Implication of TDS

[Asked by Guest]

As a service receiver ( for import of services in India) we have to pay service tax on $ 100 to be paid to a management consultant in UK. Whether TDS ( under Income Tax)is to be deducted on $100 or at $112.36 ??

As per Sec.66A of Finance Act and Sec.2(1)(d)(iv)r.w. Import of service, rules, the person receiving the service in India would be liable to pay service tax when a service of the nature explained in the query is received. As per IT provisions, the TDS is attracted u/s 195 on any payment made (or credited) to a Non-resident/foreign company. In this case, the liability to pay tax would fall on the service receiver and hence it cannot said to be the payment made to the non-resident/foreign company. Hence, No TDS, if any applicable is deductible only on $ 100 and not on service tax component applicable.

[Surender Gupta]

I fully agree with the opinion of Mr. Ramanujam V and TDS should be deducted only on $ 100.

I ALSO AGGREED WITH MR RAMANUJAM V AND TDS SHOULD BE DEDUCTED ON 100 $ AND NOT ON 112.36 $

AI Summary

TDS on cross-border service payments applies to the service consideration only, excluding service tax payable by the recipient.
Where the recipient in India is liable to discharge service tax on imported services, the service tax element is the recipient's tax obligation and not payment to the foreign service provider; therefore withholding under the non resident payment rules is to be calculated on the service consideration alone and excludes the service tax charged to and payable by the Indian recipient.