How Indian CA and tax firms collect from US clients: the P1005 and P1015 playbook

The answer

For Indian CA firms and tax practitioners billing overseas clients, the correct RBI purpose code depends on the service delivered. Accounting, auditing and bookkeeping receipts use P1005. Tax consulting and tax-return work use P1015. Legal opinions sit under P1004. File an LUT once a year to invoice at 0% IGST, keep FIRAs matched to invoices, and declare receipts in the monthly EDF with your AD bank.

Key takeaways

• P1005 covers accounting, auditing and bookkeeping services. P1015 covers tax consulting.
• The code is chosen per invoice by the service delivered. A firm doing both for one client invoices each separately so the FIRA matches the work.
• A GST-registered CA firm invoices export services at 0% IGST once a Letter of Undertaking (Form RFD-11) is on file for the financial year.
• Services must be realised within the FEMA window prescribed by RBI from the invoice date. Payment past that window creates an IGST liability with interest if you are on an LUT.
• The FIRA carries the purpose code the bank actually recorded. Mismatches to the invoice should be flagged to the bank immediately.
• Monthly export invoices are reported in the Export Declaration Form (EDF) filed with your AD bank.

P1005 vs P1015: which code applies when

RBI reads the deliverable, not the practitioner. A “CA” is a profession; the code follows what the invoice is for.

For an engagement that genuinely crosses two codes (say, monthly bookkeeping plus quarterly tax return work), the cleanest route is two invoices on separate schedules. One receipt, one code, one FIRA entry per invoice. Mixing both services on a single invoice creates reconciliation problems with EDPMS and can block GST refund claims later.

Before the first invoice: the engagement setup

A clean engagement setup takes about half a day of partner time once, and saves hours of back-and-forth with the bank on every receipt after.

Engagement letter

Write the scope so the services match the purpose codes you will use. Separate the fee for accounting/bookkeeping from the fee for tax work in the fee schedule. If the client agrees to one blended monthly fee, keep the internal split in your practice management system so you can issue separate invoices against it.

LUT (Letter of Undertaking)

If your firm is GST-registered, file Form RFD-11 on the GST portal once each financial year. The LUT lets you invoice export services at 0% IGST under Section 16 of the IGST Act. Without an LUT the alternative is to charge 18% IGST upfront and claim a refund later, which blocks working capital on every invoice.

Purpose code set at onboarding

Communicate the expected purpose code to your bank or payment provider at the time you onboard the US client. For a firm doing both accounting and tax, flag that different invoices will carry P1005 and P1015 so the bank does not query every receipt. If you use a receiving platform, set the code per invoice at the time you raise it.

IEC only if you need DGFT routes

Service exports do not strictly require an Importer Exporter Code for GST or bank purposes. If you plan to self-certify e-BRCs on the DGFT portal, you need an IEC. For most CA firms that rely on FIRA and FIRC as the day-to-day proof, the IEC is optional.

The process, in numbered steps

What the Indian CA firm does

1. Confirm GSTIN (if registered) and ensure the LUT is on file for the current financial year. Renew every year, ideally before the first April invoice.
2. Draft the engagement letter with the fee split so each service maps to the right purpose code. Separate bookkeeping, audit, tax return and tax advisory lines.
3. Raise the invoice in a freely convertible currency, or in INR through an RBI-permitted channel. Include GSTIN, PAN, the LUT reference and the endorsement “Supply meant for export under Letter of Undertaking without payment of integrated tax.”
4. Match the service description on the invoice to the chosen code. “Bookkeeping for October” or “US Federal 1120 preparation” reads cleanly for the bank.
5. Set the purpose code on the receiving platform or confirm it with your AD bank for a direct wire. For mixed engagements, set the code per invoice.
6. Collect payment through your AD bank or a regulated collection platform that settles into it.
7. Verify the FIRA when payment lands. Check the amount, sender name and purpose code. Flag mismatches to the bank the same day; corrections before EDPMS reconciliation are easier than after.
8. Report the receipt in the monthly EDF filed with your AD bank, within 30 days from the end of the invoice month. One EDF can cover every client billed that month.
9. Track realisation. Each invoice must be paid within the FEMA window from its own invoice date. Late payment under an LUT triggers the IGST with 18% annual interest from the invoice date.

