Foreign payments by form 15cb

This query is : Resolved

Gokulesh (Querist)
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18 December 2012 Dear Sir,

In case of one of my client, I have to issue form 15CB for foreign payments.

Payment is in nature of commission for export of Cotton Yarn to Guatemala.

Payment is to be made in 1) Pakistan & 2) Hongkong of approx 572$ each.

My Query :-

1)Whether TDS is deductible? If yes then at what rate? (Both part's do not have permanant establishment in India)

2) What documents to be taken on record for issuing certificate in15CB

3) Whether Service Tax is to be charged in reverse mechanism.

Sir your advice is requested as M new in this type of issues.

Arun Biyani

Arun Biyani (Expert)
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18 December 2012 TDS is not deductible. Although india do not have DTAA with Pakistan and Hongkong however export commission to NR not having PE in india does not deem to be accrued in india and hence section 195 not applicable. Earlier there was a special circular 786 something to this effect, however the said cirular is withdrawn still its not liable for TDS as generally done.

You take two undertakings - first from your client that the payment is export commission with terms and conditions, second ask him to get a undertaking from export commission party that it does not have PE or agent in india. Also ask for Tax residency certificate of party.

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Gokulesh

Gokulesh (Querist)
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18 December 2012 Thanks alot.
Also Kindly let me service tax to be charged or not

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Arun Biyani

Arun Biyani (Expert)
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18 December 2012 Dear there is one notification came in 2012, i dont recollect no. it says that export commission upto 10% of value is exempt from service tax however this commission needs to be mentioned in export documents shipping bill and custome copy. if it exceeds 10% then service tax is payable on difference amount between such exceed rate and 10%.

Gokulesh

Gokulesh (Querist)
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19 December 2012 Dear Arunji,
If the above mentioned circular 786 is withdrawn then can you please, let me know on what ground we can state that No TDS required.

Arun Biyani

Arun Biyani (Expert)
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19 December 2012 i will explain you in short and simple way when circular is withdrawn then you have to go to section 195. now 195 says the payment to non resident is subject to tax if the payment is of any sum chargeble to income tax. now what is chargeble to tax is-- payment received, deemed to be received, accrued deemed to be accrued, salary, interest, royalty and fees as per section 9. now deem to be accrued is only when the party has permanant establishment in india. since in your case it does not have establishment or dependent agent it india, income cant be deem to be accrue, so section 195 is not applicable so no tds requirement, hope it is clear.

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