Know GST Provisions applicable on Non Residents Taxable Persons

GST Provisions - Non Residents Taxable Persons - Taxscan

India has seen massive industrial development over the past two decades. As a result, the country is attracting foreign direct investment (FDI). This has prompted the non-resident Indians (NRIs) to consider India as a viable destination to invest in and earn profits. Investments by NRIs in India have accelerated the growth of the Indian economy.

What is a Non-Resident Taxable Person?

Section 2(77) of CGST Act defines Non-resident taxable person (NRTP) as any person who occasionally undertakes transactions involving supply of goods /services, whether as principal/agent/in any other capacity, but who has no fixed place of business/residence in India. Therefore it covers all such people who are involved in supply of goods/service whether or not such supplies are taxable.

Is the registration mandatory for the NRTP?

The registration process introduced under GST is smooth and convenient. There are separate sets of provisions for registration, returns, refunds, etc. for domestic taxpayers and for non-resident taxable persons (NRTPs).

Section 24 of CGST Act requires mandatory registration of NRTP making taxable supplies ignoring the threshold limits. NRTP cannot opt for composition supply. The NRTP can make taxable supplies only after the issuance of the registration certificate.

A non resident taxable person is not required to apply in normal application for registration being filed by other taxpayers required to be registered. A simplified for GST REG-09 is required to be filled. A non-resident taxable person has to electronically submit an application along with a self attested copy of his valid passport for registration duly signed.

In case the non-resident taxable person is a business entity incorporated or established outside India, the application for registration shall be submitted along with its tax identification number or unique number on the basis of which entity is identified by the government of that country or its PAN, if available.

Is NRTP eligible to claim ITC?

The Input tax credit (ITC) would not be available in respect of goods or services or both received by a non resident taxable person except on goods “Imported” by him. The taxes paid by a non- resident taxable person shall be available as credit to the respective recipient under GSTR-2A.

Provision regarding Returns and payments

As per Rule 63 of CGST Rules The NRTP shall furnish a return in FORM GSTR-5 electronically through the common portal, including the details of outward supplies and inward supplies. Further, he shall pay the tax, interest, penalty, fees or any other amount payable under the Act within 20 days after the end of a calendar month or within 7 days after the last day of the validity period of registration, whichever is earlier.

Provision regarding Refund

The amount of advance tax deposited by a non-resident taxable person at the time of initial registration/ extension of registration will be refunded only after the person has furnished all the returns required in respect of the entire period for which the certificate of registration granted to him had remained in force. Refunds can be applied in the FORM GSTR-05.

Key Investment to be undertaken by NRTPs

Fixed Deposits

FDs (Fixed Deposits) are widely considered as the first investment choice of every Indian resident. FDs are also the first choice of investment among NRIs. This is because fixed deposits are considered to be one of the safest options to invest in.

NRIs can start investing in fixed deposits with their NRE (Non-Resident External), NRO (Non-Resident Ordinary), or FCNR (Foreign Currency Non-Resident) accounts.

The rate of interest relies on the bank, the amount you deposit, and the tenure of the deposit. Banks and NBFCs (Non-Banking Finance Companies) generally offer higher rates of interest on higher amounts deposited for a long-term period. Senior citizens get the benefit of getting a slightly higher rate of interest.

The current FD rate of interest for NRE varies between 3% to 7%. FDs are a good option for the risk-averse investor who can settle with average returns. This might be the most common and risk-free investment option for an NRI.

Fixed Deposits are generally offered by both non-banking and banking agencies; where NRI investors can deposit money for a fixed period for a higher rate of interest than any other savings account. The only drawback here is that one can only withdraw the money on its Maturity. In certain situations, depositors can withdraw their deposit but, with a penalty.

Mutual Funds

Investment in mutual funds comes with moderate risk. Mutual funds might be a good choice for risk-neutral investors who wish to earn higher returns than FDs. Several fund houses offer various types of investment funds, and investors can select the best one as per their risk tolerance and financial goals.

NRIs can invest in mutual funds with their NRE or NRO accounts. However, investors can only invest in Indian Rupees (INR) and not in foreign currencies.

Returns offered by mutual funds depend on the type of fund the individual has (debt, equity, and hybrid) invested in.


Public Provident Fund (PPF) is a safe investment option offered by the Indian government. NRIs can also invest in this fund scheme which is currently offering 8% returns per annum on the investment.

PPF is a long-term investment as it comes with a lock-in period of 15 years, and investors can only invest Rs. 1.5 lakh per annum with the benefit of tax deduction under section 80C of the Income Tax Act.

Bonds and Non-Convertible Debentures

Investment in bonds can be a good option for NRIs as bonds come with security and a fixed maturity period. Bonds in India can be offered by public companies or by government agencies with the exchange of interest rates.

Aside from the stock market and mutual funds, non-convertible debentures (NCD) can also be a good investment option for NRI investors. This investment tends to be a long term investment offered by companies.

NRIs can invest in NCD through NRE or NRO bank accounts. 

National Pension Scheme

This scheme is offered by the Indian government and can be part of a healthy retirement plan. Anyone in the age of 18 to 60 years can invest in this scheme.

Maturity benefits are taxable on the National Pension Scheme. However, the fund is completely tax-exempt on Maturity. Investing in this scheme is considered safe as it is backed up by the Indian government. This scheme offers a return of 12% to 14% annually.

Real Estate

The Indian real estate sector has been growing lately. The real estate prices in major cities of India such as Mumbai, Bengaluru, Pune, and Delhi have shot upwards in the last decade. This is why, as a means of earning good money, many NRIs are purchasing houses in India to let out for rent.

There are several options available to choose from. Investors need to analyze their financial goals and risk tolerance before deciding on investing.

Investing in India, especially in the real estate sector, is being considered as a good option as the country is expected to see a lot of developmental activities over the next decade.

Direct Equity

If the investor is an aggressive investor (Risk Lover) whose risk tolerance is high, then they can consider investing in equity. Under the RBIs Portfolio Investment Scheme (PINS), NRIs can invest directly in the Indian stock market.

However, NRIs must have an NRO/NRE bank account, a Trading account, and a Demat account to invest in the Indian stock market.

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