GST on TDS against import of service

[Kaustubh Karandikar]

In continuation of my earlier email on the same, XYZ (India) paying GST under reverse charge on import of service. XYZ also paying TDS under the Income Tax Act on the amount paid to the foreign service provider details of which are given herein below under two different situations:

Situation – 1 (As per the terms of the contract, the foreign supplier wanted full payment as per Invoice Value without any deduction)

Details	Amount (₹)
Invoice Value of the foreign Supplier	2452573.32
TDS Calculated on the Invoice Value i.e., on ₹ 2452573.32 and paid to the Govt.	613143.33
GST paid under reverse charge on the Invoice Value i.e., on ₹ 2452573.32	441463.20

Situation – 2 (There was no mention in the terms of the contract by the foreign supplier that he want full payment as per Invoice value without any deduction)

Details	Amount (₹)
Invoice Value of the foreign Supplier	613825.17
Actual amount paid to foreign supplier after deducting TDS paid to Indian Govt. of ₹ 61383	552442.17
TDS Calculated on the Invoice Value i.e., on ₹ 613825.17 and paid to the Govt.	61383.00
GST paid under reverse charge on the Invoice Value i.e., on ₹ 613825.17	110488.53

1. Under Situation -1, whether XYZ is required to pay GST under reverse charge on ₹. 2452573.32+ ₹ 613143.33 or on ₹. 2452573.32?
2. Whether the GST paid under reverse charge under Situation – 2 is correct?

What is he correct position of law under GST?

In my view, under Situation – 1, the GST is required to be paid on ₹. 2452573.32+ ₹ 613143.33. The GST paid under Situation – 2 is correct.

Views of the experts please.

AI Summary

GST on import of services: TDS treated as non consideration unless payer agrees to gross up, affecting reverse charge liability.
The issue is whether TDS borne by an Indian recipient on payments to a foreign service provider forms part of taxable consideration for GST under reverse charge. One view, supported by a tribunal extract, treats TDS as not forming value because it is a tax obligation not received by the non resident, so GST is on the invoice value only (Situation 2). The opposing view treats payer borne TDS under contractual grossing up as additional consideration, making GST payable on invoice plus TDS (Situation 1).