TDS on Air Freight (included in supplier's bill) in case of imports

[VIJAY GUPTA]

We are paying to our foreign supplier in advance through proforma invoice which was excluding freight. Now they raised commercial invoice where freight charges in included and Bill of entry also bears the same value as on commercial invoice. So, there is an difference between proforma invoice and commercial invoice ( the freight amount ).

Now we have to pay the freight only to our foreign customer. Is there any TDS liability persists?

Sir plz also let me know relevant circular/ /notification no., which i can refer.

Thanks

[Ganeshan Kalyani]

The payment you have to make is toward freight and this amount is to be credited to the supplier. This clarifies that freight is borne by him and now he is recovering from you. Therefore it can be termed as reimbursement. and there is no TDS on reimbursement. Further if you would have paid freight then TDS would have been deductible. Hope this clarifies you query.

[KASTURI SETHI]

Dear Sh.Ganeshan Kalyani Ji,

Your reply is very much clear and accurate. You have explained in such a simple and clear way that I have started learning about the concept of TDS from you. I am a layman regarding the provisions of Income Tax Act. Today I am perusing all your replies with a motive to learn from your experience and knowledge about VAT/CST/Income Tax. At least I would be able to file my Income Tax Return without any mistake. Thanks a tonne to you and TMI.

[Ganeshan Kalyani]

Thank you sir for your valuable appreciation. I feel very honoured by reading your appreciation post. I feel TMI is a very good platform where we all learn from each other by active interaction. We share our knowledge ( both text and experience) by way of reply and by way of articles and this entire process encourage each of us to remain in the panel as tax expert and continue contributing. Thanks.

[Jaswant Chauhan]

One of our overseas business associate deals in freight forwarding , raised a debit note on us towards AIR FREIGHT FEE and other cargo handling charges for USD 2100/- from Origin Taiwan to Destination-Delhi. Pls advise if there is any TDS Liability on Air Freight, while remitting their payment against their Debit Note/Invoice ? Because he has paid
Air Freight to Airline on our behalf and we have to reimburse the same ?

AI Summary

TDS on reimbursed freight: recovery of supplier borne costs does not attract TDS, direct payment for freight does.
TDS depends on whether freight included in an import supplier's invoice is a reimbursement or payment for services. If the supplier originally bore the freight and later recovers it from the importer, that recovery is treated as reimbursement and does not attract TDS. If the importer pays freight directly or the payment constitutes consideration for freight services rendered to the importer, TDS must be deducted. The key inquiry is the substance-who bore the cost originally and whether the amount is mere recovery of expense.