Exports are priority of any country, Goods and services are to be exported, taxes are not to be exported. WTO stipulates free and fair global trade. Giving export incentives will be against principle of fair trade and hence export incentives are not allowed under WTO. However, goods and services can be free of domestic taxes.
In the era of GST, where export of services has been considered as a “zero rated“ supply, Government has highlighted certain specific conditions to be fulfilled for services to qualify as export.
One of them is “the payment for such service has been received by the supplier of service in convertible foreign exchange”.
Subsequent to the above mentioned condition, the concept and understanding of FIRC is of paramount importance.
PayPal Holdings, Inc. is an American company operating a worldwide online payments system that supports online money transfers and serves as an electronic alternative to traditional paper methods like checks and money orders. PayPal is one of the world's largest internet payment companies. The company operates as a payment processor for online vendors, auction sites and other commercial users, for which it charges a fee.
What is FIRC?
FIRC (Foreign Inward Remittance Certificate) refers to a document which acts as a testimonial for all the inward remittances entering to India. Most of the statutory authorities use this document as a proof that an individual has received a payment in foreign currency from outside the country.
When services are exported then FIRC acts as an important proof of export of services and remittances which are received in lieu of them. There are various details which are included in FIRC. FIRC carries the beneficiary’s name, mode of payment i.e. whether the money has been deposited to the account of beneficiary or cash has been given to him, address and name of remitter, Cheque/DD/TT no. , exact amount of foreign currency, amount of money when changed in to the currency of the country of beneficiary, name of the person in whose favor the amount has been sent, purpose for the receipt of remittance and rate of exchange which is prevalent.
FIRC is issued against any receipt of amount from foreign countries by a bank to their customers. It can be an advance payment against export proceeds, ocean or airfreight, or remuneration or wages under consultancy charges or for any other reasons.
How to Request a FIRC for every money transfer via Paypal India
Most of the exporters today get their inward remittances in foreign currency into their Paypal Account. Paypal can issue a FIRC as a proof of inward foreign remittances.
Process of issuing FIRC
Every transfer of funds from an individual’s PayPal account to his respective bank account will require a separate FIRC.
The process of issuing FIRC is as under:
- The individual has to contact the bank where his PayPal withdrawals are credited to request a FIRC to Paypal.
- The individual’s bank has to write a letter addressed to Citibank with the following information and submit the same along with the Request letter of individual to Paypal:
- Unique Transaction Reference number (UTR)
- Customer name
- Account number
- Amount of money
- Date and purpose of the payment.
- The individual should also inform his bank of the postal address where he wants the certificate(s) to be delivered to.
- Please note that one FIRC is issued per transaction – hence one needs to request a separate FIRC document for each individual transfer.
Sample letter format to Citibank
REQUEST OF FOREIGN INWARD REMITTANCE CERTIFICATE (FIRC)
To Citibank,
Dear Sir,
I/We hereby request that you issue Foreign Inward Remittance Certificate(s) for the following transfers from PayPal:
Name & Address: ________________________________ ________________________________
Account Number: ________________________________
Bank Name: _____________________________________
IFSC Code: ______________________________________
Total Amount: ___________________________________
Transaction Details:
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Date |
Amount |
Unique Transaction Reference (UTR) Number* |
Purpose |
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* The UTR number is found on the bank statement beside each payment from PayPal. In the example below the reference number for the deposit from the sample PayPal credit of INR 151.49 is CITIN12198884488
Figure: Sample image of PayPal credit with n-EFT reference number (UTR number) in bank statement.
Fee for FIRC certificate
There is a fee of a specific sum charged by Citibank (i.e. per transfer from PayPal to the merchant’s bank) per FIRC certificate. For merchants with a Citibank account, this fee will be automatically deducted from the bank account. Merchants without a Citibank account will be required to submit a Demand Draft of the fee amount in favour of ‘Citibank N.A.’, together with the FIRC request letter.
The merchant will have to pay the above fee.
Time limit to process FIRC
The time taken to process the FIRC by Citibank is given below:
- Citi account holders: 3 working days
- Non-Citi account holders: 7 working days
Please note that the duration mentioned is the processing period and does not include the time taken to ship the documents from the merchant’s bank to Citibank and back.
Note – The merchant’s bank contacts the nearest Citibank corporate branch. Citibank will then issue the FIRC certificate(s) and courier them to the address provided by the merchant.
Disclaimer - The information provided in this document is for general information only. It is based on the information available publicly and the advice received from various professional experts regarding the GST law. The user of this document should be aware that the interpretation or implications of relevant GST rules may change/vary depending upon circumstances applicable to the user.