Withholding tax on export of computer software

[Raam Srinivasan Swaminathan Kalpathi]

The client renders software consultancy services to a company in Japan.  The japanese companys tax auditors have advised their client to treat this as fees for technical services - subjected to 10% withholding taxes in Japan.

For reporting of exports in the GST portal should we report only the FIRC amount or the gross amount?  The japanese customer provides us details of withholding taxes with which we avail foreign tax credit while filing Income-tax Returns.  Request distinguished colleagues to clarify.  Thanks

[Sadanand Bulbule]

Exports under GST must be reported of the gross invoice value, since foreign withholdiing of tax is an Income Tax deduction and not a reduction in consideration. FIRC reflects only net realisation and it is the proof of payment.

[KASTURI SETHI]

I fully support the reply of Sh.Sadanand Bulbule, Sir. Accurate and to the point  reply. 

[Shilpi Jain]

If your agreed consideration was say 100 and you got paid only 90 since 10 was withheld, then you will have to consider taxable value as 100.

Also you may be getting a tax credit certificate from your customer, which as per the provisions of the DTAA you may be able to tax credit against any taxes payable by you in India. Pls chk the India-Japan DTAA

AI Summary

Export of software should be reported on GST as gross invoice value; withholding is income tax and not consideration reduction. When foreign withholding tax is applied to payment for exported software services, the exporter must report the gross invoice value on the GST portal; FIRC shows net realisation and does not reduce the taxable value. Withheld amounts are income tax deductions handled through foreign tax credit or tax treaty relief in income tax filings and do not change GST reporting.