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GST and FEMA Triparty transaction
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....ST and FEMA Triparty transaction <br> Query (Issue) Started By: - ROHAN THAKKAR Dated:- 13-4-2026 Goods and Services Tax - GST <br> Got 5 Replies <br> GST<br> <br> Company "C" Indian Company get order for the manufacture of machines from Company "B" resident in Germeany, then company "C" need to supply the machine to Company "A" which is also resident Indian compnay. Now "C" will get money from "B....
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...." and "B" will get money from "A". the mchines remians in India only from C to A. please explain how the billing will be made from the prospective of GST, FEMA. --Reply By: Shilpi Jain The Reply: Share with the AD Bank, the terms and conditions with company B. Basis this the banker should allow receipt of money from B Under GST this will not be an export and will not be liable to GST. -....
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....-Reply By: Shilpi Jain The Reply: Certain bankers do not allow such receipt since goods are not going out. This aspect needs to be explained to them --Reply By: YAGAY andSUN The Reply: The transaction under consideration involves Company C (India) manufacturing and supplying machinery to Company A (India), pursuant to an order placed by Company B (Germany), with consideration flowing from B....
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.... to C and from A to B. Under the Central Goods and Services Tax Act, 2017 read with the Integrated Goods and Services Tax Act, 2017, the supply by C to A constitutes a taxable domestic supply. In terms of Section 7 of the CGST Act, supply includes all forms of supply for consideration in the course or furtherance of business, irrespective of the person making payment. Further, Section 2(31) expres....
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....sly permits consideration to flow from a third party. The place of supply, in terms of Section 10(1)(a) of the IGST Act, is the location where movement of goods terminates for delivery, i.e., within India. As the goods do not cross the territorial boundaries of India, the essential condition of "export of goods" under Section 2(5) of the IGST Act remains unfulfilled. Consequently, the transaction ....
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....does not qualify as a zero-rated supply. Company C is, therefore, obligated to raise a tax invoice on Company A and discharge applicable GST (CGST and SGST or IGST, as the case may be). From a foreign exchange perspective, the arrangement is governed by the Foreign Exchange Management Act, 1999 and extant RBI guidelines on third-party payments. Such payments are permissible provided the underlying....
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.... transaction is bona fide and supported by a contractual arrangement, typically in the nature of a tripartite agreement or clear documentation evidencing that payment by B is on behalf of A. Compliance requirements include KYC of the remitter, proper invoicing, and satisfaction of the Authorised Dealer bank regarding the legitimacy of the transaction. Notably, since the goods are neither exported ....
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....nor intended for export, the remittance received by C from B cannot be characterised as export proceeds. It is treated as a permissible inward remittance against a domestic supply. In sum, the settled legal position is that GST liability attaches as a domestic taxable supply between C and A, unaffected by the foreign source of consideration, while FEMA permits receipt of funds from B subject to re....
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....gulatory compliance, without conferring the character of an export transaction. --Reply By: Raam Srinivasan Swaminathan Kalpathi The Reply: Dear Querist The transaction enunciated is not export of goods as defined under 2(5) viz., Export of goods with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India; GST will be applicable on the trasa....
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....ction. Period. Nonetheless, on receipt of money in convertible currency you have to provide the disposal instruction to your Authorised Dealer (Bankers) with the appropriate RBI purpose code. Would sincerely advise you to discuss the appropriate purpose code with your AD before initiating any remittance. --Reply By: Pinnacle Tax Advisor The Reply: For GST prospective, there is no challanges in ....
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....this transaction. it will be treated as domestic supply and you will be liable to pay applicable GST. For FEMA prospective, you may face challanges as material is not moved outside India and you will not have the export documents. Authorized dealer banks may refuse to accept foreign remittance against such invoices unless supported by documentary evidence <br>***<br> Disc....
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