GST implication on pass through invoice by Indian Compnay

[Dhruva]

A foreign Company has given an order of some goods to other foreign company. But due to some issue in conducting commercial transaction. The supplier foreign company has raised invoice to its sister concern in India and the Indian company has raised invoice to the receiver foreign company with no commission or fee. what will be the GST implication?

[Sadanand Bulbule]

Plz refer the following entry of Third Schedule- neither supply of goods nor services:

7. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India.

"Taxable Territory" is defined under Section 2[109] of the CGST Act.

Since in your case goods are occuring outside India--it is to be treated as outside the taxable territory. Under such situation, there is no GST as it is outside the scope of supply under Section 7 of the Act.

Mere invoicing by Indian does not make such transaction taxable. However he should maintian robost documentation.

[Shilpi Jain]

In case of GST there may not be implications however from point of view of FEMA there could be a certain non-compliance which requires that merchant trading should be for a profit.

Also whether any money at all will be recieved and paid for these invoices or money also gets settled abroad with no money coming into INdia?

[Dhruva]

Money will be received and paid in and from India. But there is no commission charged for just transaction. It is just pure reimbursement.

[Shilpi Jain]

Merchanting Trade under FEMA you would have to look into.

AI Summary

Foreign-to-foreign goods sale via Indian affiliate likely outside GST scope under IGST Act Section 7, but FEMA risks remain A foreign-to-foreign goods sale routed via an Indian affiliate as a pass-through invoice is generally outside GST scope if the goods neither enter India nor the supply is deemed to occur in the taxable territory; mere invoicing by the Indian entity does not automatically attract GST, provided documentary evidence supports extraterritorial movement. However, routing receipts and payments through India raises FEMA concerns and merchanting trade rules - particularly where no commission is charged - so the arrangement should ensure compliance with forex regulations, proper documentation, and that merchanting conditions (including profit motive) are met.