Taxation on Design, supervision, erection in India

This query is : Resolved

CA Manish Sharma (Querist)
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03 November 2010 We are in discussion with some of the Overseas Buyers for a equipment which consists of :

1) Design, Engineering
2) Manufacturing & Supply.
3) Supervision of Erection & Commissioning.

Please advise the following :

i) Whether there is any withholding Tax or any other tax applicable for Supply of Design, Engineering. If so, what is the rate ?

ii) Whether there is any withholding Tax or any other tax applicable for Supervision of Erection & Commissionig ? If so, what is the rate ?

CA Shailesh Kumar Bhagat

CA Shailesh Kumar Bhagat (Expert)
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03 November 2010 One thing must be confirmed there should not be any business link of supplier in India.

Ownership of machinary must be transfered outside india.

Payment must be made outside india or through the banker.

the all three contracts should not be in composite nature.

If all above is true , TDS u/s 195 will be applicable on supervision of erection & commissioning only.

CA.Madhusudan B.P.

CA.Madhusudan B.P. (Expert)
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05 November 2010 i) Design & Engineering:TDS would be applicable as the provision of Sec 9(1)vi Royalty or Fee for Techinical Services. The rates of withholding tax shall be Income Tax rates or DTAA with the foreign country.
ii)In my opinion, TDS is applicable similar to i) above AND Service tax may also attract as it would amount to import of services.(If the foreign vendor do not have place of business in India)Service tax rates are 10+2+1=10.30% & this should be cash payout n cannot adjust in cenvat

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