Freelancers in India have been outraged at a recent policy update on Paypal India that suggested that an 18% GST would be charged on all future transactions. The note on the Paypal India website read,
“We have updated our UA to comply with local laws applicable to Indian companies including local taxation laws. We have been advised PayPal Services will attract a GST rate of 18%. Please consult your tax advisors in terms of your eligibility for refunds.”
In effect, what Paypal seemed to suggest is that all future transactions (starting October 2 or later) would invite a default deduction of 18% towards GST which its users may claim a refund for from the Income Tax authorities after furnishing sufficient proof.
This appeared ridiculous given that Paypal transactions within India are restricted to overseas transactions (which should not invite a GST in the first place). A recent Change.org petition filed over the matter suggested something even more apocalyptic.
“I have real bad news guys. In a support chat one of our people was able to get a clarification from Paypal that the 18% GST would be deducted on the entire amount, and not just their charges.
This really creates an even more explosive situation.
On one hand, Paypal will take 18% GST from you already, and on the second, you have to register and give the GoI 18% GST (that you need to claim a refund for later), or file exemption.
So in effect, you could be losing 36% of your revenues on arrival, with no clarity on refunds at all because you don’t have FIRCs yet.”
No GST For Overseas Paypal Transactions
But all of this looks to be a miscommunication. GoRumors was able to get confirmation from Paypal that GST shall not be levied on overseas transactions. In an email response, a Paypal support representative wrote,
“Kindly be informed that this information is for a new update which will be coming soon and you will be informed before it is implemented.
Rest assured if it is an overseas transaction it will be exempted from the GST charges.”
So there you go – no GST for the kind of transactions that are now prevalent on Paypal.
Paypal Soon For Domestic Transactions In India?
What this also means is that we may soon have Paypal open up for domestic transactions in India. At the moment, this facility is not available to Indian users. But by registering as a local company, Paypal can establish itself as a viable alternative to other popular digital wallets in the country like Paytm and Mobikwik.
That would be a welcome step, if only Paypal didn’t have those high fees.