Service Tax RCM on Import Service

[NARESH VIJAY]

Dear Sir,

We have received Service from our foreign Service Provider. But Agreement with service provider all the taxes are to be borne (TDS) by Service Receiver

I.e. Invoice Amount - Euro 4210

TDS @ 10% - Euro 421 - TDS Amount Paid by SR

Total Amount - Euro 4631

Please advice service Tax RCM applicable on Invoice Amount (Euro 4210) or Total Amount ( Euro 4631).

Thanks

Anoop

[Rajagopalan Ranganathan]

Sir,

Service tax is payable on the gross amount charged by the service provider. In your case the gross amount charged by the service provider is Euro 4210. Therefore you have to pay service tax is payable on this amount. Normally TDS will be deducted from the gross amount payable. You have added it to the gross amount which is, in my opinion, not correct. As far as Service Tax law is concerned TDS cannot be deducted from the gross amount payable for calculating amount of service tax payable.

[Ganeshan Kalyani]

Sir, service is payable on the gross amount charged by the service provider. I agree with Sri Rajagopalam Sir, that TDS is to be deducted and paid to the Govt. But in practise in many cases it is seen that TDS is not borne by the service provider and Service service receiver takes the hit. It is a commercial call anyhow. What the Govt is concern is that TDS to be paid.

The service tax is payable on the amount before TDS amount in your case. Thanks.

AI Summary

Taxable Value for Service Tax remains the gross amount charged; TDS borne by receiver doesn't alter tax base.
Service tax under reverse charge is payable on the gross amount charged by the foreign service provider; the taxable value is the provider's invoice amount and does not include withholding tax (TDS) even if the receiver commercially bears and pays that TDS to the government.