Payment to NR for service providing by him outside india. TDS ? Service Tax ?

[CABIJENDERKUMAR BANSAL]

Dear All, Our company has imported some finished goods of automobiles parts from China. We have appointed a person in china who is an interpreter. He will visit different factoreis of automobile manufacturer and provides us the details of products that they made and selling price etc . The such person provide us a bill summary in which he charges from us regading his serives and reimbursement of his fooding, hotel accomdation, conveyance etc. Total amount is to be pay 850USD. Now Services are provided outside india in china and payment is to be made outside india (china). Whether tds u/s 195 is to be deducted or not? If yes ? how much , the person has not a pan no. Whethere any service tax liablitiy is there ?

[Rama Krishana]

This issue is most controversial one. But in my view, since there is no P/E in India, the source of income is not existing in India, no operations are performed in India, no TDS is required to be deducted u/s 195 since such non resident is not liable to pay tax India. But, if any of the condition is found to be incorrect, TDS would be required to be deducted at prevailing rate or 20% which ever is more since non resident is not having PAN. With regard to service tax, service tax is payable on import of services under reverse charge method.

AI Summary

TDS on payments to non-residents: generally not required if services and payment are outside India and no permanent establishment. Whether withholding under section 195 applies depends on source and presence of a permanent establishment: services performed and paid for outside India with no PE or Indian source generally do not attract TDS, but if those factual conditions are not met withholding at the applicable or higher rate (where PAN is absent) will be required. Import of services remains subject to service tax on a reverse charge basis.