TDS under CGST for foreign shipping companies

[BRIJMOHAN GOYAL]

As per CBDT circular 723 of 1995, foreign shipping companies or their agents are exempted from TDS under section 194C – payment to contractors . However, as per section 51 of CGST Act, 2017 our company is mandated to deduct TDS @ 1% CGST & SGST each or 2% IGST. Shipping companies/agents are submitting GST invoices for destination charges, which our company is processing after 2% TDS deduction as per CGST Act, 2017. Shipping companies however are not accepting this deduction. Is there any exemption available to foreign shipping companies/agents from TDS under GST? Please share details of circular/notification, if any. In addition, what is the recourse if Shipping companies does not accept deduction. We are incurring heavy detention charges in comparison to small amount of TDS.

AI Summary

Tax Deduction at Source under GST may not apply to foreign shipping companies; importer may pay IGST under reverse charge.
Section 51 GST TDS applies only to persons or categories notified as deductors (governmental bodies and notified entities). Services supplied by a person located outside the taxable territory (foreign shipping company) make the importer in India liable to pay IGST under the reverse charge mechanism and claim input tax credit; Income Tax TDS exemptions do not affect GST TDS obligations.