Taxation

How taxation works for International and Indian Subscriptions?

When it comes to taxes, online payments are just like offline payments, just on-line. They become tricky because of the fees that payment gateways charge and GST.

In case of international transactions, since you are collecting Rupee, somebody has to change the currency. Hence, conversion charges are there until the gateway has partnered with some platform like Visa or Mastercard. In that particular case, they will not charge a conversion fee.

What makes things even more complicated? GST: who can collect, who can transfer and how to account for it?

So, it is a bit complicated. Let’s look at how these stack up.

So, Razorpay is costly for Indian subscription payments while economical for foreign payments whereas Stripe is cheaper in India but with limited payment options and very costly for collecting international payments.

Now, let's do a simple calculation to see how subscription payments stack up for you using Razorpay. Let’s assume that you are selling an educational course. Hence, GST for your business will be 18%. You charge the customer INR 500 only for the course. How much will you receive at the end of settlement?

If an Indian customer pays with Visa card issued by ICICI: 2% fee and 18% GST on that fee will be charged. So, 2% + 18% x 2% = 2.36% of amount to be given to you. Let amount given to you is y. Y + Y x 2.36% = 500, Y = 488.47

This includes 18% GST that you have to submit to govt.

Hence, what you finally get is 488.47/(1.18) = 413.96. Approximately, 17.21% on final amount is paid to tax, gateway charges, etc.

You can try with a foreign transfer and if you face any issues, please do reach out to me. Or for making your life easier, you can use Paperr.io