What the overseas client does

1. Receives the invoice, pays the face value in a freely convertible currency, or in INR through an RBI-permitted channel.
2. Includes the invoice number in the remittance memo so the bank or platform can reconcile the payment to the right invoice and EDF entry.
3. Files a W-8BEN or W-8BEN-E on the US side so no US withholding is applied under the India-US tax treaty. No Indian form is required from the client.

Documents to keep, with the purpose code

For every export invoice, hold the following on file. Your CA firm partner, your AD bank or the GST officer can ask for them at refund, assessment or FEMA reconciliation.

• Engagement letter with the fee split by service type.
• Invoice, with the service description written in words that match the chosen purpose code and the LUT endorsement.
• LUT acknowledgement (ARN from RFD-11), valid for the financial year.
• W-8BEN or W-8BEN-E from the US client for US tax-withholding purposes.
• Remitter details: the paying client’s legal name, address and country.
• FIRA (Foreign Inward Remittance Advice), showing the RBI purpose code the bank recorded against the receipt.
• Bank or platform statement showing the credit in foreign currency.
• EDF reference from the monthly filing with the AD bank.

Purpose code at a glance

For a CA and tax firm, the two primary codes are P1005 (accounting, auditing and bookkeeping) and P1015 (tax consulting). Near-neighbour codes: P1004 (legal), P1006 (business and management consultancy), P1014 (engineering, where you support an engineering-led project), and P1017 (publishing, if the firm writes paid technical content). Confirm the code with your bank or payment provider at onboarding so every FIRA carries the right classification.

How P1005 and P1015 apply across engagement types

The same firm can legitimately receive three invoices in the same month under two different codes, depending on the work. The code is chosen per invoice, not per client.

Rules that apply across the three

• All three invoices are reported in one monthly EDF filed with the AD bank.
• With the LUT on file, each invoice is raised at 0% IGST and reported in GSTR-1 as an export without payment of tax.
• Each invoice must be realised within the FEMA window from its own invoice date; the clock runs separately for each one.
• The $2,000 and $8,000 FIRAs should carry P1005; the $4,500 FIRA should carry P1015. If the FIRA on the $4,500 invoice shows P1005, call the bank and ask for a correction before EDPMS reconciles it.
• If the US client wants to pay one blended fee, split into two invoices or add an internal credit note so each portion carries its own code.

The realisation window and late-paying clients

Under the FEMA export regulations, services exported from India must be realised within the window prescribed by RBI from the invoice date. A longer window applies where the invoice is raised or settled in Indian rupees through an RBI-permitted channel. The exact period has been revised over time, so confirm the current window with your AD bank or a Chartered Accountant.

If payment is not received within that window and you are on an LUT, the IGST on the invoice becomes payable with 18% annual interest from the invoice date. Late-paying US clients are a GST problem, not just a cash-flow problem. Two practical defences: track each invoice by its own invoice date, not the client’s expected pay date, and request an extension from your AD bank in writing before the window closes, citing the reason.

Common mistakes CA firms make

• “I am a CA, so my code is P1005.” Not always. If the specific invoice is for tax return work, the code is P1015. The invoice drives the code, not your designation.
• Bundling bookkeeping and tax on one invoice. One FIRA, two codes needed. The reconciliation gets ugly. Invoice separately.
• Using a personal-transfer code (P1301 family maintenance, P1302 personal gifts) when a US-based client pays via a personal-style wire. That misdescribes a business receipt and the FIRA will not read as an export of services.
• Letting codes drift across invoices for the same engagement. Same work, same code, every time.
• Treating the LUT as “set and forget.” It expires with the financial year. File a fresh RFD-11 each April, ideally before the first export invoice.
• Missing the realisation window. The IGST under LUT comes back with 18% interest. Track by invoice date, not expected receipt date.
• Charging 18% IGST on an export invoice “just to be safe.” The IGST blocks working capital on every receipt until refunded. File the LUT instead.