is it true tds on import of goods
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
10 December 2009
is it true tds on import of goods,if aperson import goods in india than he have deduct tds of forign country as income is accre araise in india plz help sir and also tell the procedure to import goods?
11 December 2009
There is no TDS on imports of goods provided you are purchasing on principal to principal basis and have contracted with the party abroad.
However, if party has a branch in India or a dependent agent with whom you made the contract then you have to deduct TDS. In case of a fictional creation of DAPE (Independent Agent being considered as dependent) you do not have to deduct TDS unless demanded by department that you do.
In all cases, if the purchase of goods involves an element of royalty or fees for technical services (most common in machinery and equipments where you have installation and commissioning charges or some equipments may have a software) then you have to deduct TDS @ 10% (20% in case of No PAN) on the Royalty & FTS portion if the import of machine is for an activity permitted under the existing industrial policy otherwise 30% + cess in case payee is individual or 40% + surcharge and cess for companies other than domestic companies. In case of latter, you can apply the rates provided in DTAA with country of residence of payee in case that is more beneficial. Some DTAAs may exclude the tax on Royalty or FTS for those not having PE or Branch in India. Most give a beneficial rate. If lower than 20%, you need a PAN otherwise 20%.
If the Seller has a Branch or PE and he does not provide you with a certificate under section 197, then you have to do as follows:-
1) First you deduct the TDS on the Royalty and FTS. The certificate under Section 197 is usually not applicable for this portion of the payment. It is only for the business income of the assessee. You use rates in force as per the act or DTAA provisions, whichever more beneficial.
2) Reduce the remittance amount by the amount for FTS and Royalty.
3) On the balance, if there is no PE, then no TDS. If there is PE and a certificate u/s 197, then as per the certificate. If there is no certificate, then 30% + cess if payee is individual and 40% + surcharge + cess if payee is a company other than domestic company.
Cess and Surcharge is still applicable for Section 195. In case rates arelower than 20%, PAN is required.
If there is no royalty or FTS and if you are a consignment agent for the goods imported (you have received open terms from seller and you achieve for him a price and have full control of the goods you sell on his behalf and remit to him payment), you are then the DAPE of the Non resident and Responsible to file his tax returns and deduct/pay tax. In this instance you have two entities to look after. The first is your own commission for which you have to discharge tax liability separately. The other responsibility is the Tax liability of the DAPE where you deduct TDS as applicable. It is always better to make an estimate of the income accruing to the non resident and apply for certificate u/s 197 on behalf of the DAPE so if you remit on account, you will deduct at the lower rate. Apply for PAN for the DAPE that you are responsible for. In this instance what happens is you receive payments in India in your name and then you pay the seller. By virtue of being a consignment agent, DAPE is created and you are responsible for the tax on whatever you remit to the seller.
However, if party has a branch in India or a dependent agent with whom you made the contract then you have to deduct TDS. In case of a fictional creation of DAPE (Independent Agent being considered as dependent) you do not have to deduct TDS unless demanded by department that you do.
In all cases, if the purchase of goods involves an element of royalty or fees for technical services (most common in machinery and equipments where you have installation and commissioning charges or some equipments may have a software) then you have to deduct TDS @ 10% (20% in case of No PAN) on the Royalty & FTS portion if the import of machine is for an activity permitted under the existing industrial policy otherwise 30% + cess in case payee is individual or 40% + surcharge and cess for companies other than domestic companies. In case of latter, you can apply the rates provided in DTAA with country of residence of payee in case that is more beneficial. Some DTAAs may exclude the tax on Royalty or FTS for those not having PE or Branch in India. Most give a beneficial rate. If lower than 20%, you need a PAN otherwise 20%.
If the Seller has a Branch or PE and he does not provide you with a certificate under section 197, then you have to do as follows:-
1) First you deduct the TDS on the Royalty and FTS. The certificate under Section 197 is usually not applicable for this portion of the payment. It is only for the business income of the assessee. You use rates in force as per the act or DTAA provisions, whichever more beneficial.
2) Reduce the remittance amount by the amount for FTS and Royalty.
3) On the balance, if there is no PE, then no TDS. If there is PE and a certificate u/s 197, then as per the certificate. If there is no certificate, then 30% + cess if payee is individual and 40% + surcharge + cess if payee is a company other than domestic company.
Cess and Surcharge is still applicable for Section 195. In case rates arelower than 20%, PAN is required.
If there is no royalty or FTS and if you are a consignment agent for the goods imported (you have received open terms from seller and you achieve for him a price and have full control of the goods you sell on his behalf and remit to him payment), you are then the DAPE of the Non resident and Responsible to file his tax returns and deduct/pay tax. In this instance you have two entities to look after. The first is your own commission for which you have to discharge tax liability separately. The other responsibility is the Tax liability of the DAPE where you deduct TDS as applicable. It is always better to make an estimate of the income accruing to the non resident and apply for certificate u/s 197 on behalf of the DAPE so if you remit on account, you will deduct at the lower rate. Apply for PAN for the DAPE that you are responsible for. In this instance what happens is you receive payments in India in your name and then you pay the seller. By virtue of being a consignment agent, DAPE is created and you are responsible for the tax on whatever you remit to the seller.
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11 December 2009
Dear Anonymous,
Sec195 says that if u r making any payment to a non-resident , and the receipt by him is in anyway chargeable to tax to the non-resident, then u have to deduct tds on the payment made.
Sec195 says that if u r making any payment to a non-resident , and the receipt by him is in anyway chargeable to tax to the non-resident, then u have to deduct tds on the payment made.
Querist : Anonymous
Querist :
Anonymous
(Querist)
12 December 2009
plz clear my dout.....
12 December 2009
TDS is applicable if any income accrues to the NR in India. For business abroad no income accrues in India and therefore there is no tax applicable to the NR when you import goods from him as that is his income abroad when you dealon a principal toprincipal basis. However, income accrues to him in India when:-
1) You have transacted the business with NR having a branch in India.
2) You have contracted business with an NR having an authorised dependent agent in India.
3) All the circumstances I have detailed to you in my post above (If import has element of Royalty / Fees for Technical Services).
In the above cases you deduct TDS. You have to deduct separately for the Royalty and FTS even if the NR does not have a branch or agent in India and on the balance you have to deduct for other sums if he has branch or agent in India.
This is the position per Section 9 as well as Article 7 of most of the DTAAs and Section 195.
1) You have transacted the business with NR having a branch in India.
2) You have contracted business with an NR having an authorised dependent agent in India.
3) All the circumstances I have detailed to you in my post above (If import has element of Royalty / Fees for Technical Services).
In the above cases you deduct TDS. You have to deduct separately for the Royalty and FTS even if the NR does not have a branch or agent in India and on the balance you have to deduct for other sums if he has branch or agent in India.
This is the position per Section 9 as well as Article 7 of most of the DTAAs and Section 195.
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Querist : Anonymous
Querist :
Anonymous
(Querist)
12 December 2009
thanks sir .........
26 June 2021
Please note that if the installation charges payable is connected to purchase of the machinery it is a composite contract, and takes the colour of a purchase transaction hence no TDS is deductible for installation charges as fees for technical services in such a case. Pl. refer Mahindra Forgings case - ITAT Pune.
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