one-year period. If the shortfall is due to a third-party processing fee, it will likely not trigger an issue under GST, as the actual amount received ($900) is still part of the export transaction. However, the exporter should ensure that the remittance receipt includes details of the fee to support the actual receipt amount.

Interest or penalties would not typically apply under GST if the shortfall is clearly due to the third-party processing fee, as long as the actual payment received is consistent with the invoiced amount. This should be substantiated with proper documentation like the FIRC (Foreign Inward Remittance Certificate) and bank statements/e-BRC.

[Shan S]

Thanks for the reply.

In that case, any proof to be kept for like paypal fees or payoneer fees + their currency conversion fees. as in FIRC the USD they give is far almost 10% lesser than the invoice raised.

But in their transaction reports that break up is there. so in that case can these be kept as supporting documents that all the amount has been realized but deduction of the fees were at source by paypal and balance only remitted to bank.

[KASTURI SETHI]

Have you received any notice from the department ? 

[Shilpi Jain]

Do keep the transaction summary which gives the break up of your fees and paypal deductions.

[Shan S]

yes transaction report shows original dollar received by paypal for that transaction.

And firc has the dollar remitted to bank A/C after the charges.

[KASTURI SETHI]

Dear Querist,

You have received service from PayPal which is located in USA. Have you not imported service ?  One of my clients has faced similar problem.

AI Summary

GST Export Services: Navigating Invoice Remittance Challenges with Third-Party Processing Fee Deductions A discussion forum explores GST implications when export service invoice remittance is less than the full amount due to third-party processing fees. Participants discuss documentation requirements, export transaction reporting, and potential tax consequences when payment is received with deductions. The consensus suggests maintaining transaction reports and FIRC as supporting evidence, with no significant GST penalties expected if proper documentation demonstrates the fee-related shortfall.