TDS on demurrage paid to overseas supplier

[Shyam Naik]

Dear Experts,

We are coal importers. The contract with the supplier provides that the Coal shall be supplied on CIF basis. Accordingly, the sea freight is paid by the foreign supplier.

The contract provides for a time, within which, we are required to discharge the cargo. In case the discharge gets completed before the time allowed, we are eligible for some refund. Similarly, in case there is delay, we are liable to pay an agreed amount to the seller. This amount is referred to as demurrage.

Whether, the amount of demurrage payable to overseas supplier is liable for deduct of TDS u/s 195.

Kindly opine.

Thank you.

With due regards,

Shyam

AI Summary

Debate on TDS applicability under Section 195 for demurrage payments in CIF coal import contracts with overseas suppliers. A coal importer is inquiring about the applicability of Tax Deducted at Source (TDS) under section 195 on demurrage payments to an overseas supplier. The contract specifies that coal is supplied on a CIF basis, with demurrage payable if cargo discharge is delayed. One expert believes TDS is not applicable, while another suggests it is, citing relevant case laws. The discussion seeks expert opinions on whether these demurrage payments to a foreign supplier are subject to TDS deductions.