PayPal will be levying the Goods and Services Tax (GST) starting from tomorrow to any individual, merchant or entity in India, regardless whether it is a business or individual account. However, it needs to be pointed out that the GST of 18% will be levied only on the PayPal fee, not the purchase amount, the company said in its FAQs.

Till 31 October, 2017 all PayPal users in India were contracted with the company’s Singapore subsidiary. However, all Indian users will be contracted with the Indian entity, PayPal Payments Pvt Ltd, on November 1, 2017, the company added in the FAQs. A spokesperson added that this was being done to comply with local regulations.

“PayPal is required to charge GST up front, however, merchants and freelancers may be eligible for refunds or be able to set off the GST charged – please consult your tax advisor for details,” the company added.

How the charges will apply

GST will be levied on the fee charged by PayPal for every transaction, and a consolidated invoice will be shared with to customers at the end of every month.

  • For web payments and for up to monthly sales of up to $3000, the company charges 4.4% per transaction and the fixed fee.
  • For monthly sales above $3000 and between $10,00, it charges 3.9% per transaction along with the fixed fee.
  • Above $10,000 and between $100,00, a charge of 3.7% per transaction along with the fixed fee.
  • Above $100,000 it charges 3.4% per transaction along with the fixed fee.

For US dollars, it charges a fixed fee of $0.3 per transaction.

For example, if a merchant is getting payments worth $1000, he/she will have to pay 4.4% of the transaction along with the fixed fee ($0.3 in this case). The 18% GST on this fee of $44.3 is $7.9.

Update: PayPal clarified that it does not process transactions in Indian Rupee and processes in US Dollars. The example has been modified suitably.