AGENCY TAX SUMMARY FOR INDIA
As an agency, your agreement is with RecruitiFi. RecruitiFi has no physical presence in India, thus the supply is treated as the export of services, and is not subject to GST. Payments from RecruitiFi will not include GST for Indian hires.
The Indian Revenue Service (IRS) has reviewed our terms and business model and has provided the following guidance.
According to the Central GST act, 2016, the supply of any service shall be treated as Export of Service when:
- The supplier of service is located in India,
- The recipient of service is located outside India,
- The place of supply of service is outside India,
- The payment for such service has been received by the supplier of service in convertible foreign exchange, and
- The supplier of service and recipient of service are not just establishments of a distinct person.
In the case of RecruitiFi, the recruiting agency is contracted with RecruitiFi, not the Employer. So, the agency in India provides recruitment consultant to RecruitiFi in the U.S. The payment is made by RecruitiFi from the U.S. in USD (although our third-party payment provider converts the payment when sending to foreign bank accounts).
Location of the supplier – India
Location of the recipient – U.S.
Payment for service – Calculated in USD
Relationship between supplier & recipient – Distinct persons
Thus, an Indian agency's supply of recruitment services to RecruitiFi qualifies as an export of service. The rate of tax on supply is 0%.
But I have a contract with the Employer, and they're in India. Shouldn't I be charging GST to the Employer?
Again, this situation has been reviewed by the IRS, and technically, Agencies are not directly contracted with any Employers for the purposes of Indian taxes. The Employers are contracted with RecruitiFi and pay RecruitiFi for the services. All Agencies are also contracted with RecruitiFi, and RecruitiFi pays the Agencies as consultants.
Even if an Employer and an Agency had a prior relationship, the RecruitiFi Terms supersede their previous contracts for the duration of their engagement through RecruitiFi.
Whether the Employer is located in the India does not factor into the tax situation.
Since I'm providing the services in the U.S., is there U.S. sales tax?
All Agency services are received by RecruitiFi in New York state. Services are not taxed in New York, so there is no need to collect or pay local sales tax in the U.S.
Tags: Tax, Taxes, GST, India, Goods & Services Tax, Agencies, Agency