Guarantee Fee to Japan- DTAA

[Pradeep Kaushik]

Respected Sir/s,

MCI, India has raised working capital loan from Bank of Tokyo and MCHC, Japan, (Parent Company of MCI, India) has provided the bank guarantee to Bank of Tokyo, on behalf of MCI, India

Guarantee fee is now charged by MCHC, Japan to MCI, India.

Request you to confirm the TDS & Service tax liability in this Transaction.

With Regards.

[Pradeep Kaushik]

Respected All,

Awaiting your valuable opinion on above query.

With regards.

[Ganeshan Kalyani]

Please elaborate guarantee fee. Whether it is a kind of service charge or purely fees.

[Pradeep Kaushik]

Sir,

This guarantee fee is being calculated @ 1.5% PA, on the availed WCDL at every month closing.

With Regards.

[Ganeshan Kalyani]

Service tax would have to be paid on the guarantee fee by you.

AI Summary

Guarantee fee: recipient liable for service tax on bank guarantee charges, withholding tax status queried. MCHC, Japan provided a bank guarantee for MCI India's working capital loan and charged a recurring guarantee fee calculated annually and billed monthly. The query asked whether TDS and service tax apply. The advisory reply in the forum states that the guarantee fee is subject to service tax and that the recipient (MCI) must pay the service tax; no conclusive comment on TDS was recorded.