R&D Cess on Witholding Tax

[Mr.G.R.Prabhu Mr. G.R.Prabhu]

On import of technology, if Witholding tax is to be borne by the Indian importer, then for payment of R&D cess is the grossed up value (taken for calculation of Witholding Tax) to be considered or the net invoice value is to be considered?

Similarly for calculation of Service tax as deemed service provider, on such import, is the grossed up value to be taken.

 

 

[CA Rachit Agarwal]

Witholding Tax is the tax amount which is paid on behalf of Non-Resident. It is immaterial whether borne by the service provider (Non-Resident) or Importer. Witholding Tax is like TDS. Value of Services is equal to the amount credited to the account of non-resident plus tax deposited.

Hence for the calculation of Service Tax, gross amount is to be taken.

[Mr.G.R.Prabhu Mr. G.R.Prabhu]

The question is what amount should be taken for calculating R & D cess on import of technology when invoice amount is grossed up and tax is borne by the Importer.

Kindly clarify.

AI Summary

Withholding tax: grossed-up value governs service tax calculation when tax on imported technology is borne by importer.
Where withholding tax on imported technology is borne by the importer and the invoice is grossed up, the adviser states that withholding tax is paid on behalf of the non resident and that the value of services equals the amount credited to the non resident plus the tax deposited; accordingly, for calculation of Service Tax the grossed up amount is to be taken, while the treatment of R&D cess on the same grossed up base remained subject to clarification.