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

[Ganeshan Kalyani]

In my view No, but i welcome views of colleague experts. Thanks.

[DR.MARIAPPAN GOVINDARAJAN]

In my view TDS is recoverable. I came across some case laws in this regard.

AI Summary

TDS on demurrage payments: applicability under withholding tax law disputed by experts for overseas supplier remittances. Whether demurrage paid to an overseas supplier in a CIF import contract is subject to withholding tax. The contract requires the buyer to discharge cargo within a stipulated time, with agreed demurrage payable for delay. Two expert views conflict: one denies a TDS obligation on demurrage to the non-resident supplier; the other maintains that tax deduction is recoverable and references case law.